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Marrying Digital & Physical Channels

Just like ATMs that continue to exist in spite of a digital revolution, bank branches will also stand the test of time as banking continues to be a matter of utmost trust for the consumer, and... (the) credibility linked with these branches

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Ever since the digitalisation of financial services began, there has been one topic that many players in the banking industry have been wary of addressing – that of the future of bank branches. In the debate between ‘Physical branches v/s Digital branches’, the common notion is that retail branch outlets will become redundant in a few years, but perhaps we are being too hasty in presuming that. Inevitably, ATM, mobile and Internet banking have taken away regular operations like money transfers, deposits and withdrawals that were common reasons for customers to visit branches. Today, the complete banking experience has shifted into a mobile or laptop at the comfort of the consumer’s home or desired location. As the demographic in the country alters, the digital banking community is also set to broaden. But this need not necessarily mean we write off the relevance of physical outlets. While they may diminish in numbers, according to me their delivery in value services instead will escalate in the coming years.

As lesser branches will translate into huge savings for companies, with a bulk of mundane operations transferred to alternate delivery channels, banking representatives will be able to focus on more value-based services like relationship building with the customers. Going ahead, there will be an increased focus on providing personalised services and customised solutions. However, branches are not inclined to lose their importance where proximity and human connectivity matters, for example, seeking advisory services for wealth management, addressing grievances, or making big financial decisions like home loans, retail investments etc. Human interaction will continue to be cherished, especially when bots, AI and automated services take over increased teller functions.

Having said that, banks are today at an inflection point where they need to rethink their business strategy and adapt to the changing environment. With new entrants in the financial services sector, the competition is becoming fierce and banks will no longer be able to function as a standard service provider. Those who wish to acquire and retain consumers will have to constantly innovate.

What will matter soon is not the gamut of products and services offered but the complete banking experience, including a seamless convergence of speed, security, technology and convenience. Over the next few years, we will require 30 per cent to 40 per cent less branches and only high-traffic outlets will be viable to retain.

Instead of focusing on less traffic, banks would benefit by focusing on increasing their digital reach and efficiency. The value of digital must be exploited and human capital management should be made more productive by automating repetitive and low-risk processes. Not adapting fast enough could mean erosion of profit, irrelevance, and damage to reputation or even becoming obsolete.

However, what is important here, is to discuss how well  physical and digital bank branches can co-exist to seamlessly improve interaction with the consumer. To stay competitive and connected, banks will have to synchronise their operating model and converge the physical and virtual touchpoints to create an omni-channel experience for the consumer. Creating a frictionless, unified experience may need more than adopting a few digital tools. All the delivery channels must complement each other in the consumer experience journey. In the bid to create ‘branch of the future’, more power will be centred in the hands of the consumer, empowering them with digital tools, knowledge and new technologies and enabling them to make financial decisions independently. In the advanced countries, we are witnessing a revamping pattern that is likely to hit the Indian landscape too. This includes revamp in strategy, technology and aesthetics. Not only are business growth plans conceived on digital and tech advancements, branches are transforming into a lounge/café zone which are designed to positively influence the in-branch experience.

Just like ATMs, that continue to exist in spite of a digital revolution, bank branches will also stand the test of time as banking continues to be a matter of utmost trust for the consumer, and the emotional security, reassurance and credibility linked with these branches will take a while to be replaced by a branchless world.

The way I see it, perhaps the biggest shift and challenge is going to be for the banks to perceive themselves not as financial institutions but as retail consumer companies  from here on.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Ravi B. Goyal

The author is Chairman and Managing Director, AGS Transact Technologies

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