By Shabiya Ali Ahlam
From small-time retailers to top-notch businesses, today everyone is trying to climb on board the digitisation train that will allow entities to expand their target audience and reach greater heights.
Just as everything else, this endeavour is easier said than done as an essential ingredient to push the effort is for banking institutions to have an effective digital platform to promote online purchases and transactions. Sri Lanka has a long way to go in this regard.
Today, most banks aspire to become leaders in the digital space for two reasons - it is where the customers are and it is where the world is heading towards. Acknowledging in the past decade digital banking has taken hold, majority of the local banks have attempted to incorporate digital strategies in their game plane, but are they doing enough?
What is changing the game?
With online solutions and services having existed longer than we think, this has progressively led banks to go beyond multichannel strategies as Internet access has become universal and more heavily used. In a nutshell, the digitisation of retail banking is most defiantly not a new development, but there is immense space for growth.
A global study conducted by A.T. Kearney earlier this year revealed in the coming years mobile use will become the epicentre of digital banking as technology improves and smartphones and tablets become even more widespread. More than half of mobile devices sold today are smartphones and more than 80 percent will be by 2020. The potential is massive.
Are we serious enough on changing trends?
A mobile-centric generation is certainly the millennials, but according to a study by Millward Brown, as both the length of the task and its importance increase, all generations, even millennials — are more likely to use a laptop than a smartphone.
The study highlighted that when it comes to financial services, only 8 percent of millennials prefer to use a smartphone to submit a checking or savings account application, versus 46 percent who prefer to use a laptop. Similarly, 17 percent of millennials prefer to use a smartphone to submit a credit card application, versus 57 percent who opt for a laptop.
Pushing digital banking in Sri Lanka
Finance Minister Ravi Karunanayake announced a few weeks back the government is in the midst of facilitating e-National Identity Cards for all citizens.
However, adding clarity to this, Information and Communication Technology Agency (ICTA) Chief Executive Officer Muhunthan Canagey stated it will be a ‘Digital Identity Card’ that will be rolled out from January 2016.
The new card will typically allow all citizens to have a face, finger, iris and voice registration that will help in establishing a national digital authentication platform, which the local banking sector can partake.
The card will typically cut down the requirement of citizens from having to register themselves multiple times. The ICTA head, at a technical session at the 27th Anniversary Convention of the Association of Professional Bankers of Sri Lanka, urged all financial institutions to subscribe for the same.
“This is important to all the banks as it will form part of the national payment platform which ICTA has been working on. Citizens would give digital instruction to the banks to process and a confirmation would be sent. The beneficiary’s bank will acknowledge the same. This will work on a real-time basis. By 2018, the entire government will only access payment thru this platform. That is the whole roll out we are going in for,” shared Canagey.
However, data will be owned by individual citizens, thus if institutions require access to the information, the request will have to be approved by the citizen himself.
Making most of local ICT infrastructure
While the government is in the midst of implementing an extensive ICT plan, which includes in having islandwide Wi-Fi, the scale for banks will no longer be just 20 million people. The market will continue to extend, but the question remains if our local banks are geared to cater to this scale.
“Once you open the digital doors there are no borders. The market that people will be reaching is beyond the market of Sri Lanka. Challenge the challenger and become a disrupter yourself. Accelerating digital transformation will be my words to you. Given consumers’ rapidly changing behaviour across screens, banks need to dig into how people use each device for specific financial activities in order to engage with consumers successfully,” professed Canagey.
Furthermore, financial sector analysts note that half of the banks would disappear with the cracks open by the digital destruction of the industry. Seventy two percent of the millennials would be likely to bank with a non-financial services company with which they do business.
Local banks are yet to have an effective strategy in this regard and have a roadmap that captures device strategy. “This is happening right now and we must take into account if we want to stay ahead of the game. Now wearable technologies have come on and it’s about real-time financial feedback and tracking financial behaviour. It comes down to biometric.
“The national digital identity is created to ensure that we are ready for this. No single institution can go it by itself. Thus, we are going it at a national level.”
Recipe to become successful digital institution
The banking and finance sector received key pointers from the ICTA head in becoming a successful digital institution at the ABP annual convention, which would typically help the nation realise its goal in moving towards a paperless economy in the near future.
Canagey noted the first step banks should take in realising this goal is to divide their core product offering and the digital banking by spinning the IT company as a separate company for digital banking all together.
“Let the spinoff company be a technology-based culture and not a traditional banking-based one. It is imperative to move away from risk evaluation in the new spinoff. Credit risk evaluation is entirely different and it its proven even in the US that traditional banks cannot do that,” professed Canagey.
Noting it is time to change the culture and the way of work by observing the millennials, he said, “Change from the printing slip for every transaction mentality and look at sending all transactions digitally. You will be surprised the amount of money that is being spent on printing slips.”
Embracing knowledge and investing in intellectual capital is key and it is important now than ever to move away from traditional boardroom decision-making to coffee shop decision-making.
Furthermore, he asserted it is time banks stopped asking for collaterals and have better analytics instead.
“We need to change. We are not respecting intellectual capital here and if you want to be in the digital space, it’s time you start respecting this,” advised Canagey.
Look before going digital
Stepping into digital territory without setting the house in order is like skating in thin ice. Adopting the new technologies needed to attract new customers, the current set-up must be handled well to keep the existing customers happy.
According to Finacle Product Strategy, payment has witnessed the maximum innovation and disruption of all financial services. While the likes of Google Wallet and Apple Pay have revolutionised the front-end, the underlying systems of clearing and settlement remain trapped in legacy.
The group asserts that while undoubtedly digital is a big driver of next-gen banking, it is not the only one. Banks must also adopt new thinking along with new technology. To achieve breakthroughs in the future, it is not enough to merely solve familiar problems, but banks have to anticipate ones which have not yet been identified. Design Thinking is a tool which will help banks in this discovery process.
Learning from the region: India’s ICICI Twitter money transfer
Staring January 2015, customers of ICICI Bank, India were able to use their Twitter account for real-time fund transfers, prepaid mobile recharges and to check bank balance.
The user will have to subscribe (follow) the bank’s Twitter handle and register for the facility. For fund transfer, the sender needs to know the beneficiary’s Twitter handle.
The sender will get an SMS with a unique code after the transfer; the beneficiary would need to enter it on the special webpage where he/she would be directed, to complete the transaction.
The process complies with all the regulatory requirements of two-factor authentication. The bank will not charge for such fund transfers. However, the sender will have to pay the fees as applicable for a NEFT or RTGS transaction.
The innovative offering is the first in Asia and only second in the world to offer a Twitter-based fund transfer service. An year ago it launched the facility to transfer funds through Facebook and has now 30,000 active Facebook users.
A statement released by the company to Indian media stated that as the bank serves the highest number of youth in the country, the new service is in view of the demographic.
It has 2.8 million registered mobile banking users and 15 million Internet banking users. A team of 100 people is working on digital banking within the bank.
ICICI Bank is also working on a mobile digital wallet, which will work on near-field communication technology, just like its rival HDFC Bank. Furthermore, it is also working on banking services through wearable devices, the kind of which are a rage with fitness enthusiasts.