Banking industry is on the cusp of Digital disruption. Threats are no longer coming from their traditional peers, but from disrupters across telecom (Bharati Airtel applying for Banking license), cash rich retail (Amazon, Alibaba providing lending services) & Smart phone manufacturing (Google, Apple etc) industry. To complicate things further, multiple Digital disrupters are introducing innovative models like P2P, crowdsourcing lending to negatively impact Cost income ratio and RoE.

In fact tomorrow if a telecom or a retail company opens a bank, they can create much better payments and ecommerce driven experience than most of the banks do today. Banks eventually run the risk of losing low margin, high volume retail banking business to these new breed of competition.

This requires a fundamental shift to the way Banks do business. While focus should still be on core products (Retail and investment and commercial), banks should start to provide more advisory and value added services to make them integral part of customer day to day life.

Once banks master the art of managing real time, mobile-wallet driven Payments advisory services, they are then better off focusing on how to influence, add value and drive digital commerce.

Initially commerce used to happen between two individuals. Gradually the concept of Market place evolved. It gave buyers the opportunity to search, evaluate, bargain & go for the best offer. It also gave seller opportunity to innovate and compete on product, services & price. Market place was also used as social platform intelligence gathering, reviews & recommendation. Primary channel of the commerce (sell, service) was F2F. And trade was done either with a common physical currency and exchange of physical commodities. Supply chain management (inventory, procurement, distribution management) was done manually and very Adhoc basis.

If we think carefully the basics of commerce remained same, only the boundaries between physical and digital world is blurring. Mobile is becoming primary channel for commerce, market place is no longer a town centres, it’s internet. Search is digital & intelligent meta data driven, Customer service is done over digital channels. Social media is becoming a place for intelligence gathering, product review and recommendation. Rewards, discount, personalization, optimization & recommendations are done real time based on data. And supply chain & inventory management are optimized using digital platforms.  And most importantly the currency used to trade is no longer physical, its virtual or digital. This puts banks at the centre of commerce economy. And Banks can get their digital wallet strategy right and it will play a bigger role in driving digital commerce through progressive stages of adoption:-

Stage-1: Rise of Mobile channels - establish wallet for sales channel 

Proliferation of Mobile, Wearables, IoT, Augmented, Virtual reality devices coupled with Digital wallet is driving adoption of Mobile commerce. Consumers are targeted intelligently at real time based on location, context. Seller & merchants are also benefits due to adoption of mobile POS devices.

Banks should build its own digital wallets. CITI, Nationwide, Visa and MasterCard's etc  have already built the wallet. This will enable banks to enforce transaction using mobile devices.

Stage-2: Next generation customer Service - driven by wallet

Customer services is a key post sales activity which increases the loyalty and advocacy. This also ensures high NPS score and larger wallet share.

Along with call centres and branches, Web and mobile & social channels are used to drive interactions with customer. Techniques like Collaborative browsing, co-browsing, video/web/voice chat, Web real-time communication, Social feedback management, virtual customer assistance could drive customer satisfaction.

Banks can align their services to provide higher customer satisfaction. For example, A quick video call to increase your digital wallet cards credit limit on real time, if if your digital wallet transaction is declined. Banks can also advise on real time abt the best promotion, rewards and loyalty to save money. 

Stage-3: Customer and product personalization - deliver marketing & advisory services through wallet

Rise of the real time data driven analytics has changed the game for most ecommerce companies. A 360* view of customer combined with NEXT BEST OFFER can drive the personalization across customer segments. Customer behaviour, interaction, transaction history, demographic details coupled with its social and other digital footprint can drive reward and loyalty points. A detail analysis of Product/Services consumption, review & recommendation could help in configure & optimize price and recommend right set of products for high cross/up sell.

If Banks can enforce use of Digital wallet & effective partnership with retailers, then it can own the interaction and transaction data to drive advisory capability for value added services.

Stage-4: Supply chain - optimized by wallet

Retailers are moving towards distributed inventory and order management paradigm. Where order fulfilment can span across multiple systems; can be owned and operated by the organization or its partners.

Retailers are optimizing its inventory and de-risking the operating model by partnership with local merchants. This requires an integrated order management approach which works in this network model.

Banks can tap into this chain of retail/merchant network and open up larger credit line. Banks can also drive marketing notification model to drive more traffic to SME business through digital wallet.

In summary, if banks to survive in tomorrows world, they must build and encourage Digital wallet adoption. This will ensure active role in digital commerce & survival in digital economy.