Digital slowly, but surely is becoming the new normal. Customer-centric digital platforms have driven transformational change and have single handedly changed the face of many an industry. Amongst the sectors that have undergone a major disruption, Financial Services has seen a vast transformation with the advent of the ‘digital revolution’ – an interesting phenomenon that lies at the intersection of rapid development of digital technology and its adoption by the customer. The ‘revolution’ is cutting across deliverance of seamless processes and services and infrastructure flexibility, to innovative business models and a culture of rapid experimentation.
Skeptics, if any, often quote the current volumes of offline transactions which surely dwarf digital transactions in the Financial Services industry. However what makes this trend mega is its potential – not only in terms of volumes, but in terms of the all-encompassing scope. From mobile banking to digital wallets and Peer-to-Peer (P2P) payments, the transformation on both the demand and supply-side is commendable.
Today financial services companies are using digital across multiple areas such as – marketing, sales, customer service, operational efficiency, process re-engineering, personalization of experiences, product development, data-led cross-sell/up-sell and superior risk management.
The sector is seeing the emergence of new single-product focused digital entrants and full-fledged ‘digital’ banks. And to add to the paradigm shift, the sector is also witnessing the entry of non-financial players who have access to large scale of customers and are now expanding their bouquet of services to serve their financial needs.
The new digitally powered world of financial services is path-breaking and gradually the numbers are weighing in its favor. As per a global Deloitte and Visa report on Digital Transaction Banking, by 2025, when the large population of the ‘digital natives’ come of age, they are expected to drive the spending power of approximately USD 900 billion and sharply increase the demand for digitization. And since most of the generation would be technologically-adept by 2025, transactions for Generations X, Y, and Z combined will account for 75 percent of the total spending power at approximately USD 1.8 trillion.
These digital natives present tremendous opportunity and potential for financial services organizations to digitize further. The opportunities are immense and manifest across – digitization of existing financial products and processes to development of unknown new and superior digital financial products and processes. This revolution is also supported by the focus that ‘Digital’ is getting both at the Government’s and regulator’s end. There are constant efforts to build an entire eco-system to support Digital India, and specifically digital financial services. Key pillars amongst these are – e-KYC, e-Signature, Unified Payment Interface (UPI), electronic NACH facility and Central KYC Registry.
While the digital shift, with its benefits of efficient customer acquisition/retention, revenue generation and cost optimization is one of the top agenda items of CXOs across, organizations need to draft their digital strategies carefully. The financial sector faces tremendous challenges such as increasing competitive pressures, challenging macroeconomic conditions and stringent regulatory environment, and hence when it comes to embracing digital platforms, it is important that they isolate the noise from the signal.
And as all organizations race with one another to use digital coherently and holistically, what can act as the North Star is going back to the basic cornerstone of any business – credence to genuine customer value creation and high customer orientation.