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Bankless banking is coming. And traditional banks have to get ready.

The explosive evolution of mobile computing, coupled with growing internet penetration, cloud technologies and social media access globally and in India, has led to traditional banks being challenged in their modus operandi and having to embrace technologies of the future. The graphics below, courtesy McKinsey Global Institute (MGI), are reflective of the growing digital penetration in India:

India is surging to the top on key digital adoption metrics. Source: McKinsey Global Institute (MGI)

Growth of digital infrastructure and online users across variety of income groups. Source: McKinsey

That said, let’s take the current scenario of banks — for a larger part they are still pushing products to their customers. This leads to a situation where the customer ends up having different relationship managers for the multiple products from the bank e.g. savings account, credit card, auto loan, home loan, car insurance, home insurance, life insurance, investments, trading, etc. Banks have tried to integrate these products through their apps, where these apps have ended up reducing cost by shifting the workload from the bank employee to the customer in the form of Do It Yourself (D-I-Y). However, if you have a problem or want a service, then you would be typically directed by their IVR/app to different customer service personnel for different products. The result is that the bank stops understanding the customer, reducing personalization and bespoke support for its customers creating dissatisfaction and trust deficit.

As an alternative specialised NBFC’s/banks dedicated to one or two products that are offered by universal banks. This creates an entity highly efficient in one or two products, but ends up replacing the above problem with another : customers having to deal with different entities for different products/services. Case in point : PayTM, Groww, Sqrrl, Policy Bazaar. Great companies, but narrowly focused.

The future bank would have a structure that starts with the customer once he registers, uses his digital footprint and behaviour analytics to build an understanding of him, identifies his needs and dovetails its communications, products and services into a seamless experience using AI driven CX supported by a dedicated Human Intelligence — whether employed or influencers. The same has been wonderfully captured by Nandan Nilekani in his presentation “Indian Banking — In a Time For Change”:

The Bank As A New Digital Platform by Nandan Nilekani

According to Accenture’s Technology 2020 Vision paper titled WE, THE POST-DIGITAL PEOPLE: Can your enterprise survive the “tech-clash”?, “The full potential of AI has moved beyond being a mere automation of simple tasks to being a powerful collaboration tool between human employees and machines. Successful businesses will understand the importance of context in human-machine interaction and take advantage of advances that help them collaborate on a larger scale. This will position companies to reimagine all aspects of their entire business from the ground up”. Case in point: Movenbank, which uses behavioural gamification and AI to engage with their customers on a day to day basis, offering value added services like personalised expense management to cash flow seamlessness to on-tap products.