Whenever there is a major global technological change, the businesses that are quick to jump the bandwagon have the first mover advantage and banking industry is no exception. With the rise in online banking, the customer interaction has increased manifolds. Now payment of bills and transfer of money is possible digitally without being physically present at branches. Digital banking has therefore changed consumer preferences by providing frictionless and (near) real-time transactions. Some of the advantages that digital banks offer over conventional banks are:
- Convenience
- Agility
- Mobility
- Efficiency
- Transparency
- Accessibility
Further, since digital banks have reduced overhead expenses due to lower infrastructure costs, they are more economical and hence able to pass on the benefits to the consumers. By employing advancement in technology, digital banks offer more personalized and innovative services to their customers which, in turn, is becoming more of a threat for conventional banks. Youth is the major driving force behind adoption of digital banking. Their inclination towards digital banking also stems from the reason that online banking is paperless and uses less energy due to non-existence of huge physical structures. Due to this disruption, the profits of conventional banks may go down to the levels where closure of branches becomes inevitable.
Having said that, the flipside is that there are some complex transactions beyond the scope of chatbots which require face-to-face human interaction. It is for this very reason that conventional banks have still an edge over digital banks. Loyalty is a virtue that older generations merit and because of this banker-customer relationship in a conventional setup sometimes transcends into personalized decisions such as buying a home or an insurance policy. Till the time artificial intelligence can understand human psyche (which is still a distant thought), conventional banks may continue to thrive. It may also be said that digital banking customers have not suffered global financial crisis similar to the one in 2008. A major glitch may test their preference and inclination towards digital banking.
In light of the above, it may be safely assumed that banks can become productive and maximize their profits through customer satisfaction by taking the best of both worlds. Digital banking has many benefits but there are some areas that are exclusive to conventional banks. Maximum success could only be achieved if a bank offers best in both areas i.e. physical and digital. Being solely digital is not enough and only those companies have a competitive advantage who started their digital footprint in addition to physical presence of business. Determining the right ratio between physical and digital is the key behind success of any business and same is true for banking industry as well.
The banks need to take into account that human nature is unpredictable and that the future is uncertain. The uncertainty factor must be considered in long term planning as banks continue to formulate their crisis management policies. Only those banks will succeed which can serve customer preferences by making use of emerging technologies as well as enabling them to arrive at financial decisions in a customer-friendly environment by offering human support, if and when needed.