By Rajashekara Maiya,VP, Global Head-Business Consulting-Finacle at Infosys

Power to the consumer

Consumer expectations continue to increase rapidly, leaning further towards touchless experience and instant fulfilment. No doubt the pandemic played a part in this, but the seeds had been sown long before 2020 by the following developments:

For the past five to ten years, power has been shifting towards “end-points” to rest in the hands of consumers. This shift is best captured in numbers: buyers of the iPhone 14 will hold 16 billion transistors in their palms, which is more than twice the number of transistors in their office computers. With bigger and bigger compute and storage coming at smaller and smaller size and cost, digital power is becoming more accessible than ever for the ordinary customer.

In parallel, there has been a reversal of enterprise and consumer roles in driving digital applications forward, with consumer applications becoming “enterprised” and enterprise applications getting “consumerized”. For example, consumers are performing an enterprise role such as infrastructure provisioning by procuring storage on cloud, while enterprises are using consumer gaming techniques to spread financial awareness. Industry roles are also reversing, as technology companies cross over into banking territory, and banks become technology-led organizations.

This cross-pollination of trends is blurring the lines between businesses, such that consumers neither know, nor care, where a particular service is originating from. There’s no better example than instant UPI-based payments that the same customer could execute from a Google Pay app, on the Amazon website, or via an Internet bank portal at different times.

Thirdly, the scope of virtualization has expanded beyond technology elements – desktop, server, OS etc. – to include almost every possible experience. This has disrupted a number of experience-centric industries, such as education, entertainment, and financial services. And once the metaverse takes hold, virtual immersive experiences will become more important than some physical, real-world experiences.

These changes are presenting the banking industry with several challenges on the customer front:

Convert rational engagement to emotional engagement

The first is how to engage the most powerful and informed customer generation ever. Or more specifically, finding a way to emotionally engage them. Prior studies show that emotionally engaged banking customers generate 70 percent more business than rationally engaged customers. A study by Gallup shows companies that manage this record 63 percent lower customer attrition and 23 percent better overall performance compared to their rivals.

Convert engagement into profitability

Banks also want to make engaged customers more profitable. Empirical evidence shows that 40 percent of customers yield more than 60 percent of the profit in any organization, including banks; in some banks, it is even more skewed, at 20-80. While even the customers who don’t yield profit are useful for building scale, more equitable profit generation is better on so many counts, not least because it blunts the impact of churn.

Convert unbanked to financially included

The third challenge is to bring the next “billion” (or other number based on context) customers on board formal banking services. Incumbent banks are nearing the limit of the business they can get from their existing customers, who are also being wooed aggressively by next-generation providers, such as big tech, fintech and neo-banks. So, the key to future-proofing the business is the millions and millions of unbanked and underbanked consumers that are out there. The initial challenge then, is acquiring these customers economically, quickly and in a frictionless manner, to create the next level of opportunity for the organization and the larger economy. Think jobs, wealth, market access, and so on.

For hard proof that this is indeed possible, banks can study the evolution of the Indian financial landscape. By throwing open access to payments infrastructure in the form of the Unified Payments Interface, the country scripted history by taking digital financial inclusion to the masses in record time. In August, UPI-based payment transactions exceeded 6.5 billion, and are showing no signs of slowing down. Other initiatives, such as Open Network for Digital Commerce (ONDC) and Open Credit Enabled Network (OCEN), will democratize access to financial solutions besides payments.

Empower and engage

Having onboarded customers en-masse, how can banks engage them at scale? Infosys Finacle has devised a holistic model for customer engagement called the “Golden Engagement Circle”, which is featured in a new report titled, “Maximizing Digital Banking Engagement”, produced jointly with Qorus.

According to the report, just 14 percent of banks are successfully engaging customers at scale, while 13 percent are empowering employees with insights so they can build stronger customer relationships.

Financial institutions of varying organizational maturity can draw ideas from the Golden Engagement Circle on how to engage customers better while fulfilling their financial needs. Further, the model envisages how, when banks put people, processes and technology at the center of everything, they empower customers across onboarding, conversation, service and self-service transactions. This should be executed on all channels – traditional, contemporary, emerging and open (banking). Some action is needed here because the study found that 62 percent of banks had established contemporary channels, but only 3 percent had succeeded with futuristic channels.

When one looks back at history, the best business organizations were those that displayed humility and empathy for customers. On the other hand, when self-interest rises above customer interest, it can cause great harm, such as trigger the Great Financial Crisis of 2008-9. The principle of the Golden Engagement Circle is to always work towards delivering value to customers by helping them save, pay, borrow, invest and insure better.

About Author:

Rajashekara Maiya is responsible for charting Finacle’s product strategy and defining its product roadmap, strategic acquisitions, alliance partnerships, and client engagements. He represents the company while interacting with external stakeholders such as analysts and the media. He is also responsible for the business consulting practice at Finacle, Eco-system innovation Group along with Cloud, Blockchain business. He has played several roles across diverse areas, including product management, solution architecture, implementation, and pre-sales over the last 20 years at Infosys.

Maiya has been instrumental in the conceptualization and planning of Finacle Enterprise – the latest addition to the Finacle portfolio designed to deliver simplified transformation and progressive modernization capabilities to global banks. Maiya specializes in core banking, risk management, regulations, and compliance. He has been quoted on these and other topics in reputed publications such as Forbes, The Banker, Banking Technology, The Economist, Business Line, BBC Radio, and the Economic Times. He is on the expert panel of the McKinsey Quarterly; is a member of the XBRL Abstract Modelling Task Force (AMTF) Group, MIT Technology Review Global Panel; and is an Associate member of the Institute of Chartered Accountants of India.

Maiya holds several patents and has pending patents in the areas of partner portals, delivery channels, offline banking, and customer experience. Maiya is also a co-author of the book called ‘SMACing the Bank’.