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How is Digital Banking Faring a Year after Demonetization Consumers who have experienced the potential benefits of digital banking are now strongly recommending it to family and friends and their wider social circle

By Praveen Kutty

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The Indian banking sector has come a long way since demonetization which happened exactly a year ago. The withdrawal of high-currency notes on the night of November 8, 2016, has given a significant impetus to digital banking - catapulting customer education and customer adoption to a scale never seen before. Electronic funds transfer through Internet banking or mobile banking and debit card usage at merchant establishments saw a massive upswing. Digital banking which was essentially a preserve of the young, urban and predominantly salaried segment became much more ubiquitous, with rapid penetration in the rural areas and the self-employed section of our society.

Evolution of Consumer Banking

If we were to look at the evolution of consumer banking over the past three decades -- we see the emergence of ATMs, phone banking, the use of merchant POS terminals in the 1990s, the advent of internet banking in 2000s and the disruptive world of mobile banking in the current decade -- What is noteworthy is that no single innovation has replaced another. In spite of the several technological advances and more convenient options, all the services introduced earlier are still around -- be it manual teller counters inside bank branches, phone banking, ATMs or payment cards. If anything, these facilities are only complementing one another. The customer wants the choice to reach his bank account in the mode that she wants, at the time she wants. The advent of Aadhaar, the smartphone explosion, the presence of business correspondents (for various banks) and the digital push provided by demonetization have ensured that mobile banking is increasingly becoming the access channel of choice for most banking customers.

Innovations Leading the Way

In the past one year, digitization has seen many significant innovations, which includes Aadhaar-linked ATMs. To put it simply, customers can use their Aadhaar number and fingerprint (biometrics) to withdraw money from an ATM, instead of using an ATM card and pin. The 'card-less and pin-less' ATM is the next big wave, which will provide immense convenience and unmatched security to the customers.

Every new concept has its share of challenges, and digital banking is no exception. Convincing people to migrate from traditional to electronic channels has been the biggest challenge of digitization. The next big test is to assure them that the digital systems put in place were safe and secure. And lastly, it is important to match customer expectations with reality. These challenges can be easily mitigated if banks and customers become partners in the digitization journey, where banks initially handhold their customers and guide them through the various digital banking channels, and win their confidence.

Digitization Enhancing Consumer Experience

Digitization has also made it easier and convenient for banks to open savings accounts and term deposits for new customers. The physical presence of a consumer is not a must anymore. Banks help an individual to open an account from the comfort of his or her home or office. While not fully online, it is an assisted process, where a banker can help fill the necessary details on a tablet, scan the biometric details, digitally submit photographs and instantaneously open a bank account. The bank will do a verification based on PAN and/or Aadhaar numbers. The result is that the individual can open an account and start operating it in a matter of minutes, without once entering the bank branch

Notwithstanding their reservations about digitization, customers are turning out to be the 'Ambassadors of Banks'. Consumers who have experienced the potential benefits of digital banking are now strongly recommending it to family and friends and their wider social circle. And the good news is that they are winning new customers for banks.

Paperless fully electronic mode of filing tax returns is another step which is ensuring rapid customer adoption to electronic financial literacy. More and more self-employed businessmen are adopting simple systems which assist in invoice creation, reconciliation of input credits and filing of GST returns. I am confident that, in years to come, digital banking will not just be a one-off thing or a mere paperless transaction -- but a way of life that will ultimately benefit Banks, Indian economy and more importantly the consumers.

(The author is Head - Retail and SME Banking, DCB Bank.)

Praveen Kutty

Head - Retail and SME Banking, DCB Bank

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