Digital banking: The journey ahead

Digitalisation is not merely online banking, internet banking, mobile banking or paperless banking. Digital banking is the application of new technology to transform existing business model to a new business model which will itself produce new customer base, unveil new financial services, ensure faster and seamless services to customers with reduced operational cost, zero error, ease of use  and obviously, optimum security. It's not only a new channel; rather it's a new way of transforming existing transaction-based banking to experience- based banking which can be accessed by the customer anytime and from anywhere.
FACTORS COMPELLING DIGITALISATION:
a. Saturation of Internet and smartphone: According to the website of the Bangladesh Telecommunications Regulatory Commission (BTRC), the total number of internet subscribers (considering those who are using internet for the last 90 days) reached 63.195 million at the end of July, 2016. The saturation of internet, smart phones and growth in e-commerce is changing consumer behaviour.
b. Changes in buying decision: Purchase decision will be influenced by social media, peer reviewing of product/services, online research, digital payment solution, etc.
c. National thrive for digitalisation: Digitalisation is now a national movement - from union offices to the Secretariat and from village farmers to university students all are involved.
WHY BANKS WILL GO DIGITAL:
a. To capture future customer equity: The age group from 15 to 25 is 'Generation Z or iGeneration' and they are digitally savvy in the meantime. They will be the future clients of banks in Bangladesh. They will be professionals of leading multinational/local companies and will be dealing with banks. Again, some of them will be entrepreneurs. A few members of this group are next generation of present entrepreneurs who own largest business groups in our country. Next generation will be more educated and tech savvy than their predecessors.
b. To enhance internal connectivity: Digitalisation increases connectivity not only with customers but also among employees. Banks must have their own internet not only with mere information on company background and management profile but also with all other resources i.e. profiles of all employees, internal circulars, regulator's circulars, national/international economic data, e-library of books on banking/economics, etc.  Internet should be easily accessible where employees can post about a problem and discuss about it from different places. It will increase communication, collaboration and coordination.
c. To ensure maximum reach and customer engagement: Digital marketing will also provide opportunity to boost banks' brands in social media. One thing is pretty sure that 'Generation Z' will spend most of their time on social media. Most probably, any ad in social media is going to get more reach than that in any other print/electronic media. Moreover, digital marketing can engage customers in brand building. For example, if a bank posts an ad congratulating national cricket team from its Facebook Business (FB) page on the occasion of their victory, others will share it or tag others. In this way, banks may post ad on others' national/international days.
d. To make banking interesting: Clients, especially in retail banking, won't seek banking services but banking experiences in the future. It should be more interesting and fun-based. 'Gamification in Banking' is now known in Europe, even in India. It is the way of associating fun, interest and excitement to traditional tedious banking services to convert it into more amusing banking experiences. ICICI Bank is alluring clients about its various services by creating fun-based game (http://www.icicibankgames. com/). The most important part is that existing clients will share these games/ apps in social media.
e. To ensure effective decision making: Digitalisation draws 'Big Data' and advanced analyses to take customised decision for sales, product innovation, pricing, etc. Banks continuously analyse clients, define different segments and offer products and services based on their needs and expectations on real-time basis. BBVA, in Spain, established BBVA Data & Analytics (https://www.bbvadata.com/) to continuously analyse clients' behaviour, economic data etc. to transform unseen and unutilised Big Data into financial intelligence.

f. To ensure banking at anytime, anywhere: It's not merely internet banking for balance check, fund transfer, bill payment, etc. Virtual RM (Relationship Manager) for selective clients, chat and instant messaging, automated product recommendations, etc. will play a vital role in the future.
