Digital technology influences almost everything we do-our interactions with friends, the way we shop, even the way we bank. Consumers view online banking services and mortgage clearing houses as convenient and empowering-and clamor for more. But these innovations have caused major disruptions in the way banks have traditionally operated. Now, in addition to compliance and financial uncertainty, banks must figure out which emerging services to adopt, how to manage complexity and risk, and how to retain old customers while attracting new ones. Here are three current digital disruption trends to think about.
1. The changing face of the bank branch
Faced with rising real-estate costs, banks have realized that their branches, especially in premium locations, are becoming expensive monuments to the past. Now, web and mobile digital touchpoints let customers perform routine transactions anywhere, anytime at much lower costs. Today, banks are reducing the size of branches or relocating them to retail stores, and arming their bankers with iPads to create personalized offerings for walk-in customers. At the same time, video tellers and self-service kiosks effectively cater to the non-profitable segment, stopping in for routine transactions.
2. Non-banking players encroaching on financial services
Payment is the biggest digital disruption, from online direct deposit to PayPal. The latest incursion is the mobile solution, Square, which, according to industry estimates, is now used by a third of small merchants in the U.S. in just 3 years. Telecom companies are also looking to capture this expanding market by integrating financial services along with phone accounts. These digital disruptions threaten to relegate banks to behind-the-screen-operators and commoditize their services. Most leading banks have identified this threat and have started a host of initiatives to reinvent customer engagement with wearables, gamification and big data.
3. The impact of social media
As the generation with heaviest social media usage (Gen-Y) moves into their prime productive years, no organization can afford to ignore this digital disruption. Research shows that Gen-Yers are more impatient and demand higher level of service than previous generations, and they frequently go to social media to air their grievances. Reputations have been tarnished in hours due to awkward or inadequate social media communications. As a result, savvy banks are leveraging social media to service customer requests, answer general queries, quickly and honestly address grievances. While social media has not been adopted for transactions because of security compliance concerns, many banks in the developing world are creating transactional functions such as money transfers or the ability to share expenses among friends within a social network.
At Mindtree, we think about the impact of digital disruption all the time. We can help you identify and capitalize on these and other trends. If you would like more information, drop me a line.