General

The Digital Company: It is Much More Than Just “Online and mobile”

As per one of the research, it has been found out that approximately some single individual pics up the phone 85 times a day so it seems obvious that a company should be rushing to strengthen their digital capabilities.

From a report of World Retail Banking 2016 of Capgemini, it states that 96% of the people agree that industry is evolving towards digital banking ecosystem and only 12.9% people agree that the core system can support such an ecosystem. Today only 14% of loan applications are submitted via digital channels, but soon the customers will demand more.

The reason for this slower progress of digitalization is lack of focus, limited awareness about the benefit associated with an end to end digital, the challenges of dealing with the legacy system and inability to effectively mitigate the risk associated with transformation. To address this problem it is necessary to become aware of the possibilities of digital ecosystem in lending.

The digital journey starts from ensuring that prospective customers are offered appropriate products, which are specifically tailored to meet their requirements. One of the main reason for the quick rise of FinTech Companies has been their razor-sharp focus on specific customer requirements and bridging the gaps in the service provided by the existing players. Along with the accurate identification of the target segments and their requirements, it is equally important for banks, financial institutions, and other industries to quickly launch tailored products for benefiting from the first mover advantage.

Moving on to the market launch phase, customers react very differently to different channels. To maximize conversions, it is vital for companies to approach the customer using the right channel, the one preferred by the individual customer. Insights from predictive analytics solutions have been proven to be very productive in ensuring the success of digital initiatives.

To improve the healthiness of the company’s credit portfolio, a comprehensive credit scoring mechanism can help filter the credit unworthy applications right at the beginning of the cycle while also helping to automate the credit decision making process in a standardized manner.  Based on the unique digital experience provided by companies in travel, retail, hospitality, and entertainment, customers expect a similar experience in bank lending. Capabilities like pre-approved offers, the ability to self-apply on mobile, use of digitized document submissions, Omni-channel experiences and complete visibility of their application status may very soon cease to be a differentiator, instead of becoming table stakes.  Offering speed and convenience to the customer is a must to create a win-win proposition in the competitive marketplace.

Customers don’t want to spend the time and bankers would like to reduce their costs. Servicing loans can play a strong role here. In a digitally evolved setup, the majority of customer transactions could be easily managed by the customer, anytime anywhere, as per their convenience. Delinquency management is another area offering scope for digital. Keeping delinquencies low and preventing them from turning into Non-Performing Loans (NPLs) may be well supported by leveraging some predictive analytics based systematic approach, backed by data-driven decisions. Identifying early which customers might turn delinquent and take the most appropriate corrective action can deliver tremendous benefits. Loan collections so far, have largely been manual effort intensive, with tremendous room for improving the operational efficiency by way of automation and use of analytics.

Much has been said about how the new age FinTech companies have combined their innovative business models and the latest technology to create a very customer-centric approach, which has struck a chord with the customers.  The mood in banking and financial services has now shifted from viewing Fin-Techs as competitors to that of a possible partner. Fin-Techs offer the opportunity for banks to learn about new technologies and importance of creating good user experiences. FinTechs, in turn, can unravel details of handling regulatory compliance, widespread distribution and higher volume processing from the banks.  As per a BCG Report, by ensuring operational and digital excellence and radical simplicity, companies can reduce operating expenses by 15% to 25%, increase pre-tax profit by 20% to 30%, and boost pre-tax profit margins by 5 to 10 percentage points.

In some parts of the world, where there are large numbers of people who are not internet/smartphone savvy, they may continue to prefer branch banking. However, digital is not just about offering online and mobile access, but it is also about ensuring optimization, automation standardization in the business processes. When these initiatives result in faster processing, transparency in service, quicker resolution of queries, personalization, lower cost and easy availability of service, innovative offerings, and wider reach, everyone will be benefitted not just those who use digital channels.

By looking at digitalization, lenders can leverage the power of technology to unlock tremendous value for both their business and customers. The infographic touches upon the various aspects of digitization in lending and the value adds that be easily incorporated by a next-generation lender to position itself as a smart and customer-centric service provider of choice.