#Asia Your bank tomorrow will be paperless, frictionless, and without a physical presence


Think about it, as a customer what do you need — a bank or banking services?

Morris Shapiro, president of M.A. Schapiro & Co., an investment banking company once said, “There are more banks than bankers, and that’s fundamentally the problem.”

For a customer, the presence of a bank is not vital [of course licenses, compliance and regulations are needed] but thanks to technology and innovation, banking services can now be enjoyed 24×7, making your smartphone your bank on-the-go.

In just pure numbers, according to the 2016 World Payments Report,  non-cash transactions were expected to grow by 10.1 per cent, and surpass 426 billion transactions globally in 2015. And many of these transactions are now happening on mobile. Last year, mobile payment transactions volume grew by 42 per cent to touch 26.9million in 2016, up from 18.9 million in 2015.  We saw a similar trend in our company, BankBazaar, where nearly 56 per cent of 14 million transactions on our platform in January 2017 were done on mobile.

Clearly these days a customer does not look for a multi-storeyed building that represents a bank, but is more interested in the services and how they can do their transactions hassle-free.

And here’s why we believe the future of banking is paperless, frictionless, and won’t need physical banks.

It helps build a cordial relationship through better digital channels

How many of us recall the long queues at the branch office for simple services like an account closure, an address change or to know more about savings/loan products?  How has your interaction been with a customer care executive of a bank over the phone?

How many times did you provide the same documents for different services? How many “follow-up calls” have you made on a service request? If your fingers are falling short, then you are in company. It is these instances that make a customer skeptical of using their bank, jeopardising the customer relationship, and also forcing them to take up only the mandated services.

Also read: As fintech startups drive innovation in the finance sector, the banking industry looks to catch up as demand for digital services increases

On the other hand, banks don’t have it easy either. They face a tough time with spelling mistakes, poor handwriting, and manual errors, and they need to go back to the customer to fill the forms again. So it works for both the banks and customers to go paperless and invest more on digital channels.

Bain’s Customer Behaviour, Experience and Loyalty in Retail Banking, explains it perfectly. “Our analysis shows that for the average bank, a high priority is to migrate routine activities out of the branch, where they are more likely to annoy customers, into self-service digital channels, including mobile. That means improving the mobile experience to the extent that it truly delights customers, making the experience fast, intuitive, convenient, and capable of handling the most common transactions and service requests.”

And sure enough, we have seen the impact of BankBazaar’s paperless efforts. We recently launched a multi-brand, paperless e-KYC platform that gives instant loan approval. This allows customers with phones to review and apply for various financial products, using the eSign and e-KYC technology, which takes out the need to submit physical documents. For partner banks, this platform has minimised risk of fraud, reduced their operating expenses in processing applications and brought transparency that avoids mis-selling of financial products.

As a result, these offerings have resulted in an increase in traffic, from an average of 12 million quarterly visitors two years ago, to about 44 million in the last quarter.  Understanding the benefits of going paperless and tapping into the opportunity has worked for both our customers, our partners and us.

Similarly, DBS went an extra mile and installed an interactive wall MicroTile at the branch entrance. Customers could communicate with the virtual assistant wall through hand gestures. It provided services like query resolution, DBS rewards program, etc. It is interesting to see this innovation in customer servicing. Traditionally, it hasn’t been an area of great focus for financial institutions.

Bain’s study also goes on to explain the need for banks to focus on mobile. “Given scarce resources, it’s more valuable to focus on improving a mobile app than a website because, on average, customers use apps almost twice as often as mobile web browsing for routine interactions, and apps are consistently more likely to delight.”

Their key statistical analysis metric for customer loyalty, the Net Promoter Score, is significantly impacted by the annoyance with the branch experience, the branch’s share of interactions, and delight in the mobile and online experiences. Winning customers 101 – it is right here.

However, taking this route comes with its own set of challenges. Cyber security is fast emerging as a significant threat, with several instances around the world of financial data theft. According to the PwC’s Global Economic Crime Survey 2016, cybercrime is the second most report economic crime and financial institutions are prime targets. The survey showed that 46% of respondents in the Financial Services industry reported being victims of economic crime in the last 24 months – an increase from 45 per cent reported in 2014. This clearly showed that despite the huge investment being made Financial Services organisations are finding it difficult to join the strategic dots across the growing volume, sophistication and variety of economic crime.

One big advantage of going paperless is financial inclusion. Access to banking services suddenly becomes more universal that before. However, the pace of financial inclusion will be in line with the infrastructure growth in the countries. If the mobile and internet penetration is lower that desired, the potential of these channels will also end up being limited.

It enables smoother transactions with innovation in distributed ledger technology

All the facilities like debit/credit cards, cheque books, paperwork for loan approvals, etc. provided by the bank are chargeable to the client. On the other hand, if a bank opens its new branch — leasing a commercial space, hiring bankers, buying banking equipment brings with it another set of costs.

Also read: Unfurling the blockchain hype: Why it’s all about relationships and trust

Cut it all out, and you have lower costs for customers and the bank. And there is more innovation coming in to slash operational costs even further, through the Distributed Database.

Just imagine a world where banking transactions are available on such a database.  It is spread across multiple nodes, is decentralised in nature and eliminates the need for an intermediary to process or validate transactions. It then allows for lower costs (with reduced accounting requirements) and faster processing (read KYC requirements done and no central settlement processes). This world could soon become a reality with Distributed Ledgers.

The future of financial Infrastructure report produced by the World Economic Forum in collaboration with Deloitte, predicted that 80% of the banks are likely to initiate digital ledger technology projects in 2017. Welcome frictionless banking into our lives.

While this does seem like the way the sector is moving ahead, it is fairly greenfield and may pose unknown risks. And to take on these new risks, significant upskilling of finance professionals will be needed in the next few years. One key difference that has emerged from the use of things like distribute ledger is that these are no longer just an improvement to current processes, but they are significantly transformative. According to the Association for Finance Professionals, issues like standardisation, regulations and interoperability will need to be sorted out.

It improves banking services, allowing organisations to offer tailored products to customers

Given competitive margin pressures, banks also look for innovation to improve cost efficiency and productivity. The primary motive of banks may be to increase the customer base but expanding the business with a physical location would be tough for both the business and the customer.

This is why United Overseas Bank (UOB) remodeled one of their existing branches to provide wealth management advisory. It now features videos of Singaporeans who have turned their dreams into reality with financial planning. While, this gives an extra edge to UOB among its competitors, it also helps it to reach out to specific sections of the customer base, fine tuning their offerings to meet their demands.

Greater customisation in turn helps to ensure that customers are more loyal and the relationship strength increases.

Also read: Money is going digital, and the underbanked will be among the biggest beneficiaries

While much has changed in the financial sector, more changes are likely to sweep in. As AI becomes more mainstream, products will become niche and regulations more challenging. Convenience of mobile payments will be further enhanced; interoperability issues addressed and security risks mitigated. And through these journeys, the consumer will need to be continuously educated to see the benefits and adopt them seamlessly into their lives.


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The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, submit your post here.

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