The need of the hour
Being digital is all the rage, but being truly digital is essential for most, if not all, banks. Unfortunately, for some, we have found that even after being digitized, product interfaces are not seamless, let alone personalized.
Today’s world is synonymous with digital transformation, having all the facilities at your fingertips, housed in one app, in one versatile device. In Bangladesh, while some so-called “digitally savvy banks” deliver their digital services to customers through different interfaces or apps for different offerings, this falls far short of the digital banking efficiency that is the need of the hour.
Naturally, legacy banks suffer from their age-old systems, processes and platforms, which are not nimble enough to meet today’s demands. Consequently, by tweaking here and there the interface of their old banking application, some boast of having become “digital”.
Until everything is integrated and the backend is fully digitized end-to-end, it remains outdated compared to what Neo Banks is supposed to offer.
Being digital is all the rage, but being truly digital is essential for most if not all of these banks today. Unfortunately, for some, we have found that even after being digitized, product interfaces are not seamless, let alone personalized.
It is because of the inheritance that these banks manage. In addition, the lack of understanding of digitization, digitization and digital transformation is a significant factor. The lack of resources or leaders who understand the full essence of these three elements on a stand-alone basis as well as collectively has made the digital banking scenario so murky.
In addition, in traditional banks, often the lack of support from board stakeholders – who most of the time do not fully realize the potential or importance of digital transformation – especially with regards to safeguarding budgetary and logistical, makes it harder for banks to fully embrace digital transformation.
For this to happen, one needs to distinguish between the terms digitization, digitization and digital transformation which are often used interchangeably in organizations in Bangladesh, and specifically within banks.
Many consider them to be synonyms, but in practice the difference is quite significant. For organizations, there is an urgent need to close this knowledge gap, as growing digital transformation trends, the explosion of data and the Covid-19 pandemic have amplified the need to be agile and stay competitive despite disruption. .
In its most rudimentary sense, digitization is the process of changing from analog to digital form, also known as digital enablement, such as converting music from CDs and vinyl records to MP3s or paper documents into digital files saved on a computer.
Many banks confuse this as digital. The conversion or representation of physical or non-digital objects into a digital format means that this information can now be used by a computer system.
The creation of digital versions of these so-called “physical information carriers” allows us to extract data that can be processed, transmitted or used to optimize processes. In this regard, digitization also includes the automation of existing manual and paper-based processes. Essentially, digitization creates value by reducing costs and laying the foundation for business use cases that leverage data.
Distinguishing digitization from digitization may seem like a finicky exercise, but they are very different concepts with very different implications. The definition of digitalization is – “the use of digital technologies and digitized data to impact the way work is done, transform the way customers and businesses engage and interact, and create new sources of digital income”.
In other words, digitization cannot be done without digitization. Going back to previous examples, a digitization initiative could include uploading these converted files to the cloud to transform collaboration and reporting processes and using analytical tools to generate actionable insights and insights to mitigate risks and promote efficiency in future projects.
Digitization is an important step towards digital transformation and has a huge impact on product, service delivery and people. It marks a change of culture within an organization, which has an important role to play in managing change.
Digital transformation is broader than that; more than applying technology to an existing business, it is the ability to adapt quickly when needed through the intelligent use of technology and information.
To reiterate, digital transformation is a journey and while digitization focuses on technology, digital transformation focuses on adding value for the end user. It’s more about the people and the strategic direction of the business than the technology.
Going back to the personalization of bank offers, it is the data of all customers and the use of AI / ML to distinguish models and parameters towards the personalization of each offer for each customer that aggregates to million for each bank is still a far-fetched idea in our country.
Another big challenge for existing banks is the mindset of their existing employee base. Change management is an arduous task to carry out for such a change to be introduced. It takes the mindset, including that of the sponsors, in the case of Bangladeshi private banks, who need to view the digital transformation journey as a rewarding long-term experience. managed by compromising short-term losses. Consideration should be given to the expense tags attached to it and the high rewards that can be recouped over a period of time and not in the blink of an eye.
Additionally, skilled resources to lead the journey and play with the data are also rare commodities in today’s industry. Conventional bankers may not be ideal resources for all roles on this journey, as some migration from Telco, MFS, ISVs and fintech is a prerequisite to fill the gaps quickly.
Moreover, collaboration with fintech is of crucial importance at this stage which, for the most part, is taboo. Few of the CEOs of banks today think like the CEO of SCB Group and say that banks must also be led today as CEOs of Fintech.
I add to that and say that banks today also need to be led by an FMCG CEO. You have to follow and decipher the evolution of customers’ tastes and preferences. Gone are the days of “one size fits all” solutions.
Plain vanilla deposit products are old fashioned for today’s generation. You have to think and know each client’s next plan to buy a new iPhone or a vacation in Thailand or buy a new condo and offer each of them a personalized savings plan according to each of their financial means. Now, this would only be possible if one had a data scientist who processes all the data of each customer and plays with it.
A total paradigm shift is the call of the times now – Neo Bank, Challenge Bank or Digital Bank (whatever we call it) is the “Netflix of Banking”. That’s what we should have now. Think of an app that brings you a complete financial solution covering your deposit/loan/payment requirements and so on in one click and keeps sending you one-time notification of offers that are made to order based on your means only.
This is happening today in many geographic regions and in our surroundings as well. An equal responsibility now lies with the regulator to take a fresh look at the system and allow fintech or similar entities to provide the solution.
Regulators will have to understand the contemporary trend and allow it to enter here as well. A fresh start with a coordinated approach from incumbent/interested players as well as regulators can pave the way for digital banks to start operations as soon as possible.
There is a universal belief among most banks in the country that there is a bank you need to meet the needs of businesses, whereas in a rapidly expanding middle class country like ours, you can reduce the concentration of risk focusing more on the retail/MSME verticals.
In today’s era, only a Digi Bank knows its customers inside out and can reach millions in a jiffy. It can offer services and proposals for everyone at their sole convenience and according to their tastes and preferences.
Like Netflix – it can feature different genres of products for the customer to pick and choose from. Banks can then continue to leverage the data to offer solutions to every end user before they even think of the need.
Mitigation of risk, minimization of costs vis-à-vis significant scale in a short time, understanding and knowing each customer end-to-end and integration at every stage of the mode everyday life of each customer are what collectively a DigiBank can offer.
Digital Bangladesh is the government’s vision and its facilitation over the past decade is commendable. MFS has made its space, start-ups are consolidating more. G2P has become an acceptable standard and that only through digital means. At this point, to fully reap the benefits of Digital Bangladesh, we need to have digital banks in play without further ado and that not only within existing banks but in collaboration with a fintech or related player.