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Truly Transformative Digital Models

Digital innovation is at the forefront of all IT investment in banks. Commercial banks across the globe have been looking at this seriously for over five years now. However, the extremely fast adoption of mobile technology and everything associated with it, has diminished banks’ chances of using mobile banking as a differentiator. The mobile banking apps became standard offerings even before half of the banks could launch that offering. Worse, whatever banks have to offer on mobile mostly does not meet customer’s expectations.

Now that almost 100% of banks have some form of digital footprint, primarily mobile banking, it is time to step back, assess and move ahead in a more structured way. The three factors that the banks have to watch out for are –

  • The competition. In our fast-paced, technology driven society, competition is rising from a variety of atypical sources. The non-FIs, have an undue, late-mover advantage as their IT landscape, operations and process are much more nimble, and they are not under the tremendous, regulatory pressure that the banks are. This means that they can move much faster both in creation of new technology and in launching new offerings on existing ones.
  • The customer. Most Gen Y’s do not have the same outlook towards life in general as older age groups such as Gen X and Baby Boomers. They have grown up with mobiles in their hands. They haven’t even gone to bank branches for opening their accounts. And on top of that, in the fast moving world – they give much more importance to convenience than to risk aversion or savings. There is, however, one trend that stands out from the crowd and calls for careful evaluation from banks – the virtual wallets, like those of Starbucks, Paypal and Apple’s iStore, where customers store value at no interest. Standing on their own, these small-value products may not initially send warning signs: however, across millions of customers and countless retailers, banks are set to lose a huge portion of their low cost source of funds. This is an especially large problem for banks in low interest regimes, as customers are more likely to choose convenience over low interest income.
  • The cell phone, as the medium of interaction, is less accommodating than the web. Customers didn’t like to, but could, ignore irrelevant promotional messages on the right side of a banking website, and even junk the generic promotional emails. However on mobile, the limited real estate, generic or irrelevant promotions can pose more damage to banks than do any good.