Digitalization in Banking system

Digitalization in Banking system

Digitalization is one of the key main aspects discussed in macro level when it comes to banking industry in last decade. Most of the banks in the world are either transformed or in the stage of transformation process towards a digitalized banking environment. It is important to note that this digitalization has supported the banks in many ways to avoid many problems that they faced in the past years with lot of manual work; such as High cost of providing service, obtaining a competitive advantage over other firms that involved in the business, saving more time for productive work etc.

Most of the banks have introduced their own systems by themselves whereas some banks have purchased from system developers. Therefore these systems have provided extended banking activities towards customers as well as it has enhanced the productivity within the organization to a greater extent. Most of the manual work has been automated and it has reduced the work that the staff has involved in the past. Some of the activities that have been systemized are;

-          Balance Inquiry

-          Funds Transfers

-          Cash Deposits and Withdrawals

-          Account’s Opening

-          Credit application

These are only few factors that the bank has included the systems and have made the process more effective. It seems that almost all the functions that a bank involved in have been digitalized. We can observe that the system factor has a greater importance when the bank moves forward in the future world not only to have competitive advantage over the others but also for long term sustainability.

According to the current trends most of customers are requesting for digitalized solutions in banking, simply because they have less time to spend on banking activities. This is a more common thing in the developed countries like USA, UK, German, Switzerland, Japan, Australia etc. Further, most of the young generation is involved in doing banking through systems which is a more common trend in developed countries as well as emerging economies. This is one fact that the banks should focus on when developing e-products. Since most of youngsters using systems it is prudent to invest more on systems than on people in order to have a sustainable future. Currently most of the banks in developed countries are operating in more digitalized environment and physical branch outlets are very less in operation. Therefore in future there will only be virtual banks exist without any staff involvement. This has already introduced to the world and some of the banks are currently practicing it where they say “Digital branch” existence made possible.

There is just a one problem that is customers are not bits and bytes but human beings. Most large banks seem to be ignoring this fact. Customer and bank relationship has consistently found to be widening due to this reason where bank is mostly focusing on the development of its digitalization aspects rather than concentrating on customer satisfaction point. This seems to be much short term strategy where banks need to be careful of handling of the customers who will lose their faith on them in future due to this rapid technology focus. Especially banks do need to think beyond the profits and figures and should focus more on customer satisfaction which is continuously lacking on them.

Since the banking itself is a high contact service, it is important that the people should be treated well in order to have a successful future sustainability. The reason behind this is that the human behavior is not always adhere to such computer based rules, algorithms, statistical methods etc. Further, banking business is a “High Contact Service” which means it always has high involvement with the customer in a very professional way and at high end. At the point of service encounter customer always look for solutions for their financial problems through the person whom they deal with. This proves that the customer is not 100% believing in digitalized solutions for their problems but they seek friendly and courteous service from the professional banker. At the point of financial advisory service we can clearly see this fact and how true it is. Therefore most of the people seek a one to one contact point service still in the society where they feel comfortable. Especially this we can observe from most of the elders as well as emerging country people.

Interaction between the bank and the customer is extremely important rather than being mostly digitalized because it will always connect people. Systems can be unavailable and it can be temporarily out of service at times. But if the people factor is there that means the business is concentrating on business continuity and they have a backup for any system emergency. Further if the telecommunication connections turned down for one day it will be really hard to do your transactions using the systems provided for the activities. Therefore if the bank is about to be mostly digitalized they must ensure that the service won’t be interrupted by any external factors. There are two entities in this people factor

-          Customers

-          Staff

However, the future will be more and more technological. Therefore we cannot ignore that fact that we have to adapt to the situation n future. There will be a day that emerging economies like Srilanka, the whole customer base will demand for digitalized products. Therefore we have to be prepared. Thinking about the future we can say that the system factor is more important than the people factor. But we need to identify the ways and means as to how we can improve the service or the customer satisfaction factors without affected by system failures. Under no circumstances the banks should 100% systemize their functions. Because whatever said and done it is clear human behavior can be only identified by another human. Software or a system can hardly understand this behavioral aspect since it cannot think and do anything.

One can argue that Bank can deliver a speedy and accurate service by using of systems here it gives more accurate results. The question here is “Are these systems or digitalized solutions can understand human behavior? Do these have the human touch required for a high contact service?”. According to the concept of marketing mix there are 4P’s of production mix (Product,Price,Place,Promotion) where as they have extended the traditional marketing mix to 7P’s by including the factors People, Process and Physical evidence. Therefore we can still prove that in a service organization how importantly identified the importance of the people fact.

Further banks can increase profitability by the way of reducing of the staff of the organization to a certain extent. There will be clear profit maximization from this strategy where most of the banks use this as a key strategy by offering staff schemes such as voluntary retirement scheme (VRS). But in this case also we have to consider on the existing staff and keep the required amount of staff to perform the duties. This is mainly because the behavioral factors of the clients and to address them accordingly.

Conclusion

From the above factors we can understand that the both the factors People and Systems are important. But it can swing either way. This is because mainly customers don’t have the proper knowledge of using the systems. They are more comfortable in conventional banking practices. Therefore there is a challenge of providing the necessary knowledge to the customers of using the systems for the banking activities. Further if we are to promote more on systems point of view we need to develop the telecommunication system to the level of signals without breakdowns. There should be a backup plan for any system breakdowns.

People factor too is important. But we should realize the truth that we are moving forward towards a more digitalized environment in future. Therefore it is the System Factor is the more important than People Factor. Further there should be ways and means of meeting the requirements of the behavioral intentions of the customers. With this rapid development in the technology it is not impossible to create things that can feel human touch (Using Artificial Intelligence). Therefore I would go ahead with the system is more important than people factor in Banks in future.