Covid-19, A- Before and after moment for Digital Transformation in Banking:

After seeing one of the most viral picture (improvised as above) all around social media specially in the banking circles, i tried to analyze the reason why and how the corona virus situation can have the analogy with that of the demonetization in India. The way demonetization drove the digital India, covid-19 can be one of the key bridging situation for digital transformation of banking in Nepal. As the impact from the corona virus intensifies, banks and financial institutions need to be excited like never to provide all banking services without the need of branches more specifically through digital channels. Unfortunately, there continues to be an over-reliance on physical delivery and inadequate education on the benefits of digital alternatives.

The corona virus pandemic has forced the locked down resulting in closure of schools, restaurants and major retailers globally to break the chain of pandemic. But the need for banking services has and will not cease. In fact, there will be an increased demand for credit availability, new accounts, new or replacement debit and credit cards, as well as general financial advice. Government bodies are rolling out circular for banks and financial institutions to reduce branch hours and few have called for complete closure of branches due to health challenge of people visiting the branch with possibility of spray. Unlike previously, the ability for consumers to conduct banking business Digitally may be a matter of life and death.

What researchers and their data suggests?

Many researches indicate that most consumers and financial institutions are not well equipped for an instant migration to digital channels. For those organizations that have focused on building completely digital solutions or have the digital channel capability (of any extent), this can be transformation period in terms of diverting customers to digital channel and provide a strong competitive advantage. Likewise, those organizations that have created tools for educating consumers on digital banking alternatives also are in a position of strength. That is why the Covid-19 situation though creating disaster all over may be the surprising factor for the Nepali banking industry as “Before and After Moment for Digital Transformation”.

Despite a significant move to digital channels, most consumers use multiple channels to manage their finances. An international research conducted by Fiserv on Banking Expectations and Experiences, 58% of consumers prefer to interact with their primary financial institution via digital channels (online or mobile). This is significantly higher than those who prefer branch interactions (32%). As expected, the channel of preference is highly related to age, with seniors having the highest preference for branch visits. All other segments prefer to interact with their primary financial organization through online and mobile, with Millennial and Gen Z having the strongest preference for online and mobile channels (77%). In other words, the segment of the population most at risk for corona virus are also the most likely to visit branches. (source Fiserv Publications)

For several years, analysts have forecasts the stiff growth in digital payments and use of digital wallet. Through it is far than the expected growth, recent increment in digital payments is emerging due to a continued migration away from cash by youth, Mandate in the use of contactless cards by card associations/schemes, the use of advance POS devices and the increased dependence and confidence on mobile devices by all generations. This estimate was done prior to the impact of pandemic. Now the new catalyst came up in the name of Covid-19 while mobile proximity payments were set to grow the fastest, mobile P2P payments would become the largest segment, increasing to hit over $600 billion annually by 2023.

X and Y Factors to the Change?

The dread worry put forward by the increasing spread of COVID-19 has resulted in transformation in overall user mindset. Social distancing and the awareness of vulnerability has changed the way consumers do their transaction who previously visited branches regularly conduct business.

For those financial institutions that invested in creating seamless, easy-to-use digital products and services, these investments will finally pay off. As consumers seek out digital options, this may also result in greater awareness and usage of fintech alternatives. The most common reason for visiting a branch was to deposit a check or withdraw cash. Both transactions can be done digitally using remote deposit capture or by having payments made with a digital wallet directly into the account.

As part of the mobile payment evolution, mobile wallets are beginning to be used more frequently, with eSewa leading and chased by Khalti, IME Pay and Mobile Banking proposition of the Banks. Digital enthusiast banks are doing massive awareness branding from 360-degree digital channels. Beside creating discount offers for digital users have become another trend to fuel the transformation with NIC ASIA bank leading through partnership with most of the online merchants like Daraz, Foodmandu, etc. Beside to support customers in accessing digital channel and resolve problem related from knowledge to transaction, most of the bank have created a digital help-desk, that operates 24X7 for service delivery.

Still the Pull Back?

While consumers are trying to adopt digital channels more than ever and embracing digital payments driven by the corona outbreak, except few players, Nepali banking industry is still alarmingly unprepared to react to an immediate shift to digital products and services. Part of the reason for this is due to the lack of readiness as only few banks have managed their digital proposition from the ‘inside-out’ as opposed to simply focusing on a prettier mobile app. Without a mobile platform that significantly modifies how transactions and products are delivered, consumers are likely to stuck with a disjointed in a hard to use application.

In a situation where consumers may be seized in their homes for an extended period, a requirement of visiting a branch at any stage starting from on-boarding to activating an account or loan operation can never be acceptable. Thus, Banks must come out of the illusion of Digital Transformation where customers’ needs to visit to the Bank at least once for their personal verification. The level of readiness to leverage other, more advanced, digital technologies such as video call available in any social channel, which is already quite popular at this moment, can be utilized as a tool for customer verification. Jargon pronounced by the bankers about open banking APIs, advanced analytics, robotic process automation, cloud computing and the Internet of things can be thought later once the basics are made correct.

What requires an immediate intervention?

We all are aware that there is no lack of understanding of what is needed to digitally transform an organization particularly a Bank including the challenges and many of the solutions that are available. So far the reason for inaction might be the complacent philosophy that was calmed into a sense of security because of strong financial results. But financial results that are not digitally prepared (not prepared digitally) is most likely to receive an ache. If consumers cannot deposit a check from their home, make digital payments, open a new *“Activated”* account or apply for a new personal loan remotely, market share will soon be lost. Further, the banks that claim to have a focus on strong consumer experience and loyalty will be negatively impacted. Three strategies will be needed immediately to respond and Tap this Before-After Moment to transform:

·      Digital First Approach: Once the health concerns around the corona virus decrease/seize and if banks are not prepared, consumer will have no choice to return to previous behaviors of visiting the branch for depositing checks, getting cash, depositing cash or getting advice. Banks and Financial Institutions need to eliminate the need to visit a branch for any reason by offering all their services over the website, mobile app or ATM Machine. Not an impossible task, it has been done by many organizations around the world. What it requires is a clear vision, easy partnership or vendor engagement mechanism and a smart execution team.

·      Easy Customer Communication: At any crisis-situation like this, consumers are likely to look for options to stay safe without stopping their regular activity like banking and payment. It is imperative for banks and Financial Institute to reach out to any customer or stakeholder who has done a branch transaction and inform them of digital options. Its easy- prepare a tutorial video or process flow diagram in native language (for native users) and share in the mutual communication channel. Set-up a strong team (working from home) available for any kind of support for customer in all communication channel including social media.

·      Increase Security Protocol, Build Awareness but Relax the Procedure: With the possible major influx of new digital consumers and transactions, security around transactions has never been more important. A strong, agile, proactive and vigilant information security protocol and team is required to be setup. Awareness centered communication around all digital users will be much required for new/all segment of consumers who may be completely unfamiliar with digital privacy and security. The communication will enhance the confidence in using the digital channel, which has been the biggest showstopper for a long time. Relaxation on the standard security procedure such as requirement of visiting branch for activating service should be looked upon by utilizing digital channel such as video call and online forms.

By focusing the entire available resources on these strategies will go a long way towards serving the consumer at a time of international crisis and likely to transform in terms of customer mindset for Digital days ahead. However, it is mandatory for banks and financial institutions to streamline digital engagement and to keep customers away from any sort of threats. This can be done if banks eliminate the need for a branch interaction by setting back office processes and deliver consumer safety messages about banking from home using their never left apart phone and computer.

Sources: Based on personal experience and various research and article published around digital space.