Timing Digital Transformation

As banks across the globe go digital and compete with each other to provide digital offerings to retain existing customers and attract new ones, it would be interesting to understand how far they have succeeded. While digital products, offerings and services are useful differentiators, bank strategists need to consider many other factors, such as launch timing, target customer segments, infrastructure requirements, potential business impact, and the revenues that will accrue over a period.

Banks need to adopt a staggered process, going from conventional to semi-digital to fully digital. In India, when banks started to implement core banking solutions (CBS) in the 1990s, both customers and banks benefited from the technology. In the early 2000s, there was a move to internet banking, but it was only partly successful. The few banks that launched it early, witnessed a rapid shift of customers to internet banking.  Though early adopters succeeded initially, it was not the case with other banks; there were multiple reasons for this, including limited features and usability, badly timed launch, expectation mismatch etc.

Similarly, early 2010 saw the penetration of smartphones and mobile banking into India, where the latter was expected to make a revolutionary impact. But although some Generation Y consumers are availing this facility, it still has not reached the scale that was imagined.

When it comes to fully digitized offerings, banks need to define a digital strategy, which will encapsulate all customer segments. Analysis of data from existing customers would help in doing this segmentation:

a)      Customer segment – Kiddie/ Youth/Middle Aged/Senior Citizens

b)      Location – Rural/Semi-urban/Urban/Metropolitan

c)       Products and Services availed currently – Branch/Channels/ATM etc.

Banks also need to provision infrastructure for digital offerings, including technology platforms, hardware, networking etc., to ensure uninterrupted service. Integration and chaining of business processes are other critical activities that must be completed before going fully digital. It is always advisable to test market a set of offerings among employees, which would equip them to respond to customer queries better. Needless to say, staff training is important and knowledgeable staff could impact the success of products and offerings to a large extent based on how far they can cross-sell them to customers.

The next and most important step in the digital roadmap of a bank is the assessment of potential business revenue and impact on P&L, on account of:

a)      Additional business which can be sourced through digital services

b)      Cost of investing in technology, infrastructure and manpower for providing digital services

c)       Profit that will accrue over a period when digital services are availed by customers.

 To conclude, it is important to time the launch of digital offerings right, when transforming into a fully digital bank. In today’s competitive world, not going digital would hugely impact potential business. Banks also need to be aware of their core strengths and take care not to compromise them while going digital. Banks’ digital strategists must define a transformation process analyzing the pros and cons of early versus late launch of digital offerings. Better customer experience, competitive differentiation and innovation which can lead to steady growth in business volumes for banks and lower cost of services to customers are some of the key drivers. Strategies that are built without understanding existing customers and their transaction behavior may not provide the desired results.