Cash accounts for total 95% of payments. The potential to transform and innovate is therefore, not restricted to the already enabled 5% of the digital consumers but a much broader spectrum is available. It is imperative that the banks build a payments franchise, not restricted to now passé “click versus brick model”. The incremental organic growth can reduce cash over a horizon of next decade. However, the coming of the 4G networks, growing number of tablets and handhelds, young population, number literacy and complex interfaces being replaced by simplified Apps, cloud networks and the smartphone boom with their ever dropping price points, the government launching a Digital India Programme are a big game changer for the digital strategy that banks can leverage to accelerate the migration of payments to digital in a much shorter time span. These drivers will ensure that the consumer is connected online to the bank more often using the mobile and therefore, a place and space strategy is more contextual and appropriate than the click and brick model.

 

The key actor at the center of the universe for banks being able to build a strong Payments Franchise is the Customer. Enabling every customer account to do digital transaction is the stairway to digital heaven. Only a quarter of the banking customers today are enabled for digital or mobile banking since banking has preceded mobile technology. It would serve banks well if all new accounts in the banking system are ab initio mobile banking enabled, with a definite early timeline to digitally enable at least 60-70% of the savings accounts. The cheque book in the “joining kit” should become a relic and customer receiving the video link on his mobile at the time of enrolment on how to do a mobile banking transaction at his bank. Simplifying and standardizing the digital enablement process across the banking community at the time of onboarding and allaying concerns around security will additionally remove the two biggest entry barriers customers today on digital banking. Arming the customer with digital enablement will have a network effect with close to a billion people enabled for digital banking and turning suppliers of digital banking transactions rather than demanding the digital banking transactions. This supply surplus will have a prominent network effect by instilling confidence in the merchants and aggregators to have in place infrastructure to consume digital payments rather than create fragmented infrastructure to handle cash, cheque and disparate modes of electronic and mobile payments. The power of the digitally enabled network of consumers will create a viral effect on both the scale and scope of digital payments.

 

The IOT revolution, big data, mobile and social technologies and the connected digitally enabled customer will force banks to rethink a “siloed”and “verticalised” application strategy with alternative channels, in the front end connecting bank to the Siloed applications, entry posting real time or in batch to the core banking and feed going back to the DataWarehouse at “End of Day”. The off line and application specific reconciliation processes, multiple customer IDs across applications, spreadsheet based solutions require a rethought as the customer is not looking at alternative channels (for which the technology of today has been patched with multiple sticky tapes) but looking for the alternative to channels to fulfil the service needed like buying a television or getting a loan without caring for the channel.The bankers need to move from multichannel to omni-channel. Additionally, banks can leverage the cloud providers’ for making technology led digital product implementation more nimble, drive low cost and reduce technology implementation turnaround time and save the bank from tech obsolescence. One important component of technology implementation is to hide all the complexity in the backend and simplifying the customers’ mobile experience.

 

A right mix of strategy, products, technology is the enabler for the bank staff to engage with the customer. However, the bank staff can only engage with the customer in offering digital products that suite his requirements, if she herself understands and experience digital products, their features and the benefits. The aware staff is the banks’ best bet in digitizing payments and will be able to help end consumer adopt digital platforms. With the plethora of payment products being available across the board and new ones emerging every day, banks’ investing in the reskilling and enriching its human capital would be the ones benefitting the most. The train the trainer program, the e-learning modules on digital payments, posting contents online, creating intra bank training portal, animation videos on how to do transactions digitally, creating specific workshops to “Do It Yourself” digital transactions will help the bank staff accelerate the learning and create confidence to be able to do transactions themselves, experience benefits personally and hence advocate to the customers based on the self-experience.

 

The consumer is not on-boarded to digital platform primarily because of his lack of awareness of the product itself or its attendant benefits or complicated on-boarding process. A more proactive design approach in simplifying the on-boarding process, making it standard across all banks which give unified experience to the customer in registering for digital service will be a big boost for digital banking. The Customer Relationship Manager can himself demonstrate and carry out a token digital transaction with the customer and handhold him in doing the customers’ first digital transaction. Traditional channels like print and TV/Radio can be continued to be leveraged for creating user awareness on digital products. FAQs, creating “SIRI” like virtual assistants while the customer is carrying out digital transaction, creating user experience and knowledge sharing portals where customers can leverage the knowledge and power of experienced user to solve for their problems and allay their fears will be a big boost for digital banking and create first time success stories. Umbrella Institutions like NPCI can be inducted by banks to co-create digital content for creating user awareness.

