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Banking on Channels

The good old alternate channels are now back the in digital model. In older model, alternate channels were complementing to conventional banking but as a new norm it is other way round. Now the alternate channels are the main channels, meaning they are no more alternate but the main channel.

Thrust of the banks should be to migrate more and more customers on to these alternate channels and start treating these channels as key business driving and service platforms and not the branches as it was before. Branches remain as key consultative selling touch point.

Banks are surrounded by digital people who have different digital personas. These personas are always on digital channels, they are not in a branch or on street. If you are looking for these personas you must look for them on the digital channels or platforms.

Every bank will say it has call center, mobile banking, internet banking etc; but key question is - has the bank been able to first make these channels as Omni channels and second, have they been able to start treating them as their main channel? These alternate channels have the capacity to offer services face to face as in any conventional branch but in a more convenient way and as per customers’ choice.

In the whole discussion banks should just think about customers. Channels are deployed to reach out to customers or help customers consume the service. So it is both ways; first the banks should make the channels available to customers and second customers should use the channels to satisfy their banking needs.

Retail banking will look very different in next 5 – 10 years especially because of the change in the lifestyle of consumers and it is going to bring complete revolution in how customers consume the banking products and services. As per PWC report retail banking 2020 – Powerful forces are transforming the retail banking industry. Growth remains elusive, costs are proving hard to contain and ROEs remain stubbornly low. Technology is rapidly morphing from an expensive challenge into a potent enabler of both customer experience and effective operations. Non-traditional players are challenging the established order, leading with customer- centric innovation. New service providers are emerging. Customers are demanding ever higher levels of service and value. Trust is an all-time low. Now is the time to increase the trust by providing control in customers in hand by making the alternate channels as the main channel of the bank.

All most all the banks are spending their resources globally are rolling out futuristic branches to keep up with the technology cutting-edge, but according to financial technology experts, it’s a major waste of time and money. Within a decade the retail bank branch model will be dead. Banking and financial sector will be the most disrupted industry in the near future.

The most obvious losers are going to be the retail bank branches for transactions when the alternate channels will become the main channel. The most impacted job would be the bank teller job as they won’t be needed by customers anymore. According to FDIC data, last year saw the highest level of bank branch closures in the U.S.

The number of people expected to come online in the near future across the globe is a primary reason for the pessimism about the branch model’s future and it is the reason about why the alternate channels are going to be the new bank.

Further by 2020 at least 66% of the global population will be online, according to a conservative estimate from PHD Ventures. That would mean an additional 3 billion global consumers. This number will become even higher—as many as 5 billion new consumers—backed by Internet-expansion projects like Mark Zuckerberg’s and Google’s Project Loon.

The banks need to go digital way to tap these additional new customers entering in global economy. If these new customers remain unbanked the alternate channels will become the new bank for such prospective clients.

The banks, which will survive next 10 years, would be the ones, which consider themselves as technology companies and the banks who keep their eyes and ears closed to this reality would have real problems and should remain ready to pay the price.