g. To establish internal e-process: For going truly digital, banks' internal process should be done digitally. For example, investment proposals can be processed through banks' internet/core banking software. Credit analyst will log into system by his ID and password and will input the client's unique Customer relationship management (CRM) number. Client's all information (name of the concern, proprietor's/partners'/directors' name and other detailed info, share holding percentage, addresses (showroom, office, factory) of the concern, loan availing history, liability position of the concern/allied concerns, detailed breakdown of liability position, etc.) will be auto-generated through system just after entering client's unique CRM. System will also automatically collect controlled Image Base (CIB) data through linkage from CIB department, which won't be changed by anyone. Proposed/ enhanced credit facilities will be selected from the menus. In this way, all other information, description, justification, attachment of scanned copies, etc. can be placed through system by the credit analyst from his ID. Then, Branch Manager/Head of Branch will log into the system by using his ID and password and will give correction to the e-proposal and will forward it to CHO assessment (business and risk) officers. CHO credit analyst will place his own justification and will forward it to CEC (Credit Evaluation Committee) members from their ID. Then, CEC members may provide justifications for sanctioning/refusing/enhancing credit facilities. Respective branch manager will be notified simultaneously. In this process, branch manager, CHO officials and CEC members will be able to interact digitally by commenting and replying to each other without sitting together in a formal meeting and all the processes will be e-documented to the server. This process will reduce processing time incredibly and ensure proper and transparent justification. This will also put 'Paperless Banking' into practice. This is just an example of e-process. In this way, banks may initiate e-process in different arenas. Hana Financial Group, in South Korea, is offering home loan as 'One Click Mortgaged Loan' to its existing clients who have at least a deposit account and clients don't need to visit branch and all the processes are done digitally. In Bangladesh, banks may initially offer credit card as 'Credit Card by One Click'.
HOW BANKS WILL SHIFT TO DIGITAL:
a. Focus on client: The challenge is getting closure to clients' expectations and this should be the centre of the bank. Customer focus in future will include social networks, maintaining live interactions on those, etc. Highly enabled technology will be continuously analysing these social networks and will offer them value-based customised products. For example, we can say about American Express's 'Link, Like and Love' (URL: http://apps.facebook.com/amexlinklikelove) which accesses likes, interests, behaviour, expectations, preferences, etc. of card members on social media to swiftly react to clients' preferences.
b. Creativity and innovation: Dedication for changes, innovations and new ideas can be the best way for digitalisation. Our conservative traditional banking system becomes inherent to us and prevents us from being innovative. To add insult to the injury, we also refuse to think outside the box as we possess a preset perception that there is nothing to create new in banking industry. The best way is to build a team consisting of e-commerce/digital marketing expertise and bankers to bring out the innovation which will comply with existing regulations, ensure safety and will create values as well.
c. Deployment and integration of new technologies: Financial Technologies or 'Fin-Tech' will surely play a vital role in the future. It's not  deploying new technologies; rather it's all about a cultural change to integrate new technology into core business value chain where branches, call centres, apps and virtual bankers will be at the 'Front End'; customer intelligence software for value-added functionalities like peer-to-peer payments, loyalty programmes, personal finance management tools and many more will be in the 'Middle'. Core banking software will be at the 'Back End'.
d. Use of human resources: Using human resources for optimum use of new 'Fin-Techs' will be most challenging. Training and development in this regard are not enough. Mindset all over the organisation for a tech-savvy culture is important as the new game will be ushered in by human resources. 'Mindset' is not all about complying with internal new policies for digitalisation. It's all about curiosity and embrace by the employees for new services, technological changes, etc. Less than 5.0 per cent bankers use their own bank's app in their smart phones.  
e. Digital reach: For being digital, banks must reach digitally. Banks should have their own official FB page to promote their services/CSR activities, to respond to query instantly on their page. Bangladesh Bank, the central bank, has its own official Facebook Page to interact digitally. But, most of the commercial banks don't have their own FB page. Even if they have, they don't respond to any query by prospective or existing client. Perhaps, no banks in Bangladesh have employee(s) who is/are exclusively responsible to manage their FB page. It's not only about FB/Twitter page. It includes digital marketing, analysing social behaviour of customers and many more.
FUTURE ROLES OF BRICK & MORTAR BRANCHES: Branches will also play a significant role in the future in banks' profit generation. Future banking experience will be based on omni-channel banking experience where branch will play a different role than what it is today. Today's traditional branch- based banking will be replaced by an integrated multi-channel approach. In this approach, clients may initiate a transaction through mobile app or branch and will complete it visiting branch or logging into mobile app respectively.  In future, clients will not make their decision after going to a branch. Rather, they will make decision from online peer reviews, interaction with virtual customer service executives and then will visit branch. To establish initial relationship with the clients, branch's role will remain the same. Branches will also be required for (a) security and (b) regulatory requirements for identification of clients as Know your customer (KYC) is important to prevent money laundering and terrorist financing. Branches in the future will be more like self-service centres. However, today's overlapping branch density and size of branch will be reduced significantly and cost reduction will follow accordingly.
