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What Is The Future Of Banking?

Banks and fintechs are focusing on elevating customer experience by addressing inherent needs: comparing options, faster delivery, and hyper-personalized solutions. Three futuristic banking models explore these requirements.

What Is The Future Of Banking?
POSTED ON January 31, 2024 6:49 PM

We were so used to ordering food by directly dialing into the restaurant of our choice before food aggregator platforms came in and pretty much changed the way we order food 

Remember before online travel platforms became the new norm, we were pretty accustomed to how we booked our flight and train tickets with the help of agents?  

And how can we forget how UPI has pretty much changed the way we do our payments now? 

None of these technologies and innovations could be predicted with reasonable clarity looking back but all still have one thing common in– They all elevated customer experience from the status quo. 

The future of any industry or market is going to be on how customer experience can be elevated and this is going to be no different when we endeavour to look at the future of banking. Almost every fintech or bank is doing its best to enhance customer experience every day but only a few are really reimaging the experience for customers. 

Customers have some inherent needs which does not change with time and those really are anchor points on which customer experience can be reimagined. Customers thus:

  • Want to compare and access more options 
  • .Expect a faster and friction-free product or service delivery 
  • Are always looking for more hyper-personalized solutions for their need 

I am going to throw light on three upcoming futuristic models in banking which are solving on the backbone of these inherent customer needs 

Marketplace Banking: Bank of your choice   

Imagine walking into a mall of banks where rather than just one bank, there are many that are wooing you for your needs with the best prices and services – This made digitally is what we call marketplace banking.   

Why should you invest in FDs from only your bank when some other bank may be offering you a higher rate of return? Similarly, why should you take a credit card from only one bank when various other banks are enabling you with credit cards across your needs?  

Customers are used to making most of their decisions on aggregators or marketplaces but when it comes to banking they get restricted with access to only their own bank. Here is where there is scope for huge innovation and marketplace banking models to become the next big thing.   

Embedded Banking: Banking Wherever You Are  

The RBI has also highlighted the rise of embedded finance, which is the incorporation of financial services or tools into the products or services of a non-financial organisation.  

For example, an e-commerce platform may let you pay later, or a ride-hailing app may give you a small insurance for your trip. Embedded finance allows non-bank players to provide financial solutions to their customers, without needing a banking license or infrastructure. This opens up new possibilities for innovation, competition, and inclusion in the financial sector.  

Embedded banking also means that banks will have to change from a sectoral approach to an ecosystem approach, and work with other players in the market, such as Fintechs, NBFCs, telecoms, retailers, and others. Banks will have to use the strengths and capabilities of these players and give them banking-as-a-service (BaaS) solutions, such as APIs, platforms, and white-label products.  

For example, a bank may team up with a fintech to offer digital borrowing or lending solutions, or a telecom to offer mobile banking services. This way, banks can reach more customers, improve their customer experience, and increase their revenue sources.  

Hyper-Personalisation: Banking That Suits Your Needs  

One of the key trends that the RBI has highlighted is the shift from separate service delivery to hyper-personalised embedded banking. This means that banking will not be a standalone service that customers have to look for, but rather a part of the products and services that customers use in their everyday lives.  

For example, when you book a flight or a hotel online, you may not need to visit a bank branch or a website to get a travel loan. Instead, the loan eligibility and disbursal could be integrated into the booking app or platform, using your consent to access your financial and non-financial information through an account aggregator or Digi Locker. This way, you can get quick and customised credit at your fingertips, without any trouble.  

Hyper-personalisation also means that banks will have to use data and technology to understand the preferences, needs, and behaviours of their customers, and offer them products and services that are relevant, convenient, and affordable. Banks will have to use artificial intelligence, machine learning, and analytics to segment their customers, design personalised offers, and deliver them through the right channels.  

For example, a bank may use your social media activity, location data, and spending patterns to offer you a discount coupon for a nearby restaurant that you like, or a cashback offer for a movie ticket that you are planning to buy.     

Banking For The Future Is Thus An Ecosystem Play  

The banking sector in India is at the high of a new era, where the traditional banking business model will have to pivot to address the evolving needs and expectations of the customers, the market, and the society.   

This will not only enhance customer satisfaction, loyalty, and retention, but also improve the efficiency, profitability, and resilience of the banks. Moreover, this will also enable the banks to play a more meaningful and impactful role in the economic and social development of the country. 

- Authored By Akshar Shah, Founder and CEO, Fixerra

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