How do Digital Banks make more Money?
Yechte Software Development Pvt Ltd, Mini Tandon

We are in an era where everything is getting revolutionised. The banks are also the one in the race that has started getting revolutionised digitally. The traditional approach, however, has offered the customers a high-quality web and mobile experience. But digital banking is a new trend in.

What is Digital Banking?

There is an alternate approach of banking these days where digitalisation has become a significant part. The customers can use their tabs or smartphones for doing everything from --opening a new account to managing each transaction to resolving all credit-card billing disputes without being physically present in the bank.

Digital Banking Business—A New Concept

It’s important for banks to digitize their existing businesses with a new digital-only banking service because it can meet up the new emerging set of customer expectations very quickly. As the banking industry is a highly regulated industry with a narrow corporate culture’s hold, there are still some internal complex issues that need to be treated. The issues would deal with the need for a different and more agile culture to enable the growth and incubation of an in-house “start-up”.

Below are the 4 points to build a digital banking business successfully:

• Test the customer experience and improvise it

It is very important for any business to know how their customers think and understand their behavioural patterns to minimize the errors that occurred. This means constant prototyping with subsequent iterations and performing experiments in order to make customer's experience more superior across all the touchpoints, is an important step to take. Such type of “real life” testing is critical for identifying what customers really value as opposed to what they might say they value.

• Target the real value of a business

Before launching a successful digital business, there should be clarity about all its value drivers. There is always a scope to replicate and copy the existing models. For instance, mBank, Poland’s first digital bank has succeeded by offering its customers access to unsecured personal loans and other simple products. The reason behind working this model in Poland and the Czech Republic is -- the credit cards aren’t popular there but may not be successful in other markets as well.

• The ecosystem for partnerships

The two big industries with large amounts of digital customers are telecommunications and e-commerce marketplaces. E-commerce players can be useful partners because they give banks an opportunity to create lending services for both consumers and small and medium-sized merchants. Alibaba's Ant Financial in China has got success by serving small businesses and has grown up to $20 billion in just 2 years, gives us the best example of a bank/e-commerce union.

• Creative Marketing

Since digital banks don’t have the same customer acquisition opportunities as legacy banks that have big branch networks, marketing plays a significant role representing around 20 to 30 % of the operating cost. Digital oriented banks will likely be targeting younger and tech-savvy customers rather than incumbent banks. For instance, AirBank tagged itself as the "first bank you will like" and promised that all customer communications would be jargon-free and all payments will be clearly outlined in one document.

To communicate such distinct selling points within no cost, banks must impart word of mouth recommendations and feedback through social media channels

Thus, with the help of launching a new digital-banking business, banks can rapidly drive value creation. A combination of emerging smart technology solutions and incorporating the critical success points mentioned above can help banks achieve this in an accelerated manner.

Do you think Digital Banking can become successful in making more money with you with these success points? Share in the comments section below!