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5 Characteristics of a Successful Digital Bank

12 May 2022

We are in an era where everything can be purchased with the help of a mobile phone.

Soon, a day will come with the help of a hi-tech wearable device, all you will need to do is say or think and you will be able to see options in front of you on a virtual screen.

That’s the Power of Technology!

While we will not comment on the impact of demonetization in general, we believe that the move has helped reduce the informal economy and compel banking and financial service industries to implement technology at the core to provide improvised services to customers.

In this blog, we seek to discuss the key attributes that are required for the success of a digital bank.

Read on!

1. 24/7 Borderless Convenience

As the name suggests, it means that the services offered by banks (notably the generic ones) should be available any time, anywhere.

For digital customers, they should not face anything similar to the queue that is seen in a rural branch of SBI on the payday of a government company.

This convenience steps up from two factors – simple, user-friendly and secured application and also convenient process.

For example, KYC continues to remain a challenge in many cases, and thus banks have started using the fingerprint-based Aadhar for the same.

Similarly, reg tech is taking centre stage gradually thereby enabling banks to optimize their customer experience while reducing cost and time to service a client.

2. Data Aggregation

Data is oil – there is no doubt about it. Thus, to provide a highly personalized financial management experience, a financial services company need to provide customers with a personalized solution.

Customers these days look for ease of decision making and thus vouch for the single, consolidated view to manage their finances.

So, we believe that the spending pattern, repayment obligation, income, age, and other data can be collected by banks. With the help of AI-supported analytics, a comprehensive personal finance solution can be provided.

Thus, data aggregation is the next attribute which we believe is a train of a highly successful digital bank.

3. Open Banking

In the second point, we spoke of data aggregation.

For executing the same, banks need information about a customer from different vendors too. Thus, banks need to implement an open culture whereby they can share data with any third party vendor who is secured.

Savings Account – Interest rate, Charges, Net banking

These third-party vendors can use tools to optimize the financial services requirement of a customer and can provide a tailor-made solution. A marketplace based aggregator is increasingly becoming the talk of the town.

You may see SBI Yono, integrating with different other players such as Amazon, Onemg, Oyo and many more to provide a comprehensive one-stop solution.

5. Security

Probably, one of the most important attributes that are required by any bank is its security feature. Remember, with high power comes greater responsibility.

Thus, it is necessary that in addition to physical security, a bank has a well-defined data and systems integrity and confidentiality guideline. This process shall help abide by rules concerning data protection.

Also, preventive security measures are to be established with multi-layered controls such as two-factor authentication (for example, a system implemented by Google for Gmail).

With these measures in place, a customer can build trust with the fact that open-banking benefits are outweighing the risks and adaptability to new-age banking improves.

6. Invisible banking

Another attribute that is likely to provide a feather to the success of a digital bank is invisible banking.

IVRS based banking or voice-based banking is something that completes the solution offered. Leveraging voice banking applications that don’t require a single touch on a device is likely to provide a fillip to growth.

Let’s Wrap it Up

To conclude, we believe a proper combination of the above attributes can significantly improve the banking experience. With the help of advanced analytics, a bank can get a deeper understanding of customer behaviour and facilitate customized offers — tailored dashboards, themed animation, custom solutions for shopping based on past trends, etc.

While the new banks are moving away from branch-based banking (for example, Bandhan bank has very few branches across India), the big guys are going back to the drawing board to align their strategy with the current need (for example, India’s largest public sector bank launched SBI Yono and also partnered with Jio for improving reach).

Thus, a more comprehensive and ideal customer experience is required that will enable banking to move to the core of society.

We also believe that a clear fintech strategy that aligns with organizational objectives while including an execution plan for addressing gaps and managing a transformation will continue to evolve.

Be it providing new ways to enhance customer experience, responding to regulatory changes, or new payment methods or digital delivery model; the fintech solutions are rapidly helping re-invest the value chain of the financial services industry.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww

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