How are banks pacing for the new wave in banking? – Ernst & Young

How are banks pacing for the new wave in banking? – Ernst & Young

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EY India Financial Services Risk Leader
With over 20 years of experience across governance, risk and compliance, Pratik is enabling leaders across various global banks and financial institutions formulate strategies and build efficiencies.
EY India Banking and Capital Markets Leader
Partner with Financial Services Consulting and a subject matter expert in Digital transformation, customer experience enhancements, operational efficiency improvements and cost optimization
In brief
Banking as an industry was already undergoing significant changes on multiple fronts (including a high degree of self-disruption), but COVID-19 has accelerated a wave of trends demanding an immediate addressal. In that sense, it brought the future of banking into much clearer and instant focus. 
EY India rolled out a survey earlier this year to get a view on the extent of these market shifts and suggests how financial institutions can ride the new wave of banking through this report titled: Shifting growth gears: pacing for the new wave in banking.
Evolving needs of next gen consumer
The advent of the pandemic and the rise of consumerism has brought about a paradigm shift and a renewed focus on convenience, especially for GenZ, making the banking industry steadfast into gearing to serve them in the most appropriate manner. 
Gen Z rates convenience higher in their overall banking and shopping experience. While paying monthly bills, they want everything one click away. They want to pay EMIs, credit card bills, electricity bills, groceries, etc., in one app and on the same screen.  
The next decade will be shaped by the maturation of GenZ, the largest generational cohort in history.
More than
feel comfortable managing their finances using a virtual assistant

are willing to share data for rewards

use comparison site for choosing a product
Digitized neo-banks are here to stay
Over the past few years, the global neo-banking industry has witnessed an exponential growth in terms of customer base and the size of the overall market, despite regulatory hurdles. With endless technological possibilities and digital transformation in banking, neo-banks can elevate customer experience by bridging the gaps in traditional banking and simplifying the age-long complex banking processes.  
Further, their technology-enabled solutions and offerings stand them an opportunity to be the frontrunner in the domain, capture market share, and set themselves on the path to profitability.
By providing seamless integration and easy access, neo-banks bridge the gap between the services that traditional banks offer and the evolving expectations of customers in the digital age. The induced need for personalization and convenience has led to the growing popularity of neo-banks. Commonly coined as ‘challenger banks’, their niche lies in offering customers a seamless experience elevated via lucrative offers, exciting rewards and cashback. Their exponential growth relies on how empowered they make the consumers feel through superior DIY journeys, better customer experience and supported ecosystem offerings personalized to a consumer. 
The traditional bank and neo-bank partnerships typically involve contractual aspects of revenue sharing, activity distribution, and customer ownership arrangement. Neo-banking incumbents need to rise above the ambiguity by finding suitable banking partners to hold the ground. For other major Indian banks, on the other hand, the need to get their API stack in place may act as a critical enabler to fructify these partnerships.
Neo-banks have understood the early mover’s advantage of utilizing the power of data and analytics and marrying it with the evolving needs of the customers to put forth offerings that make them lead the market dynamics to the T.
In India, neo-banks or FinTech companies struggle, owing to a lack of banking license, thereby increasing their dependence on banking partners to provide licensed services. 
Traditional banks need to invest more in enabling technologies:  
Bricks to clicks, building a sustainable bank in the digital era
Neo-banks are gaining popularity with consumers majorly because of the superior personalization capabilities and better products offerings. But trust remains a crucial front in the battle for relationship primacy, especially since consumers show a greater willingness to maintain multiple financial relationships.
Basis our global survey findings on trust in banking parameters, traditional banks still operate from a position of strength. Consumers like to have high degrees of trust in the players they choose for their PFRs. 
In general, the data demonstrates that most consumers completely trust their PFRs, ranging from 72% of the UK consumers to 92% of the Chinese consumers. While the global average of all markets is 82%, in India, this number is ~90%.
Hence, it is not surprising that, while neo-banks are quite ahead in their digital capabilities; they lack a certain credibility in the market. This is because the trust of the consumers lies with more established players.
According to the EY report, Indian customer values trust as utmost in their primary financial relationship, giving traditional banks a position of pride despite multiple shortcomings as against the up-to-the-minute counterparts in neo-banks. On the other hand, while these neo-banks have impressive digital capabilities, they lack with credibility in the domestic market. A collaborative approach may be the best bet in overcoming the respective shortcomings of both traditional and neo-banks, and in bringing innovation into digital banking. 
Need for a robust customer service strategy
Market competition, cost pressures, and changing customer expectations create an imperative for banks to transform their customer service operations. With the number of financial relationships per consumer growing at a steady pace, banks need to evaluate their end game to engage consumers uniquely at each touch point. It is pivotal to create a sound ecosystem of offerings focused on customer centricity through enhanced customer service, hyper personalized offerings, super apps, etc. 
Data-driven personalization will carve the way forward
Digital transformation in banking is changing financial relationships, but clients’ willingness to share their data holds the key to ensuring personalization.
Here are the critical insights to consider:
Unlock the advantages of the digital era to harness innovation, drive operational efficiencies and grow your business.
The global payments industry is undergoing major change and transformation, driven by changing customer demands. Our global network and proven expertise can help you manage the disruption along the entire value chain within cards, payments, digital commerce and digital convergence.
Rapid technology advances are reshaping the entire banking ecosystem, and Corporate, Commercial and SME (CCSB) banking sectors are not immune. EY is helping banks shift their focus back to growth, placing an increased emphasis on client experience, new technology and operational efficiency.
There is a generational shift in consumer expectations of trust and a robust inclination towards seamless integration among various services and providers.
Banks need to maintain their customer relationships and to enhance their capabilities with the growing preference towards hyper personalization capabilities and ecosystem business models, which are imperative for growth.
About this article
EY India Financial Services Risk Leader
With over 20 years of experience across governance, risk and compliance, Pratik is enabling leaders across various global banks and financial institutions formulate strategies and build efficiencies.
EY India Banking and Capital Markets Leader
Partner with Financial Services Consulting and a subject matter expert in Digital transformation, customer experience enhancements, operational efficiency improvements and cost optimization
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EY is a global leader in assurance, consulting, strategy and transactions, and tax services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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