 

The route to digital payments is through collaboration with partners and thinking new use cases. This has been amply demonstrated by Apple which with its apps ecosystem processes close to 30 Bn transactions annually. Alliances with educational institutions and universities to create digital awareness will ensure that we are creating citizens of tomorrow who are less dependent on cash. The educational campuses are the place where great movements have started in the past and the campuses should be the first target for enabling digital payments. Power of students can also be harnessed in coming up with innovation around digital payments. Hackathons and Idea Workshops, Campus Innovation Challenges for creating banks’ digital strategy should be initiated by the banks. Banks can adopt campuses and drive digital payments in mission mode. Similarly large employers like railways, Government salary payment, tax collections should be converted to electronic by banks creating digital alliances and providing digital options to Governments to make or receive payments. Use of Aadhaar for authentication and payments can be the entry point for digitizing payments in the Government sector. The mobile gives the power to consumer to pay when he wants and where he wants. This translates to a rich source of data to the banks, far richer than the credit data or cash withdrawal data. The transaction data coupled with the merchant location details are the biggest key insight to the banks on the customers’ spending behaviour and more. The data becomes a source of profiling the customer spends and lifestyle, needs and requirements, shopping pattern; all of which can be harnessed to offer the right product to the right consumer or design banks’ marketing or product strategies as per the insight obtained or promotions offered based on the profile or create online real time customer specific offers. The capture of the mobile based spending and analysis of the captured data has the potential to become an alternate to CIBIL score, much more powerful than the CIBIL itself which is just a credit score. With majority of the accounts in the banking system having average balances of less than 1 lakh, bank led Mobile Wallet strategy to serve this customers on the lines of what Payment Banks is the need of the moment.

 

All this while, the branch and also now for last decade or so, the internet was the front end of the retail banking to the customer. Mobile based Apps are now set to change the ground rules by being the front end of the retail banking to the customer in the always connected world. These thumb size icons are ubiquitous and let customer do splitting and pooling payments, push and pull money, make an enquiry for the loan, pay for a cab direct from the wallet or the bank account, gift money to friend for birthday, order a pizza. The Apps based Human Mobile interface will span a number of new innovations, make payments digital by creating next generation use cases, monitor and track the status of transaction real time, lodge a service request or a complaint online real time. Given their simplicity and the usability only limited by imagination, Apps are here to stay forever and the sooner the banks start using this powerful front end to the customer, the faster will be the scaling of the digital ecosystem.

 

To drive the agenda of digital strategy, it is recommended that the banks create a position of Chief Payment Officer as part of the bank’s leadership team. The Chief Payment Officer will lead the integrated digital strategy of the bank cutting across marketing, business development, operations, product, marketing and technology. She will be the leader of the matrix organization. She will be responsible for consolidating the digital leadership governance and executing the strategy end to end.

 

She will sponsor the bank’s payments agenda to the Board, define the cornerstone of digital strategy, collaborate and synthesise with ecosystem stakeholders in delivering the strategic objectives. She will be payments evangelist who will identify digital opportunities and innovation,develop execution roadmaps,define and create value enablers, reduce inefficiencies and drive down costs and put in place risk measurement and mitigation framework.

 

Having a well-crafted and nimbly executed Digital Strategy will open new avenues for banks apart from the traditional methods of banking. Make mobile banking simple, convenient and secure. Mobile banking would surpass all other channels in cash less economy for the benefits of all stakeholders. Productivity would increase and cost decrease by an order of magnitude and mobile banking is a powerful for Financial Inclusion and government shall invest heavily in infrastructure and R&D to come up with more innovative services which would focus on ease of use and convenience of common man.

 

A day is not too far when there are rating websites for Indian Banks’ digital apps in India too like the one that is there on one of the international websites. The customer is and will be truly the king and the banks listen to the king!