There was a time when we had to visit a bank to make any financial transaction. To send money to someone, we needed a demand draft, and to get that, we had to make at least a couple of visits to the bank over two or three days.
Banking operations have become a lot easier now. In 2022, India topped the world with 89.5 million transactions, 46% of global real-time payments, according to MyGovIndia.
However, considering that we have had online banking for nearly three decades, is the banking sector yet to realise the full potential of digitisation? E-commerce, social media, and food delivery platforms offer us high levels of personalisation. In comparison, is the banking sector lagging behind?
IDC’s recently released Asia Pacific-focused report highlights the disconnect between banks and customers. For example, without a unified system, customers often have to fill in the same information for different services of the same bank. Also, it is a challenge to access multiple services through disparate interfaces.
One of the fintech companies that specialises in the personalisation of banking services is Backbase. Its Engagement Banking Platform helps banks to accelerate their digital transformation.
Set up in 2003 in Amsterdam, Backbase is working with more than 150 banks and financial institutions in more than 40 countries, including India, where it is looking to expanding its presence.
The Hindu spoke to Riddhi Dutta, Regional Vice President, Asia, of Backbase, on the personalisation of banking, its benefits for customers, challenges for banks and the way forward for them. Excerpts:
What is personalisation in banking?
It’s all about offering solutions for a customer by understanding his or her financial journey and the situation at a particular time. Personalisation is when a bank is able to embed its services into the life moment of its customer.
Could you explain that?
It can happen in different ways. Take, for example, a retail customer like you and me. We normally check a banking app to see how much money we have in our accounts, to see the details of a particular transaction, to open a fixed deposit, etc. Some banking apps also have a feature wherein we can set apart budgets for “eating out”, “groceries”, “transportation”, “movies”, etc.
With personalisation, the bank is able to provide us with more insights. For example, the app could tell me on the 20th of a month that 90% of my budget for groceries is already over. Beyond this information, the bank could also suggest options like reallocating my budget. Can some money be moved from “eating out” to “groceries”? Or, maybe the bank could offer an overdraft or even a short-term loan to tide over an immediate money crunch.
Take another example of a businessperson. Going by the analysis of his cash inflow and outflow, the bank could predict that six months down the line, the cash flow will be negative since there will be more account payables than receivables. The bank can forewarn the customer and offer a tailor-made solution in the form of a loan.
I think no bank in India is doing this.
Are there other ways of personalising the banking experience?
You will be amazed at the level of personalisation that some banks are doing on platforms like Backbase. For example, Discovery Bank is a lifestyle bank in South Africa; they call themselves the world’s first behavioural bank. The amount of interest is based on how the customer is spending and investing. So, if A is spending or investing money more wisely than B, then A gets more interest than B. This is a very minute level of personalisation. And there are many banks doing this.
Why do you think platforms like Backbase have an advantage in personalisation?
If you look at the entire banking landscape in India today, large banks, over the last 20 to 25 years, have invested a lot in core banking platforms. As customer demands started changing and they wanted things more digital and less physical, the core banking platforms had to build something on top of it because banks needed it.
The advantage we bring to the table is that we have not been a core banking platform at any point in time. Therefore, our digital engagement piece is not an extension of the core banking platform. So, what we are building for the bank is what the customers or the stakeholders want. The platform easily plugs into existing core banking systems and comes pre-integrated with the latest fintechs so financial institutions can innovate at scale.
Platforms like Backbase are able to do this because there is a lot of underlying data processing and data transformation that happen in the backend, thereby providing the customer with a lot of insights into his or her financial journey. With the help of these platforms, banks are able to get a complete view of the customer and based on that, they are able to personalise their services.
What about the security of customer data?
Engagement Banking Platforms are not systems of record (unlike core banking systems); hence, they do not store customer data. All data that pass through an EBP are transient in nature and are used only for personalisation. Given this, it is also easier to put an EBP on a public cloud compared to a core banking system. Even for the transient customer data that passes through EBP, it is encrypted and, hence, secure in all forms to ensure that there is no compromise on security.
Why haven’t we seen significant personalisation in banking operations still?
Though we have been in the market for a while, for a variety of reasons, we decided to focus on a few other markets over the last four to five years. However, during the past 18 to 24 months, we have brought the focus back to India big time, and we are looking at expanding our operations in the India market right now.
