Beating the 2020 Downturn With Digital Banking
June 17, 2020
CredoLab's Chief Data Scientist on How Banks and Consumer Lenders Can Leverage Data Analytics for Business and Social Impact
2020 kicked off on a positive note. The financial industry was set to ascend the next stage of its evolution with growing investments in technology, tech giants like Google and Amazon entering the financial space, and AI-lead analytics making the headlines. But then COVID-19 brought everything to a halt.
For a brief period, shrouded by uncertainty, decision-makers of all businesses became cautious. This pandemic was unlike anything we had seen before and thus required a new approach to tackle the rapidly changing customer behaviour.
However, there was a silver lining.
App Annie, a mobile market data provider, observed that since the lockdown started in different countries, the mobile usage behaviour of customers changed drastically. For example, the daily time spent on mobiles in China during the lockdown increased by 5 hours per day on average, plus 30% compared to the average for 2019. And Italy saw the second-highest jump at 11%.
And particularly, they witnessed an increase in the average weekly hours spent in Finance apps across markets. Japan, South Korea, the US and China saw the biggest uptick in time spent during the first week of March, compared to the last week of 2019 at 55%, 35%, 20% and 10% respectively.
This means two things. Firstly, customers are still actively looking for financial solutions even though they may not be physically present at your branch. And secondly, the faster the financial players like yourself make the right changes to savour this opportunity, the better for your business.
Going Completely Digital
Digital banking is not a new trend. In the last decade, we saw mobile apps, online applications, net banking, and the likes becoming the norm. Yet largely these digital practices were implemented only in the front end.
In the back end, banks largely still took shelter under the comfort of legacy systems. This had more to do with the difficulty to change than the need to change. But when times like these crop up, we are presented with the opportunity to take the leap and make the changes that are now obviously needed.
Here are 5 ways you can evolve into a truly digital organization with little or no effort.
Use Credit bureau + Alternative Data Sources
With customers spending more and more time online, relying solely on credit-bureau data to assess the creditworthiness of an applicant will be like watching a movie until intermission - incomplete and pointless. Alternative data sources like smartphone metadata have been making the news lately for their realtime, accurate predictive power and highly non-intrusive method of scoring the credibility of customers.
Hopping in a solution like this will not require an overhaul of your current practices. Instead, these plug-and-play solutions are easy to go live with and sit perfectly in complimentary with your existing systems.
Tap into the Unbanked Customers
One of the major limitations of using either credit bureau or banking history data is that they require your potential customers to already be in the banking the system. But what if they are not. What if the applicant is a newly graduated student with a brilliant business idea but without credit history to kick start the venture?
AI-based credit scoring mechanisms that use alternative data to arrive at the behavioural score of the customers have no such conditions. Anybody with just a smartphone - which is almost everybody these days - can now be eligible for credit from your bank. This opens up new market segments that were previously untapped by your sales team.
Opt for a Cloud-Based Solutions
Creating new solutions from scratch means setting up new teams, new processes, and a whole lot of planning. You don’t have that kind of time, so let’s not waste any on this.
SaaS (Software as a Solution), AaaS (Analytics as a Solution), and the likes are flooding the market today to enable you to launch better banking practices within no time. Simple APIs and easy-to-use dashboards with great user interface make it a breeze to move to a more sophisticated way to underwriting applicants that your team will love.
Going digital for some is synonymous with launching an app, and for others, it means having a web-based banking system. But instead of choosing from either of them or making one stronger than the other, what if you could launch both at the same time?
White-label apps and wire-frames are your quick fix to tap into the digital customers who are everywhere today. Don’t lose out on any customer just because you were not present where they were looking for you. With minor, easy integrations you’ll be up and running in no time.
Treat Customers’ Security with Utmost Importance
One of the key reasons for the delay in financial institutions going digital is the concerns around security. This is by far the most crucial factor to consider when choosing the right partner to go digital with.
Build trust by offering services that do not invade the privacy of your customers. For example, use smartphone metadata instead of personal data to score the customers while ensuring no personally identifiable information leaves your organization’s servers. This, coupled with a completely transparent process that informs the customers what is happening with their data, is what will set you apart from the competition.
In a nutshell, banking on alternative and innovative technologies will help make your business more agile and averse to the risk presented by unfamiliar circumstances like we are facing today. This will, in turn, equip you with the right tools to continue catering to the changing needs and behaviours of the customers.