Customer-centric Transformation in Digital Banking

Riddhi Dutta is an experienced and respected business leader with close to 20 years of experience in Banking, Treasury, and Financial Services domains. Riddhi's strategic insights and people-centric leadership have propelled the company's growth to surpass business targets, while also fostering robust partnerships within the banking community in Asia.

In a recent conversation with Prisila, Correspondent, Asia Business Outlook, Riddhi shared his insights on various aspects pertaining to customer-centric digital transformation from a financial services standpoint. Below are the excerpts of the exclusive interview.

The concept of customer-centric transformation in the context of digital banking

There are two concepts that we need to consider here in terms of customer-centric transformation – inside-out and outside-in. Inside-out means a lot of banks are not able to truly realize their ROI because banks are looking at digital banking and digital transformation as just an extension of what internal products and services that they already have, a system-centric approach. Outside-in is a customer-centric view, where a bank would evaluate why the customer might need a loan, when the loan is needed, what kind of loan would fit their current needs, and many other related aspects, and accordingly apply an optimal engagement journey and banking offering. In this regard, banks are recommended to follow an outside-in approach for effective customer-centric transformation.

Right balance between building and buying a digital banking solution

Traditionally, banks have focused on building up their core banking capabilities and other enterprise platforms which have been critical in setting-up a bank. However, these platforms are primarily designed for processing daily banking transactions and updating ledger accounts and financial records. They are not intended to enhance the digital banking experience or customer engagement for both external customers and internal employees in the omnichannel banking environment. On the contrary, there are specific platforms for customer experience and engagement. For instance, the Backbase Engagement Banking Platform connects quickly and securely to a bank’s downstream systems of record, such as core systems and CRMs, as well as third-party fintechs in your tech stack. This platform offers a comprehensive digital engine to enable the bank to seamlessly orchestrate all their customer and employee interactions across any channel. The platform APIs empower the bank and as banks become cognizant of the need for engagement banking, they grapple with the decision to build these platforms in-house. Banks must prioritize their objectives and evaluate whether their building efforts genuinely create the differentiation they need or if they are solely addressing basic operational needs that do not add extra value to their customers. To ensure sustainability, banks must also seek platforms that offer them the trifecta of control, freedom, and flexibility.

Recent trends and innovations in core banking technology.

Core banking system is a centralized system that helps in the overall operation of a bank. As a functional system to manage banking processes, this platform is designed to operate slowly and steadily, which also means that the level of innovation in core banking technologies is limited. Consequently, the potential for significant differentiation in product features, customer experiences, and other crucial aspects that directly influence the end customers is somewhat restricted. Therefore, innovations within core banking over the past 5-10 years have primarily revolved around technological enhancements, falling short in delivering substantial improvements in performance, scalability, and meeting evolving customer expectations, including personalized experiences and enhanced engagement.

The benefits of adopting a customer-centric approach in digital banking for the banks.

For banks to grow their ROE, some of their foremost objectives are reducing customer acquisition costs, optimizing the cost of servicing, increasing wallet share, and improving customer retention. With the right digital transformation approaches in place, banks are able to grow their customer base, drive preferences, increase profits and lower operating costs.

"Having a customer-centric engagement banking platform will enable the bank to architect banking around the customer and provide personalized and unique customer journeys and experiences to its customers more quickly, elevating customer trust and preference"

With an engagement banking platform designed to redefine and elevate the standards of customer engagement, banks gain the agility to swiftly launch new features and products that align with the digital-savvy customer's expectations. The modern bank's role extends beyond traditional transactions to providing tailored solutions for life's pivotal moments and financial objectives. Customer-centric banking transformation empowers banks to craft customer journeys and features that resonate with these specific needs, resulting in increased adoption rates and ample upsell and cross-sell opportunities. By seamlessly integrating their offerings into the customer's financial journey, banks establish enduring relationships with their customers. This comprehensive and holistic approach is pivotal in achieving these coveted outcomes, creating a win-win scenario for both banks and their valued customers.

Impact of customer-centric transformation in terms of digital banking for corporate customers

The digitalization of business and SME banking has not advanced at the same pace as in retail banking. Although the concept of customer-centric transformation holds equal importance for corporate clients, they often anticipate specific value additions tailored to their unique needs. These may include real-time international transactions, online initiation of letters of credit or bill guarantees, invoice financing, and various other services.

Primary Agricultural Credit Societies (PACS) aspiring to undergo customer-centric transformation and build a digital banking architecture

Firstly, it's crucial to maintain a sharp focus on defining your unique selling proposition (USP) and invest efforts in reinforcing that differentiating factor. Secondly, prioritize journeys and capabilities that truly impact customer experiences, rather than attempting an overwhelming array of initiatives simultaneously. Thirdly, it's essential to maintain an open-minded approach, embracing the hybrid strategy of adopting and building, rather than relying solely on purchasing and building. These three factors play a pivotal role in determining the success or potential failure of a bank's digital transformation journey.