Digital Banking in the New Normal – How Covid-19 has Impacted the Payments Landscape

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Recent studies have proven that the coronavirus can remain active on banknotes for up to 4 weeks. Customers, understandably concerned about hygiene, are increasingly seeking alternative payment methods that reduce physical contact at points of purchase (POS). In this way, the COVID-19 pandemic has radically increased the retail banking industries with online payment methods, contactless payments, UPI payments, digital wallets and more. In the early months of the pandemic, MasterCard (India) had witnessed a surge of 200% in digital payments.

The report also finds that self-service banking (online or digital banking) is gaining more popularity among respondents, and is expected to overtake face-to-face communication. About 68% of those surveyed said that they use online or mobile banking to carry out transactions that they would normally have conducted in a bank branch. With this in mind, it has never been more important for banks to step up and offer new and innovative digital banking initiatives.


Changing Consumer Behavior’s Due to the Pandemic

According to the FIS PACE PULSE Survey 2020, consumers across all age groups have taken to digital banking in light of the pandemic. In the 18-23 age cohort, 60% have said they opt for online banking for transactions that they would ordinarily do in a branch. The same is true for 73% of young Gen Y-ers (ages 24-28), including 71% of senior Gen Y-ers (ages 29-39), 72% for the 40-54 age cohort, and 63% of older consumers (including those over the age of 55).

The surge in digital payment transactions in India is further substantiated by the FIS Flavors of Fast 2020 annual report which reveals that India is currently the global leader in real-time payments, processing a massive 41 million transactions per day, the largest in the world. The number of transactions has doubled compared to last year, along with an 80% increase in the transaction value. According to the FIS Flavors of Fast 2020, beyond payments, the real-time rails are now offering business services such as mandate management, IPO subscriptions and invoice-in-the-box.

These are significant statistics and developments that banks cannot afford to ignore. Banks will have to be cognizant of their customers’ concerns regarding in-person banking, and develop the systems and infrastructure needed to boost digital transactions, ensuring that they aren’t just efficient, but easy-to-use, fully customer-centric and completely seamless.

Digital Banking New Normal-How Covid-19 Impacted Payments Landscape-Wikipedia of Finance

The RBI is Encouraging Digital Banking

Since the pandemic’s outbreak, the Reserve Bank of India has emphasized the necessity of digital banking, reminding customers about the availability and convenience of NEFT, IMPS, UPI, and BBPS. The RBI has allowed for these digital payment options to be available round-the-clock, to minimize in-person banking and reduce the spread of the coronavirus.

Transactions during non-banking hours will be through automated mode via STP (Straight Through Processing). So far, only the IMPS facility was allowed 24×7, with daily limits on the transaction amount. NEFT does not have an upper limit on the transaction amount. So one can large amounts whenever they need to.

Personal Banking

Personal banking products have changed a lot since Covid-19. Self-service, mobile banking, and digital communication are overtaking communication with the branch and face-to-face interactions with customers. In an effort to go digital, several banks across the country are offering new initiatives to popularize contactless banking.


On-boarding with Video Banking

A contactless on-boarding process like a video KYC or eKYC facility is not just convenient for customers but is also expected to reduce costs for banks. Earlier, though digital KYC was available, customers still had to present their documents in a physical form. Video KYC aims to do away with that system completely. Several large banks in India have taken to this new feature, and consider it a game-changer.

The eKYC service assists customers in buying insurance policies or even filing claims, by uploading their documents online. The bank can then verify the details with the customer over a video call. While this is still an urban phenomenon, it is also starting to catch on in rural areas. The significant increase in number contactless payment, digital payments, and mobile wallet payments wouldn’t have been possible without the eKYC process.

Additionally, some major banks are going a step further and establishing video branches for all their customers. This allows customers to connect with their relationship managers and branch managers over video. It is also convenient for NRI customers.

WhatsApp Banking and Chatboxes

AI-based Chatboxes for common queries have existed in the banking space for some time now. Increasingly, WhatsApp is becoming the preferred platform for banks to set up chatboxes. India is the largest market for WhatsApp and a natural platform for banks to reach their customers. Chatboxes can help customers with their doubts and provide basic banking services.

Chatboxes are more convenient than telebanking, and the AI can learn. As a result, with increased usage, chatbox services are likely to improve, as they understand the customer’s requirements better. An enormous benefit to customers is that there are no charges for the WhatsApp banking facility, making it a cost-effective way for customers to engage with their banks.


Leveraging Open Banking Services

APIs, application programming and interfaces are becoming some new norms in leveraging open banking financial services. Financial institutions can leverage third-party innovative technologies, reduce errors methods, improve relationships with customers and advance tools to manage finances. This will grow the digital payments market faster than ever before. These innovative efforts can provide more effective customer experience along with smarter technologies to help customers manage their financial lives.

