Covid-19 Impact on Digital Banking in India

Ashish M. Shaji

08 Jun, 2020

The novel coronavirus outbreak has caused a crisis of a magnitude that has never known to have happened before. It has brought a considerable change in the lives of people who are affected by it. No one needs to be a scholar to understand that this pandemic would be leading us to a significant change in the way we live and conduct our daily businesses of life. It would not be wrong to assume that we could be intruding into a lifestyle that would be very different from how we lived and conducted ourselves before; having said that one of the areas that we may observe a sea of change is “Digital Banking”. Among all the things the Covid-19 may have a transforming impact on digital banking.

How does Covid-19 impact on digital banking affect consumer behaviour?

We may see a long-lasting change in the customer’s digital behavior due to this pandemic. Due to the enormous crisis, we find ourselves in; there could be a rise in the online banking activity among the people which would be a definite change from the earlier tradition of frequent visitations to banks. The customers may be forced to adopt the digital way of banking due to covid-19 impact, which earlier people would be reluctant to use. The more people use this form of banking; they will understand the convenience it brings and is less likely to continue their visits to the bank branches. We may also see a considerable acceleration in the digital trends as the importance of digital banking would surge as an impact on digital banking due to the Covid-19.

How are banks responding to the Impact on digital banking?

As per the health recommendations, the most common way of containing the spread of coronavirus is by avoiding personal contact. This implies that people are required to engage less physically and as much as possible, spend more time at homes. In such a situation, due to the impact on digital banking, the banks in various countries have reduced their opening hours and have advised more and more people to use the facility of online banking. Banks have also sent out some advisories informing their customers about the importance and benefits attached to online banking. They have also shared tutorials on how to use digital banking and have expanded the various forms of transactions that can be carried out by the customers remotely. 

Our Recommendation: Advancement of Digital Lending in India

What are the areas that will be affected due to the Covid-19 impact on digital banking?

The areas concerning digital banking, more likely to be affected are as follows:

• Change in digital customer experience

Due to the social distancing norms amid coronavirus physical banking distribution would subside and digital customer experience would be the fundamental area of differentiation and competition for financial institutions. The financial institutions would be looking to provide customer-based and straightforward banking experiences. Excellent digital customer experience will bring more and more customers to the digital landscape. Customers who are content with the digital experience are more likely to open new bank accounts with their existing banks. They may be less sensitive to price and may generate more positive oral words.

We may see the pandemic stimulating a sweeping and systematic change of high impact digital journeys in the banks like onboarding of customers and origination of products that may combine to deliver an excellent digital experience to the customers. The digital banking apps may also start providing a user-friendly and straightforward user experience in the future which will, in turn, benefit in reducing barriers of digital and financial literacy. As a result, expect the doors of digital banking to be opened to people who use technology less.

• Shift from servicing to engagement

Another impact on digital banking could be that we may see a definite shift from servicing to engagement. When the present crisis situation in the country normalizes, the customers will be seen spending fewer times at bank branches. So what does it imply? It implies that the banks would need to promote and sell more and more products through digital banking to compensate for fewer sales through its branches. There shall be the virtual business model of selling and marketing all over the world, and the banks would stop using purely transactional digital apps which include checking balances and making payments and transfers and start using apps enabling deeper customer engagement.

The banks may be required to develop digital marketing and personalization capabilities equalling those of e-commerce platforms like Google and use an exceptional amount of data in order to understand the financial needs of their customers. As per the Harvard Business Review, one of the most apparent Covid-19 impacts on digital banking would be the insertion of data-enabled services into many aspects of life than before. 

The banks can implement sophisticated data analytics tools along with real-time campaign management that would help the banks translate the data of their customers into meaningful insight and can act on such idea by providing recommendations at the right place and time. It will help in revenue generation and engagement, which would be crucial for the financial institutions after the pandemic subsides.

• Use of next-generation technologies

It may be expected that the banks, in the future, would be dealing with an accelerated pace of change in the digital market. After the pandemic, digital banking distribution may be emphasized more due to the fact that the magnitude of competition and innovation in the digital banking among the financial institutions is likely to gain pace. It may require from the financial institutions to acclimatize to changes and uncertainties at a steady pace, thereby pushing the technology infrastructure massively.

The customer needs may see a profound change and the banks to cope with these changes are likely to move away from the legacy technologies to adopting fast and scalable digital technologies such as Artificial Intelligence and cloud platforms. These technologies are more efficient and can significantly reduce the costs of processing and storage. The next-generation technologies are capable of handling enormous amounts of queries from customers and clients.

The pace of such acceleration in the digital competition would allow the banks to come up with new and updated enhancements and features through their digital banking apps and further implement them in a quick and safe way. The banks may also adopt software development techniques like agile and continuous delivery which will play a vital role in allowing the financial institutions to reduce their time to market and provide new digital services to their customers with a view to gain a competitive advantage.

Challenges arising due to the Covid 19 impact on digital banking

There are some technical as well as operational challenges that are faced by the customers and banking systems when faced with such a pandemic and its impact on digital banking. As we all know, a sizeable Indian population is unbanked that means without access to a bank account. So the main challenge for the banking sector firstly would be to embrace new technological changes themselves and thereafter introduce it to the general public. Considering a large number of people in the rural areas maybe not accustomed to digital banking introducing them to such new technology would not be an easy task.

The customers look for safety as the primary aspect in any situation, and India’s banking sector has witnessed a lot of cyber frauds that have caused huge losses. Therefore with more people switching to digital banking post-COVID 19, the banks must devise and implement stringent measures to curb these and provide a secure framework and system.

Conclusion

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