Sunday, May 19, 2024

Deloitte Digital Banking Maturity Report 2023: Unveiling the Future of Retail Banking Channels

Indian banks have the potential to become “digital champions.”The Indian banks have displayed an applauding performance surpassing global average in several customer journeys in a survey. Indian banks have secured 3% higher than the global average in mobile banking and 1% higher in the Internet banking sector.

Deloitte India’s latest survey-based report, “Digital Banking Maturity (DBM),” unveils a noteworthy trend that positions Indian banks ahead of their global counterparts in terms of digital maturity scores, surpassing the global average. This revelation underscores the prospect for Indian banks to ascend to the coveted status of “Digital Champions,” signifying a compelling trajectory toward digital excellence in the evolving financial landscape.

Deloitte Digital Banking Maturity (DBM) Report: A Scoop of Prosperous Digital Banks

The Digital Banking Maturity (DBM) report is the world’s most prominent benchmarking study of digital retail banking channels and includes 304 banks from 41 countries spanning five continents, including some of the most prominent economies like the US, China, India, the UK and Brazil. Out of these countries, the 10 most significant performers were recognized as “Digital Champions,” followed by “Digital Adopters” and “Digital Latecomers,” respectively.

Out of these, the Indian banks have bagged the prestigious titles of “Digital Smart Followers” and “Digital Adopters”. This signifies a notwithstanding milestone as it symbolizes the inclusion of the Indian subcontinent, which has been brought under the extensive purview of DBM. The assessment methodically scrutinized banks across 1,208 digital banking features, covering six customer journeys across the entire retail customer lifecycle. These journeys encompassed activities such as information gathering, account opening, customer onboarding, day-to-day banking, relationship expansion, and if necessary, relationship termination.

According to the report, Indian banks have a significant road map of opportunity to level up their digital maturity. Specifically, in two prominent customer journeys, one is everyday banking (where UPI is a unique and globally recognized segment), and the other is more about personal Financial Management and Beyond Banking and strengthening relationships. Within these two customer journeys, the most relevant sub-steps offering significant potential for value creation are personal financial management, beyond banking, ecosystem and account aggregation, and account and product management. For instance, at the time of the survey, a notable 25% of the Indian banks offered the functionality for customers to set their financial goals, while 57% of digital champions did so.

Digital Public Infrastructure (DPI): Enabler of Digital Banking Transformation

In India, our Digital Public Infrastructure (DPI) has played a crucial role in facilitating the transformation of digital banking. Notably, the JAM (Jan Dhan, Aadhaar, Mobile) trinity, the Unified Payments Interface (UPI), and the Account Aggregator (AA) framework have been significant enablers in this process. India accomplished an 80% financial inclusion rate within six years, a feat that, according to a Bank for International Settlements paper, would have taken 47 years to achieve otherwise. Furthermore, the influence of these services extends beyond digital identity and financial inclusion, now contributing to initiatives in the health, education, and sustainability sectors.

Deloitte Suggestive of Sub-Steps for Indian Banks

Here are the four crucial sub-steps for digital retail banking in India:

  1. Personal finance management: Personal finance management is one of the go-to features for individuals to manage their finances effectively. The features in this segment include the categorization of transactions, spending limits for different expense categories, projecting cash flow, and providing financial feeds and updates. Among the Indian banks, nearly 25% have mobile applications that have incorporated goal-setting functionality, allowing users to set specific financial goals. This feature is also available in the apps of 57%t of digital champions, highlighting the significance of leading institutions that excel in digital capabilities.
  2. Value-Added Banking Services: Indian banks have enriched their mobile applications with extra functionalities, including the ability to make hotel, flight, and train bookings. Banks are offering personalized non-banking promotions and supplementary services designed to meet customer preferences, such as providing tickets for movies and theatrical performances. This is an area where Indian banks can focus on ongoing opportunities for innovation among Indian banks, allowing them to broaden and enhance their offerings. For instance, they could explore incorporating services like automotive and real estate marketplaces, as well as facilitating processes such as company registration.
  3. Ecosystem and account aggregation: This involves consolidating account information from various banks and enabling the compilation of spending data across multiple accounts, contingent upon customer consent. Banks recognize the significance of open banking in empowering the financial services ecosystem.
  4. Account and Product Management: This includes customizing and tailoring products and channels as per the specific needs and preferences of the individual customers. This includes displaying the carbon footprint associated with the account, providing a carbon calculator, and allowing customers to adjust overdraft limits.

The Future of Digital Champions

Banks leading in digital transformation, referred to as ‘digital champions,’ are at the forefront across customer journeys, delivering a compelling user interface to their customers. Through strategic investments, especially in the last two years, these banks have garnered a substantial advantage over their counterparts. Throughout the evaluation period, digital champions, on average, demonstrated a 0.1% higher return on assets and a 1.5% higher return on equity compared to their peers.

The Deloitte Digital Banking Maturity Report 2023 encapsulates a transformative era in retail banking, offering a panoramic view of the evolving digital landscape. As highlighted by the findings, the future of banking is intricately woven with technology, customer-centricity, and strategic investments.

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