Traditionally, the banking and financial services industry has been a highly process-oriented and structured one. This was, in a way, necessary because banks deal with people's money. Hence, a staid and stable approach that typically inspires confidence was perceived as desirable. But in the past few years, banks have started embracing qualities such as agility, fast decision-making and experimentation - which are usually associated with start-ups and fintech companies. However, this needs some added acceleration in order to build a new-age culture.
Banks have always been at the forefront of innovation. This was partly because of the regulatory nudge, and partly because of customer demand for better service. For instance, the 1980s saw the introduction of MICR cheques that enabled electronic transmission. The 1990s saw computerisation of branches and adoption of core banking technology, which enabled anywhere banking. The introduction of ATMs made cash transactions a breeze. In the first decade of the 2000s, with internet becoming all-pervasive, banks were able to offer electronic payment systems like NEFT, RTGS, and IMPS. In this decade, we have seen app-based banking taking off. However, the customer-first approach and openness to experiment that is the hallmark of start-ups, needs a completely different approach and a new way of thinking. The assumption that working incrementally with the luxury of time like we had in the past will enable us to compete with start-ups, has its own pitfalls.
Today, when tech companies are getting onto the payments wagon, it has become essential for banks to weave in technology in their operations. This has also made it essential for banks to imbibe the start-up culture in the way they function. Learn as you go is the way forward. But this should continue to be in tandem with governance and compliance, which is the bedrock of banking.
Practices like eKYC, paperless loan processing and faster disbursal of funds, instant account opening, reaching customers through social media, analysing social scores for customer evaluation, using artificial intelligence and machine learning for improving customer service, etc., are now being followed across financial institutions. Some of these changes were introduced by start-ups.
In All Directions
- Banks aim to offer completely digital products through multiple channels. They have to adapt rapidly, experiment and build scale. Mistakes will be made, but technology allows banks to identify them quickly and redesign, as well as offer customised products. This, however, does not mean that the role of branches and physical touch points will diminish. A multi-pronged approach is a start-up characteristic that banks are welcoming.
Being nimble: Start-ups are nimble and quick to respond. Banks are gradually catching up. Banks aim to offer completely digital products through multiple channels. Technology has made it possible to reach out to customers instead of waiting for customers to come to us. We are embracing this to improve customer proposition. Customisation and personalisation will go a long way in customer satisfaction and retention. Undoubtedly, there is still a lot of work to be done in this regard.
Banks must follow attributes of these new age companies such as adapting rapidly, experimenting and building scale. With this also comes the willingness to make mistakes and learn from them. The use of technology allows this. If customers are not happy with a product we can identify this quickly and redesign with better features. The new culture of a quick turnaround is something banks have gained from. The mind-set required today is that you are only as good as your last performance.
Customer centricity: Today, enabled by technology, service-providers are addressing customer needs faster than ever before. Besides, it is also possible to offer products to customers based on their specific preferences. Yet, despite the widening of banks' digital reach, the role of branches and physical touch points for customers has not diminished. A multi-pronged approach to any customer service requirement is another start-up characteristic that banks have welcomed. Embedding oneself in the customer's journey is a way to ensure mindshare. It is imperative to reach out to customers, so far not serviced, by leveraging technology. Recognising this trend, banks have been quick to partner with start-ups.
New skill sets: The focus has shifted from solely distribution and service-driven skills. Candidates are now hired from niche areas like analytics, design, risk, compliance, and cyber security, who can add value to the bank's digital transformation. Along with this, a continuous re-skilling of the existing workforce to enhance competencies will be another focus area. Digital inclusion is an area where a lot is being done. Analytics has emerged as a tool for customer-centricity, improving product offering and overall service quality. This will continue to be a key focus area in the future too.
Micro-entrepreneurship: We need to encourage employees to think and act like entrepreneurs. The message to employees should be to take ownership of their functions and deliver as a business owner would. This will help improve employee engagement with the organisation, too. There is a need for personalisation in employee experience as well. Just as life spans of companies are getting shorter, projects within an organisation will get more dynamic. Teams will increasingly work in partnerships with one another and share resources in a more organic way. Cross-functioning is the need of the hour.
The technology and innovation-led journey in the financial services segment has thrown up lot of opportunities for new and old players alike. This will benefit all stakeholders - the customer, the organisation and the employees.
Amitabh Chaudhry is MD and CEO of Axis Bank