Why stiff banks need a mobile work-out

Standard Chartered Bank Head of Digital Banking East Africa Edward Ndichu demonstrates how the Electronic Banking Unit dubbed 'Breeze @ The Junction' works during its launch on May 9, 2013.PHOTO | DIANA NGILA | NATION MEDIA GROUP

What you need to know:

  • Banks need to restructure their networks, reduce the number of large footprint offices and increase the number of “light” branches with secure technology.
  • The coming of M-Pesa and the use of technology and Internet-based platforms for bank transactions, is making face-to-face banking a passé.
  • In attracting more customers and getting even more people out of the banking hall, better digital experience is critical.
  • Cloud technology makes it easy and affordable for banks to put a world of banking and commerce options into the hands of consumers.

New digital technologies and the extremely rapid changes in customer preferences are threatening to dramatically impact those full-service banks that limit themselves to products and services distributed primarily through physical branch channels.

The digital banking disruptors tend to be more agile and innovative, while traditional banks are weighed down by profit sucking branches and legacy back offices.

Buoyed by the growth of digital space in Kenya and the region, and coupled with digital disruption in the marketplace, onerous capital requirements, stiff competition and economic volatility, banks need a lower cost-operating model that can generate more predictable and sustainable revenues.

Analysts have argued that banks need to restructure their networks, reducing the number of large footprint offices and increasing the number of “light” branches with secure technology.

The coming of such mobile innovations as M-Pesa, as well as the use of technology and Internet-based platforms for bank transactions, is gradually making traditional face-to-face banking a passé.

It’s clear that digital banking is not only crucial for banks to grow their user base, but also to foster customer loyalty.

Mobile apps and services are an efficient way to do this, as well as pushing personalised product offers to consumers.

Traditionally, banks have relied heavily on in-person interactions to push products and make sales, but that approach is often better for the bank’s bottom line than for the customer’s.

These targeted offers could increase the number of banking products each customer uses, which in turn would increase the banks’ revenue per user.

The trend toward digital banking is particularly pronounced among the younger population — commonly referred to as digital natives — who are walking into their banks’ traditional brick-and-mortar branches less often and opting for digital services through their smart phones.

DIGITAL MIGRATION

Digital migration is imperative due to the high cost of building and maintaining a branch and the misalignment between the cost and value of the branch channel.

In addition, the customer related high transportation costs associated with traffic jams and parking are motivators to drift faster towards the use of personalised banking technology from home.

In attracting more customers and getting even more people out of the banking hall, better digital experience is critical.

One key thing for the banks is to expand mobile support experience by integrating capabilities such as secure mobile chat into mobile offerings to allow for easy support and interaction when needed.

Banks also need to harness the power of predictive analytics and create engaging experiences while still meeting the industry’s stringent regulatory, security, financial and legal requirements.

They also must ensure that the valuable personal financial information their customers share through the digital platforms is used responsibly and protected from digital rogues.

Technology is the key to staying on top of customer expectations. Cloud technology makes it easy and affordable for banks to put a world of banking and commerce options into the hands of consumers.

It is essential for banks to focus on digital channels and to integrate mobile strategies.

There are, however, some challenges that need to be overcome. Although many mobile payment and banking apps exist, they have either been platform-specific and tricky to interoperate, or unable to fulfil banking and payments standards.

The industry players would need to resolve these issues if the banking technology is to achieve faster growth.

The traditional banking model is disappearing and the mobile banking movement is here — are we ready?

Wambugu is an informatics specialist. [email protected] @samwambugu2