Digital banking
Introduction
This is a multi-part series for digital banking. Digital banking has been prevalent in the industry for a while. This blog series discusses various aspects of digital banking through history, evolution, technology aspects, reference architecture, industry trends, and hyper scalar POV.
The blog series would cover the following at a high level:
· What is digital banking?
· Need for digital banking.
· Architecture around digital banking
· Component details
· Trends in digital banking
· Outro
What is digital banking?
Though the concept has been in the market for a while, most digitally savvy users have been regular digital banking users. Some terms are used loosely in digital banking, internet banking, and omnichannel banking. In this first blog of the series, I will try to decipher the taxonomies and the usage of each.
Like any other innovative technology, digital banking has evolved with incremental innovation to the state in which it stands today. The following infographic provides a bird’s eye view of the evolution of digital banking over the past three decades.
· In the ’90s
In the early 90s, the channels started emerging with branch channels bit siloed, working on branch level system of record. ATM was the forerunner among others which provided basic functionalities with inquiries and withdrawals with daily limits from a risk mitigation standpoint
· Late 90’s
This era is where banks were forced into single ledger core banking systems integrating all branches at a geography level. In addition, parallel payment innovation was also spearheaded with near real-time payments, transfers, etc. this is the start of digital banking, more conventionally called internet banking, which is an essential single account inquiry and transaction platform; however, it started the convenience of banking for customers as well reduced the cost of transaction for the bank significantly.
· Around 2010
This is the era for full-scale digital banking with Omnichannel capabilities, more prosperous functions, and seamless user experience across web and mobile channels. Still, the platform was more oriented toward the customer servicing part and not around origination and onboarding.
· Mid 2020
This is the evolution of Banking as a Service (Baas), where concepts like the branchless banking revolution started, and even brick-and-mortar banks created their digital brands. This operated as a BaaS platform, fulfilling not only servicing but also ̥onboarding, product origination, wealth advisory, marketplace, fintech integration, and partnerships on a bi-modal economy.
· Current trend
The current trend is AI infusion from lead identification, origination, KYC, credit appraisal, product selection, X-sell, and upsell.
When automation started in the banking industry, the core banking product was the bank’s heart. The digital journey in banks took an innovative incremental approach as the core banking evolution. The core banking took a progressive approach with the following capabilities:
Do multi-channel, omnichannel, digital banking, and super apps the same?
Multi-channel
Multi-channel is a capability for customers to access services in brick-and-mortar branch-based and self-service channels. The fundamental difference of multi-channel is that the user experience, processes, and products are only seamless across some tracks. Instead, each operates with its nuances.
Omni-channel
Omni-channel is an integrated approach towards customer experience where the customer has the same seamless experience in self-service as well as branch and assisted channels. The thinking around product definition, process definition, and user experience definition are built with self-service (digital) as the goal. Another significant difference between Omni-channels it’s not just transactional platforms as multi-channel. It has the intelligence to derive data for enhancing experience, such as customer analytics, mobile analytics, marketing analytics, etc.,
Digital banking
Digital banking is a natural extension of Omni-channel. It spans beyond a banking service platform with self-service onboarding, the origination of products, and straight-through processing as the essence of the architecture. Digital banking expands into financial products which are not only owned by the bank but partner banks, fintech alternate financial products such as insurance, investment, advisory, etc.,
Super app
Super app is a lifestyle that takes care of the financial as well as non-financial needs of the customers. The integration areas are not limited to the telco, retail chains, ticket booking, bill payments, trading, etc.; the super app provides holistic customer engagement and tries to position itself as a one-stop shop for customer needs.
