An effective digital strategy can boost profitability by 40 % or erode it as rapidly as 35% in the next 5 years - if you don't get it right, says one study. Another says digitization is at top the agenda at retail banks, ahead of all else. There is universal agreement that the future of banking, indeed every business, is digital. Most banks you speak to are cognizant of the need to digitize, and fast; a number of them have already got a plan going.
So, you would think that at least as far as digitization is concerned, everyone in the industry is on the same page.
That notion was quickly dispelled at a recent conference titled "Beyond Digital" which was organized by IDC Financial Insights in Singapore. Most participants had a different definition and understanding of digital banking, with a surprising number still limiting its scope to the customer touch point. The same narrow perception applied to digital strategy - which was seen as one more entry in a list comprising org, product, marketing, people, and other strategies.
Clearly, there is some way to go before banks attain an evolved digital end-state, the state in which they become "truly digital". To start with, a common definition of what digital banking entails could be very useful. At Infosys Finacle, we believe there are four fundamental characteristics define the truly digital bank. One, the customer is its focal point, and customer experience, its primary lever for achieving differentiation and growth. Two, the bank relies on a wide ecosystem of product and service partners to deliver "universal banking", rather than trying to do everything on its own. Three, the truly digital bank leverages automation not only at the back end, or for the improvement of efficiency, but to actually deliver personalized, no-break service experiences to customers. This it does through large-scale automation across all front and back-end systems and processes. Four, the bank adopts advanced analytics to personalize the banking experience to individual context and need, and also to continuously refine products and services.
From the above it is clear that truly digital banking is an all-encompassing state, which requires everything the bank is, or does, to be re-examined and reinvented to suit the demands of next generation banking. Effecting such a fundamental transformation calls for a deep and comprehensive digital strategy, which subsumes every other strategy in the bank. And while the fundamental precepts of truly digital banking remain the same for all, every bank would need to chart it own path of evolution. So while two banks might appear to have the same strategy on the surface, they will inevitably execute it differently. And therein lies an important source of competitive advantage for the truly digital bank.