Digital Banking: Opportunities and Challenges
Digital Banking, over a period has revolutionized banking and has moved beyond internet banking. Digital Banking today enables a bank to have a 360 degree interaction with the customer. Technology has played a pivotal role in this transformation. But, with advent of technology emerged the risks associated with it. Now, cyberattack has become the most dreaded word for the bankers across the world. Digital Banking: Definition and Evolution
Customer preferences propel digital banking
In the fast paced world, customers want the funds to be transferred across the globe in real time and transact in physical world without physical cash. Demand for ease of doing business without moving out of the comfort of office, was the real reason that prompted banks to come out with alternative delivery channels as part of their migration to digital banking. Today, ATMs, cards, POS machines, internet banking and mobile banking have become the major alternate banking channels. Now – a- days, customers can avail money transfers, online investments, deposit openings, tax, bill and fee payments, forex transactions, equity trades etc without visiting bank branches.
Fintech companies have played a major role in rewriting the banking by leveraging technology and meeting customer demands in real time without even the involvement of banks. Traditional banks are now finding it tough to compete with such disruptive banking innovations. Realizing that they cannot meet the competition and survive based on branch banking, traditional banks too have started investing heavily in technology to remain relevant for the customers. The investment in ever changing technology has become a huge financial burden for traditional banks. But digital journey has become essential for traditional banks too, and they now utilize data mining and analytics at the back ground exploring the possibility of upselling while customer is interacting online with the bank.
The ability of banks to analyze investment patterns, spending preferences and transaction habits has enabled them to create a complete profile of the customers. Better understanding of customers enables banks to predict customer wants and satisfy them by offering tailor made products. Through enhanced product suits and value added services based on customer preferences, banks have succeeded in delighting customers and retaining major part of their wallet with them.
Digital banking means profitability to banks
India has a population of around 1400 million. The population per branch is estimated to be around 11,000. With around 2,25,000 ATMs, the population served per ATM is in the range of 6300. The investment in branches and physical assets cause financial implication for banks and that is another compelling reason for banks to shift to digital banking and alternate channels. The cost per transaction is high in a branch compared to that in ATM. The transaction cost further reduces for the bank as the customer migrates to e-commerce, online banking and mobile banking. Thus digital banking enable banks to deepen customer satisfaction and carry out banking with more profitability. The changing mindset of customer to pay a little extra for carrying out transaction with better convenience and time saving are added attractions for banks. Digital Channel Enablers for Payments and Settlements
Secure technology a must for digital banking
The migration to digital banking has created a big challenge for banks; protecting themselves from cyberattacks. Banks being in the business of accepting deposits from customers and also being the custodian of money, they become the first preference of hawkers. While extending the channels of operations to the mobiles of customers, banks are required to ensure end to end information security and cyber security from bank servers to the devise with the customer. They face a lot of challenges in this.
The banks need to link their security practices with business practice and must remain alert throughout. The best information security and cyber security practices should be in place to safe guard the money entrusted to them by the public. An attack in a branch can only cause a minor loss to the bank. But an attack on the main server of the bank can question the existence of bank itself. With technology advancement evolves new threats. For a bank to keep pace with technology and follow the latest trends in digital banking, heavy investment both in technology and threat preventions is required. . Digital Banking: Different Channels, Objectives and Advantages
