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Tenets of Digitizing Transactional Banking- Customized, Secure, Partnered, and Omnichannel

March 2, 2016

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India is moving up the technology value chain with digitization, social media and mobility revolutionizing lifestyles. The BFSI industry, a lynch-pin of the Indian economy, too is experiencing technology-driven transformation through disruptive innovations in products and services, caused by the entry of non-traditional players, making digital banking an inevitable business trend. The process of digitizing transaction banking has to be a well-planned and phased one. The first task would be to identify, and more importantly, prioritize the key processes and services that needs to be digitized. A. Customization – A NecessityBanks would do well to recognize the value of customization in offering their payments related services and products to corporate clients. The dictum of ‘one size fits all’ – which in any case is dwindling even among retail consumers- does not hold in the corporate scenario. Having multiple isolated instances of similar products for different customers could make the whole process unwieldy and difficult to monitor and manage – unless of course banks are prepared to deploy large teams to handle just this. Customers are also increasingly moving towards standardization of their processes across their multiple banking relationships. This ensures seamless integration whenever a new line of business is introduced or a new bank is inducted into the consortium. Banks need to acknowledge this trend and invest in digital assets which will help the corporate seamlessly interact with the bank. These typically are ESBs (Enterprise service bars) or middleware or payment hubs. These utilities help reduce the burden of accommodating uncertain formats and client specific protocols on the Core Banking System. The orchestration also comes with centralized monitoring as all customizations for different corporate customers are on-boarded through the same platform. Corporates today expect electronic channels to become more and more sophisticated, not only providing basic transaction services, but also providing them with access to advanced reporting, forecasting and simulation services for trade finance, even more integrated with different transaction banking products like payments, foreign exchange, liquidity and cash management. B. Online SecurityA robust security infrastructure is the key to the success of any banking solution. The success of electronic commerce is based on the following four pillars: digitalC. Omni ChannelThe consumer purchase decision process has undergone a radical change and now spans across several channels. The same customer interacts with the bank at multiple touch points. This necessitates integration across channels and generating digital demand with smart tools, intuitive product choices, and use of direct channels for customer self-service. This has 2 important ramifications for banks. • Banks must ensure a seamless and unified customer experience across channels • Customer experience is a function of several factors, many of which may be intangible and perception driven. Traditionally, banks have focused on the functional factors that affect a customer’s experience, such as products, online tools, and discounts tailored to the customer’s needs. Now, they also need to factor in emotional or perception driven factors that may influence customer experience. Successfully digitized banks manage to employ a unified interface across all channels, so that a customer’s preferences and activities transfer across media. The customer experience—including sales-conversion opportunities and service interactions—needs to be tailor made. A central internet-banking platform ensures functionality is unaffected by customer’s choice of device These measures can help create a unified and consistent experience for customers, which in turn helps the bank win customer’s trust and loyalty. D. ART – Alliances, Relationships & TechnologyGiven the rapid pace at which technology is changing, many major innovations in the payments sector have come from niche start-ups and financial technology companies across the globe. This makes it important for Banks to form key strategic alliances and collaboratively work towards incorporating such technologies in their banking and payments services. It is impossible for a single institution to come up and embrace all the disruptive ideas and hence alliances play a very key role in creating new product offerings and also taking them to the end customer. E. Digital ReorganizationOrganizations will have to reorient internal processes to enable a truly ‘straight through’ experience. It is not enough to create a digital façade at the front end when the back end legacy systems do not have the capability to integrate with the data which comes through. Quite often a barrage of employees (outsourced or otherwise) are deployed to pick-up ‘Drop on the Floor’ files from the front end and process them in the Core Banking System through manual uploads. It is in the Bank’s best interest to aim for end to end process optimization as this can help it achieve scale and efficiency. Back end automation would also go a long way in motivating an increasingly neglected back end work force. The large numbers normally deployed in the back end can be used alternatively for more productive purposes. Process digitization is different from pure automation in that it not only creates cost efficiencies but also value, by responding to customer demand for new and better products and services. digital Digital enablement creates significant efficiency in the financial services ecosystem by facilitating better resource utilization and allowing banks to extend their reach beyond their branch network. Digitization will make internal processes more efficient, besides offering the customer value-added services such as wallet solutions, personal finance management tools and an omni-channel customer experience. By digitizing processes and engaging customers through digital channels for transaction and sales, banks can achieve upto 30% improvement in sales productivity. Digital transactions can lead to 20% higher current account/savings account balances and continuous use of data analytics can significantly reduce retail NPAs. The envisioned Digitization drive of the Government, coupled with Digital Banking, can be strongly leveraged to spread financial literacy and achieve Financial Inclusion for our Nation.  To succeed in the digital world, it is becoming increasingly important to adopt habits and culture of digitally native companies. While, digital banking concepts in India are still in nascent stages, with few scalable profitable models, we believe that the digital battleground presents a unique opportunity to reduce costs, develop new propositions and business models, attract new customers and explore customer value to its maximum. However, the way forward would be to adopt a more refined ‘Digical = Digital + Physical’ strategy which consists of a fine blend of online and offline service channels as customer touch points.  The next few years will be certainly very exciting for banks, with an interesting interplay of various technologies, coupled with banks and other financial institutions collaborating with the tech companies through ART (Alliances, Relationships & Technology) that will change the banking and payments landscape in our country and across the world.  Interested? Then download the FREE NASSCOM Yes Bank “Digitizing Transaction Banking: The Next Frontier†report that seeks to highlight the growing digitization of transaction banking services, key drivers and barriers for the same and explores resultant innovation opportunities.


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achyuta ghosh
Head of Research

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