The local bank in your hand
Thought Paper
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The local bank in your hand Those belonging to the X or older generations will recall the monthly visit to the local bank branch (immediately after payday), standing in line to withdraw cash and stopping by the manager‟s office for a quick chat and cup of coffee. In those unhurried days, banking was almost a part of social life, as a customer‟s relationship with the local bank had all the elements of friendship - proximity, trust, warmth, intimacy and personal rapport. Fast forward to present times, when a branch visit is the exception, rather than the rule, banking products and services are so commoditized that it doesn‟t matter where one banks, and customers are smart enough to make decisions without the guidance of their bank manager. Yet, despite achieving near utility status and changing beyond recognition, banking institutions still aspire to the age old values of the local bank, because trust, relationship and personalized service are at the heart of their business and very much a part of customer expectations. And will always be. But how do local banking values translate in these times, when digital channels have upstaged the neighborhood bank, and customers prefer to do their banking from a distance? In my book, an apt definition of local banking, the way we know it today, is a service that is convenient, cordial and contextual. In past times, local banking was staple fare at traditional financial institutions; in present times, it‟s more of a Community Bank thing; in future, my bet is that the mobile will be the world‟s local bank. That‟s because, when it comes to providing convenience, establishing a cordial, personalized relationship with customers, and understanding the context of a transaction, mobile banking is hard to beat. Let‟s start with convenience. In olden day local banking, convenience meant proximity, a branch that was a short walk away. However, for
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Thought Paper
modern day consumers, convenience means nothing less than ubiquitous banking, available at all times, everywhere. With subscriptions touching 6 billion, or 86% worldwide penetration, no device is as pervasive as the mobile, and consequently, no channel is as ubiquitous as mobile banking. The mobile “local” bank is not a short walk away; it rests in the palm of one‟s hand. What‟s more, thanks to technologies such as Mobile Remote Deposit Capture and mobile video conferencing, this channel is now able to provide the whole gamut of branch banking services. It doesn‟t stop there. While traditional local banking was limited to pure banking, local banking on the mobile crosses over into the realm of payment, commerce, and even lifestyle enablement. Nearly three decades after the credit card revolutionized payments and shopping behavior and signaled the end of cash and checks, the mobile is poised to do the same, except that this time around, plastic is at the receiving end. If estimates are to be believed, mobile payments and commerce will scale US$ 1 trillion in three years time. Moving on to cordiality. Agreed that the days of warm hospitality are behind us. Yet, banking can reclaim lost intimacy in other ways. The mobile has a central role to play in this. As an instrument that enriches lifestyles and not just banking transactions, the mobile is privy to more customer insight than any other banking channel. A person‟s mobile behavior is said to be a key to his personality, and a window into his aspirations and actions both. That window got bigger when Internet enabled smartphones provided connectivity to social networks; now, the mobile not only provides insights about an individual, but also the social groups he belongs to. With this information, banks can cultivate a deeply personal understanding of their
customers and invest that knowledge to create extremely personalized and relevant products, services and offerings. Retailing organizations are adept at this. Just to give you an example, a large supermarket chain, which also offers financial products, cross-pollinates retailing insights into the financial side of its business. The store offers customers who never buy liquor, car insurance at a lower premium! With the help of analytics, banks can distil information gathered by the mobile channel to not only create offerings targeted to individual needs, but also go a step further to predict future demands and fulfill them proactively. Personalization is to mobile local banking what cordiality was to its traditional form. In the days of traditional banking, banks knew little other than what customers told them. The arrival of solutions such as core banking and CRM systems provided bank staff a 360-degree view of customers, including the history of their transactions with the bank, which would serve as a context for the current interaction. Since the mobile is part and parcel of daily life, its data is much richer than that of a purely
banking touch point, like the branch or call center. Whatâ€&#x;s more, features such as location tracking or social networking mean that banks are never separated from their customers. Provided privacy issues are adequately addressed, such a situation is beneficial to both banks and customers. For instance, if a bank tracks down a customer to a car showroom, it can speed up the purchase process by offering a loan on the spot. Similarly, if the bank happens to hear a customer complaining about its service to a peer group, it can take evasive action before thereâ€&#x;s any further damage to its reputation. Today, mobile banking is on innovation agenda of every bank. Banks value the mobile for many reasons: it is cost effective; it helps generates revenue; it has unparalleled reach; it is a rich source of consumer insight. So it is natural that banks look at the mobile not just as a mainstream channel, but the mainstream channel of the future. But this is like missing the forest for the trees. For the mobile is not only capable of becoming the most important banking channel, it has every chance of morphing into the local bank of the future.
Sai Kumar Jayanty Lead Product Manager, Finacle, Infosys
Thought Paper
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© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.