Will bank branches vanish in a multichannel world?
Retail Banking Technology in Asia
Rapid technological advancement in retail banking, coupled with the
increasing sophistication of consumer behavior when it comes to digital
technologies, is having a sweeping impact across Asia. With Internet and
mobile banking to become a significant profit generator for Asian banks,
the all-important question is: Will Asia’s consumers gravitate online?
Should Asian banks start calling their property agents and start selling off
In a comprehensive report conducted by McKinsey & Company entitled
“Retail banking in Asia: Actionable insights for new opportunities”, key
trends in Asia were highlighted including “rapid shifts in three consumer
behaviours—heightening demands on frontline services, fast adoption of
new mobile platforms, and increasing need for credit and a larger variety of
products alongside growth of the middle class and urbanization, amongst
Banks in Asia have a unique chance to capitalize on digital innovation.
Around the world, we are seeing rapid “digitalization” of many sectors of
society. Fast internet connections, easy access to mobile networks and
cost-friendly digital services are now the norm that many consumers enjoy.
Add to that, the rise of cloud computing, big data, mobility and related
enterprise-technology innovations, all of which are paving the way for an
unprecedented reduction in costs and profit enhancing opportunities for
companies. “The result is a once-in-a-generation chance to create a new
customer-centric, digital business model for banking.”
Building a customer-centric business model makes a lot of sense as Asian
customers are becoming more and more digitally savvy: “By the end of
2011, China and India already ranked first and third in the global league
table for number of Internet users. Mobile platforms have been critical: in
China, 65 percent of mobile-phone users regularly access the Internet via
their phones, while in India, mobile-only Web browsers are expected to
comprise 55 percent of the total Internet user base by 2015.”
The rise of mobile has created a fertile ground on which mobile banking
can flourish. McKinsey notes that “Asian consumers were visiting branches
less often than in earlier years. And the percentage drop recorded in Asia’s
emerging markets—26 points—was almost the same as the 29-point fall
seen in the region’s developed markets.”
This statistics is in stark contrast to the marked increase in digital-channel
usage – an astounding 36% and 39% increase in developed markets and
emerging Asia respectively, according to the same study.
Will branches become obsolete?
This game-changing reality is now putting added pressure on physical
branches to deliver more value than what has been traditionally expected
of them. Will branches become obsolete? The simple answer is NO – at
least according to McKinsey – but it will have to reinvent itself for it to stay
relevant and valuable. The report explains:
“By and large, Asia has not yet jumped on this trend toward multichannel
banking. With the notable exceptions of some small markets such as
Singapore and Hong Kong, most Asian banking markets, especially India
and China, are still characterized by the bricks and mortar of the traditional
branch and ATM.”
While it’s true that important markets such as India and China are still, by
and large, a “bricks and mortar” economy, the changing demographics
might make it more difficult for physical branches to be justified. In the last
two decades, there have been a significant increase in university graduates
across Asia and the proportion of Asia’s population aged below 30 was
registered at 48.8% in 2012, according to a study by Euromonitor. Simply
put, Asia’s young, educated population, who are much more comfortable
and attuned to the latest digital trends, is likely to change the dynamics of
the whole banking industry.
Banks in Asia have a unique chance to
capitalize on digital innovation. Around the
world, we are seeing rapid “digitalization” of
many sectors of society.
The silver lining here is that this doesn’t have to be an “either/or”
proposition. Rather, they should be viewed as complementary and an
opportunity to innovate. Physical branches will still serve a crucial role in
the customers’ overall banking experience. But, this could be enhanced
exponentially by taking advantage of the multiple platforms available to
engage customers. And retail banks who know how to take advantage of
today’s multi-channel world have a bright future ahead. One of which is
Citibank: A Case Study
Understanding the importance of enhancing customer experience through
a multichannel approach, Citibank has embarked on developing a Mobile
Banking Application that incorporates social media into the app to increase
engagement with the users. Citibank’s highly admired @AskCiti initiative is
a shining example that Citibank “gets it”.
In a news report by Wall Street Journal, it’s remarkable to note that just a
little over two years ago, “the bank's social-media agents were required to
get third-party approval before answering even the most mundane
questions, a process that stretched response times to as long as 24 hours—
the equivalent of light years on the Web.”
Key officers of the bank set out to change that mindset and “they
persuaded Citigroup's lawyers to give social media agents wide latitude to
respond to questions about customer accounts, products and services on
their own, without requiring third-party approval. Other queries that
pertained to the thornier issues of government affairs, branding or strategy
still had to be referred to the appropriate Citigroup executives. The
different scenarios were codified into a playbook that offered guidance on
how the agents should handle complaints.”
What resulted is a much faster and more convenient way for customers to
get customer support utilizing a social media such as Twitter.
The Road Ahead
The rise of multichannel usage in consumers, juxtaposed with the distinctly
Asian characteristics of big consumer markets, is an interesting
proposition. How will it play out? Only time will tell. At the end of the day,
implementing the latest technology that helps improve customer’s
experience is what matters most. Anything short of that and retail banks
could find itself losing its competitive advantage.
Learn more how to implement latest technologies to support innovative
business strategies and improve financial services in retail banking at
the 5th Annual Retail Banking Technology Asia 2013 Summit happening
on 3-4 December 2013 in Singapore. For more information, visit
Sources: Citi Won't Sleep on Customer Tweets http://online.wsj.com/| Retail Banking in Asia by McKinsey & Company http://www.mckinsey.com/
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