Are These Changes Here to Stay?

According to the FIS PACE PULSE Survey 2020, a majority (about 83%) of respondents admitted that they would use contactless payment options in the aftermath of Covid-19, citing hygiene concerns. This is indicative that the pandemic is going to have long-term, transformative changes in the banking sector, as more and more processes will go increasingly digital.

Mobile-First Approach

The number of smartphones in use in India is expected to reach 760 million by 2021. Therefore, it’s no surprise that mobile banking is becoming the primary approach for customers to check their balances, monitor their debits and credits, and transfer money.
To successfully adopt this kind of approach, banks will need to develop a mobile-first culture internally, which might involve potentially upskilling frontline staff.

Omni-Channels

Banks will have to move past their previously siloed channels, which can be inefficient, leading to broken customer journeys and increased costs. Banks will have to re-engineer their platforms to create a seamless, streamlined omni-channel, by focusing on a digital-first outlook. All experiences would be channeled through a central hub and then sent individually to various channels. Banks will have to create omni-channels that are optimized for mobile phones.

Technology to Repair Customer Trust

Customer trust was badly broken in last 10 – 15 years due to the financial crisis, frauds and banking bad loans. Now the priority for the banking industry is to repair and build customer trust again with innovation and advanced technologies. In the digital banking era, banks are moving ahead in providing transparency fees and services to their customers. To retain customer expectations, banks need to provide better interfaces and communications tools to customers on their computers and mobile phones. Most importantly, banks need to act as friends and not as customers in future. They will need to take proactive measures and helping customers to manage their finances in much smarter ways.

Banks to Offer Personalized Financial Support to Customers

Customers want seamless, intuitive experiences that are personalized for their unique situations. They will have to rely increasingly on analytics to provide financial solutions catered to individual customers. Banks are now incorporating artificial intelligence to achieve complex task more accurately and quickly. In the near future, customers will be able to view savings, investment and expenses patterns based on historical data. Banks will be able to assist with various customized savings and investment options to each customer based on their trends and patterns.

The Way Forward: Post-Covid and the New Decade

The new decade will see transformative changes in the banking sector, some that are evolutionary and others that are radical and ground-breaking. By 2030, we can anticipate seeing data-driven, customer-centric, lifestyle integrated banking solutions that are personalized for every single customer.

Individualized Customer Experiences

Customer-centricity will be at the core of baking in the coming decade. According to one report, banks will be expected to deliver hyper-relevant services that would be integrated with each individual customer’s lifestyle. Banking interfaces will have to be intuitive and easy to use. Data and analytics would need to be paired with empathy for consumers, resulting in a hyper-personalised, contextual, and sensitive experience.

This may include specific pricing of products depending on individual customers’ usage, modifications to repayment terms on loans if the item for which the customer had borrowed money, has retained its value, and “smart assistants” who can review a customer’s historical spending and suggest on-the-spot recommendations and solutions. The one-size-fits-all approach will increasingly become a thing of the past.

Non-Negotiable Safeguards on Customer Data

Customers are increasingly particular about the security of their data, and for any progress to be made in the banking sector in the coming years, banks will have to be extremely protective of their customers’ private information. A bank’s ability to safeguard its customers’ data would likely be a deciding factor for many individuals when they consider choosing a bank. Banks would have to be on top of cybersecurity at all times, and handle their customers’ information with the highest level of integrity.

Investing in New Talent

To make these ambitions a reality, banks will have to seriously invest in hiring talented software engineers and technology experts, along with upskilling their current employees. The organization would need to have an innovative outlook with a penchant for experimentation, with an unwavering focus on finding new and unique solutions to aid customers in the new decade.

How Should Businesses Prepare for the Shift in Consumer Behavior?

Businesses need to be ready for the likely permanent shift in consumer behavior towards cashless transactions. They need to offer multiple payment options, from mobile wallets to online banking, and contactless card payments. Developing an app-based loyalty programme may also benefit businesses in the long run. Businesses will need to prioritize security as well, to assure customers that they can approach the business with a sense of safety. Businesses will need to be flexible and receptive to new innovations in the digital payments space, and incorporate them for the convenience of their customers.

Conclusion

The FIS PACE PULSE Survey 2020 has stated banks are “at a crossroads”, where digitization is the only way they will survive in the coming decades. Customers want, need, and expect substitutes for face-to-face communication, and banks will have to innovate to ensure they can assist their customers during and after the pandemic. They can offer facilities like waiving penalty on not maintaining minimum account balance, real-time payment choices, flexible terms, increasing spending limits on best credit cards and so on.

Digital banking solutions offer clients a better experience with safe and secured payments. The current crisis has improved the rate of adoption to mobile wallet and contactless payments. In a post-COVID-19 world, financial institutions will experience an extreme shift in the consumer’s preference for digital banking products and solutions.

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