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HIGHLIGHTS

  • To drive the shift toward digital transactions, banks must design innovative products – one such is where a certain portion of an incoming remittance will be automatically moved into a digital segment.
  • Financial transactions and other services like ordering cheque books and enabling account statements and double-layer authentication of transactions can be done through voice recognition (first layer) and one-time password (OTP) verification (second layer).
  • Digital accounts and voice-based transactions are not merely new banking products but offer a completely different banking experience for the digital-native millennial customers..

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ABSTRACT

In an attempt to renew their value proposition, businesses across industries have been tapping into the power of digital for more than three decades now.

The recent pandemic crystalized the vision for digitalization, bringing plenty of opportunities across industries. To begin with, people started looking for more online avenues to shop – a global trend that propelled organizations across industries to rethink their strategies for serving the end customer. The effectiveness and adoption of digital initiatives are reflected immediately in the banking space, where the number of consumers availing those services is much higher than in any other industry. The global market for digital banking was estimated at $12.1 billion in 2020 and is expected to touch USD 30.1 billion by 2026, growing at a CAGR of 15.7%. 

Read further to understand the evolving digitalization trends in the global banking space and the prospect of augmenting various digitalized services and products in the industry..

NEW-AGE BANKING

The banking industry is exploring several path-breaking technologies and trends that promise disruption in consumer banking experiences.

Technologies like artificial intelligence, blockchain, machine learning, customer data platforms, internet of behaviors, and robotic process automation, promise a paradigm shift in banking as we know it. 

As countries worldwide open their telecom space to 5G, a major thrust to banking digitalization is imminent. The speed, high bandwidth availability, and lower latency that come with 5G will accelerate technology adoption along with enhancing banking experiences and boosting financial inclusion..

 

DIGITAL CASH ACCOUNTS

Although most governments currently incentivize customers to adopt digital or cashless transactions, the adoption rate is rather low.

WCustomers always have the option of using physical cash instead of digital transactions. Further, the incentives for cash and digital transactions are more or less similar. In order to align with government initiatives for driving digital transactions, banks can offer  innovative products, for example, a certain portion of an incoming remittance gest automatically moved into a digital cash segment; such amounts can only be used for digital transactions like buying from an e-commerce site, making wire transfers, and so on,  and cannot be converted into cash.  

The recent global crisis has also given cashless transactions a visible push, resulting in notable reduction of cash-based transactions. According to a global report from ACI Worldwide and GlobalData, real-time transactions surged by 41% in 2020 in the wake of the pandemic and projects a CAGR of 23.6% from 2020 to 2025. India and China were among the top countries and witnessed 25.5 billion and 15.7 billion real-time payment transactions, respectively. 

How customers will benefit

Banks can drive the adoption of digital transactions by providing a nominal upfront discount on all digital account-based transactions. Alternatively, banks can also offer higher interest rates for the amount held as a balance in digital accounts. Such initiatives will result in more savings and higher earnings for customers who adopt digital transactions.

Ancillary to wallet transactions

At present, many consumers are linking their existing bank accounts to e-wallet platforms to make payments, as their banks do not provide wallet-equivalent services. Digital accounts can be linked to wallet-related discounts like cashback, allowing the existing customers to enjoy all the benefits provided by wallet service providers.

Sellers can market their products directly on the banks’ portal or mobile application, which creates a win-win situation for both sellers and banks’ customers. As such, digital accounts can eliminate payment or wallet services  through the proposed technology revolution. 

Voice-based transactions – Hassle-free access to financial transactions

Voice-based transactions accessible through mobile banking apps allow customers to initiate or fulfill certain transactions through voice commands. For example, the command ‘my account balance’ would display the customer’s account balance on the mobile screen, or a voice message is returned to the customer, which spells out the account balance. Customers can use this service for both financial transactions and non-financial transactions. Voice-based transactions can be customized as per customer requirements.

A customer can open his mobile app and start providing verbal instructions through pre-determined steps (similar to the interactive voice response (IVR), but command-based) and complete both financial and non-financial transactions. Some examples of non-financial transactions are ‘current account balance,’ ‘upcoming EMI or standing instructions details for the day, week, or month,’ and ‘last debit or credit details.’ Such information can be shared onscreen and also through voice notifications to provide an enhanced customer experience.

Financial transactions and other services like ordering cheque books and enabling account statements and double-layer authentication of transactions can be done through voice recognition (first layer) and one-time password (OTP) verification (second layer). The customer can set up a transfer limit for voice-based financial transactions. In addition to the above, all notifications that customers receive through text messages can be converted into voice messages, resulting in better customer experience.

Benefits to banks

By reducing the physical handling of cash, services like the withdrawal and deposit of cash through tellers and ATMs can also be minimized drastically. This will positively impact the manual efforts toward maintaining physical cash, posting entries, and loading money in ATMs. Banks can benefit by limiting the number of ATMs and saving maintenance costs of operating ATMs with a reduction in the footfall.

Benefits to regulators and the economy

In addition to the benefits for banks and their customers, digital accounts also offer various advantages to regulatory bodies and the economy as a whole.

Traceability of money

Digital accounts will provide greater transparency of end-to-end money movement as physical cash handling will be limited with transactions happening in digital mode.

Increased revenue to the government

Digital accounts will reduce the rotation of black money and increase the visibility of money movement. It will directly boost tax collections for the government and indirectly reduce the burden of the government in printing physical money and its associated costs. Money spent on combatting black money, counterfeit notes, and the prevention of money laundering activities can also be saved

LOOKING AHEAD

Digital accounts and voice-based transactions are not merely new banking products but offer a completely different banking experience to the digital-native millennials.

There is speculation that by 2024, real-time payments’ volume in overall electronic transactions will exceed 50% and further to 71.7% by 2025. Add to that, with the historic-high adoption of mobile wallet transactions at 46% in 2020, up from 40.6% in 2019 and 18.9% in 2018, it is clear that the potential of digital banking will play a key role for banks in expanding their customer base and overall business. 

With the world moving toward a cashless society, fintechs and startups are competing fiercely to introduce innovative products that can meet customers’ need for digital services. Here, digital accounts, combined with the products and features discussed, will be crucial not just to customers, but also to government agencies, financial services companies, and regulators.

 

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