DIGITAL TRANSFORMATION & ROLES OF CEO: Digital transformation is not just deploying highly enabled fin-techs. It's all about changing the organisational culture, readiness of employees to embrace digitalisation and collaboration of business unit with IT department without intervening in customer service and securing profit growth. The Chief Executive Officer (CEO) should be the first person who will initiate digitalisation. CEO along with top management will need to visualise the future to act ahead of the time, to set digital mission in line with the organisational mission, vision and business objectives. Another important thing is that future CEOs will need to have IT expertise. A few months ago, Board of Directors of a commercial bank in Bangladesh appointed someone who was the head of IT department of his previous bank.
DIGITALIZATION VS. CYBERCRIMES: Digitalisation will break ties of traditional banking system and cyber crimes are likely to increase. But, it won't be a wise decision not to cuddle digitalisation. Banks will have to develop internal process to ensure safety. But, it's not all. Awareness building among employees and clients about 'To Do' and 'Not To Do' to ensure safety is mostly important. Banks should arrange training for employees regarding this. Banks may arrange 'Awareness Programme' for clients, publish online/offline ad showing those 'To Do' and 'Not to Do', etc. Awareness among employees and clients and strong internal security process will ensure the safety.
A VISUALIZATION OF FUTURE DIGITAL BANKING IN BANGLADESH: Next-generation customers, who will be tech-savvy, will jump to digital banks like cell phone users who jumped to Apple/Samsung from Nokia. Thinking ahead of the time and being the first mover are most important for sustainable growth. In our country, digital banking is limited to only internet banking/mobile app. The big scenario is yet to come. Video advisory, Wallet Solution, Integrated App Suite, PFM (Personal Finance Management) tool, Person to Person Lending, Crowd Funding, Artificial Intelligence, Social Based Services, seamless channel integration, big data along with data of social media behaviour and system integration, change in buying pattern, etc., will create the playground of digital banking in the future which will bring restructuring and new roles for existing branches, change existing business models and even some regulatory changes.
In future, people will open a bank account without visiting a branch. S/he will visit a booth, press 'Open a Bank A/C' and will place his/her smart NID card. Basic information will be auto- loaded to system from micro chip/barcode of smart NID (National Identity). Even, basic information can be loaded automatically from one's fingerprint. Then, s/he will fill up other necessary information as required. Then, s/he will provide information about nominee along with his/her smart NID card number. After that, the system will cross-check those information against the smart NID number. Then, s/he will press button to capture photo to ensure that card holder himself/herself is opening the bank account and will sign digitally on the touch screen or scan and upload his/her signature. After that, bank's back office will match captured photo with smart NID photo, verify his address through issuing thanks letter, in person verification or by third party. We think 'INTRODUCER' to open a bank account is no longer needed as information (name, father, mother, address, occupation, date of birth or DOB) can be verified from server. If first depository account is approved, s/he will be able to open FDR/DPS from mobile app. In this way, process of loan sanctioning, disbursement, repayment, etc., may be modified. ATM/Debit card will be replaced by NFC (Near-field Communication) enabled smartphone. Banking will be more cashless. Even, video confirmation through app, which will be stored to server, for a payment may be another alternative to cheque leaf/letter for any other instruction.  
We know these are funny and there are many regulatory limitations for the processes we are visualising. It's just a dream. Dream doesn't need to be stringent to regulations. Who knows regulations may get altered and dream may come true!
One thing is pretty sure that, banks in Bangladesh will become more digital whatever the extent will be! It will be influenced by (a) Capabilities of Bank, (b) Industry Dynamism, (c) Customer Demand and (d) Regulatory Environment. Regulatory environment is much more supportive now than it had been ever. Real-time gross settlement systems (RTGS), Bangladesh Electronic Funds Transfer Network. (BEFTN), etc., are some examples.
The government is patronising digitalisation from union level to the Secretariat. Future banking industry will be dynamic and 'Generation Z' will demand digital banking. So, it's high time for banks to increase its capabilities. 'Capabilities' is not only about deploying technology. It will be tough to change existing business model to a fast, innovative, low-cost multi-channel digital banking complying with upcoming revised regulatory guidelines. Forward- thinking bank management will keep an eye on industry dynamism and customer expectations and will go for digitalisation for a better and sustainable inclusive growth.
The writer is JAVP, Mutual
Trust Bank Limited
sharif_mkt.du@yahoo.com