India’s Public Sector Banks must innovate and embrace digital banking
For quite some time, Public Sector Units (PSUs) have been stuck in their conventional way of banking without embracing digitisation. In this era when all types of business are moving online, ignoring digital banking is no longer an option for PSUs but something that they need to do – and quickly!
As per a BCG report, by digitising processes end-to-end, engaging customers on the digital channel for sales and transactions, and collectively working towards eradication of cash, banks can achieve up to a 30% jump in sales productivity, reduce administrative staff by 10-15% and improve back-office staff productivity by 20%. Digital transactions lead to higher Current Account, Savings Account (CASA) balances in accounts by as much as 20%, while the use of information bureau and analytics based early warning systems can reduce the bad debt levels substantially as shown by the continuously reducing Non-performing asset (NPA) ratio in retail banking. The report also states that in five years we may see a very different digital India with smart phones poised to become the primary banking channel. As of FY14 there were only 40 million mobile banking customers highlighting the need for banks to focus on digital innovation, a PWC report says.
The banking industry has witnessed a transition from a transaction based to a more customer centric way of operation. This will not only help to streamline current processes but also to expand businesses via cross-selling (personalised offerings to the customer through the application of analytics) as well as better customer acquisition through reduced turn-around-time (TAT), quick credit appraisals and faster disbursements.
The banking industry is replete with examples of innovative technology advancements, but most of these initiatives like hashtag banking by Kotak Mahindra, video banking by Indus Bank or icicibankpay – that allows customers to transfer money using Twitter – are limited to the private banking sector. PSU banks have so far lagged behind in this endeavour.
The Reserve Bank of India mobile banking data for the month of May 2015 shows that the top 5 private sector banks have conducted transactions of close to 21 billion USD, almost 4 times the value of those conducted by the top five public sector banks.
State Bank of India (SBI), the behemoth of the public banks, presents a strong example on how digital banking can act as a catalyst in the transformation of the PSU banks. As part of its digitization drive, SBI has launched two types of branches: In Touch and In Touch Lite. A visitor to the branch can open an account and get a personalized debit card (with the customer’s name and photograph embossed on it) in under 12 minutes. This and other services such as instant approvals for car and home loans, and the availability of remote expert advisors through video conferencing, are enabled by the use of interactive walls and table displays. SBI plans to launch 250 In Touch Lite branches in FY16 as part of its digital push.
A recent Financial Express article shows that SBI is perhaps the only bank in India whose digital offerings are tailored for non-smart phone or feature phone customers. The service called a ‘USSD interface’ helps a feature phone user in the village to send messages to the SBI system, which responds in real-time, just like an app.
Financial institutions in developed economies are further ahead in the use of technology to transform the banking industry. MasterCard has tied up with a Canadian company called Nymi that enables biometric authentication of payments through its wearable device, the Nymi band. This uses the wearer’s electrocardiogram (ECG) as a unique biometric identifier to enable cashless payments.
Nucleus Software’s state-of-the-art mobility and analytics solutions, part of the FinnOne Neo lending product set, equip banks to not just meet evolving customer expectations, but to drive growth through customer satisfaction. Nucleus Software continues to monitor the evolution of technology as leveraged by banks and financial institutions worldwide, to proactively build and provide robust solutions that empower banks to stay ahead of the curve.
It is just a matter of time before PSU banks realise the urgent need to meet the growing expectations and demands of their customers. To do that, they will need to upgrade their technology and pursue digitisation with greater willingness and enthusiasm. In the future, if (at their own peril) PSU banks decide to continue with their existing modus operandi, it will be interesting to see how they tackle the fierce competition that lies ahead of them, not just from traditional players but from new entrants as well.