Analysis Of Yojana Magazine
”Phygital Banking”
Relevance
”GS 3: Mobilization of Resources, Growth & Development”
Introduction
- Around 90 per cent of the banking transactions in India have now started moving into the non-branch channel such as internet banking, mobile banking or ATM.
- However, physical branches will continue to be relevant as a large percentage of customers are more comfortable doing transactions at branches.
- There is still a significant population who will be more comfortable in one-to-one dealings rather than only digital.
- Therefore, this world of physical plus digital or phygital will be the way forward.
What is Phygital Banking?
- Phygital or Hybrid model is a combination of the phrases physical and digital banking.
- It is a service where traditional and digital models co-exist, and customers get the best of both worlds.
- It gives the personalization, relationship and in-person experience of physical branch touchpoint and the efficiency, flexibility and convenience of digital services.
- It’s a disruptive model that utilises both human labour and innovative technology.
Advantages of going Phygital
Increased Customer Value and Cost Reduction
- The Phygital mode of lending has reduced costs, and it delivers increased value to customers.
- By automating repetitive backend & frontend tasks and reducing the processing time for paperwork, phygital model negates the need to employ a large workforce or invest in expensive real estate.
Improved Customer Experiences through Omnichannel
- Phygital set-ups are the most viable solution for patrons who wish to seamlessly change their choice of engagement touchpoints.
- They have the option to either use smartphone, tablet, kiosk, digital wall, or touch-tables installed in the branch to gain product knowledge, or they can simply talk to one of the trained staff to discuss their doubts directly.
Anticipating Valuable Customer Needs
- Innovative technologies such as AI, ML, and data analytics segregate a patron’s individualized data on a secure database.
- This provides keen insights and enables phygital NBFCs to anticipate what that customer might need in the future and deliver personalized products and services directly to them.
Securing a Wider Market Share
- The world is at a juncture where there are discussions surrounding open banking regulations to help banks & NBFCs, become more transparent and secure (data-wise).
- Phygital can build a connected ecosystem and work as a facilitator between the urban and the rural, where digital is still not widely accepted.
Improved Relationships between NBFCs and Customers
- Phygital ensures the existence and availability of branches while leveraging FinTech solutions and self-service platforms at every touchpoint, building trust and making the entire banking journey hassle-free and satisfactory for patrons.
How did Phygital become a new banking frontier for the NBFC sector?
- NBFCs have taken great initiatives in the last couple of years, making the function more agile and mobile for individuals.
- With the help of advanced technologies like AI, Automation and Chatbots, the NBFC sector has grown and reduced the dependency on physical kiosks.
- Adoption of advanced technologies have reduced the cost of NBFC companies in customer acquisition, servicing existing customers, or de-risking the portfolio while trying to overcome the increasing formal credit penetration in a growing economy.
- With the new hybrid model, the key for smart banking will be to find the right balance to create an agile business & engaged customer, as an accomplishment to the great learnings of 2020.
- Enabling agricultural NBFCs to access low-cost capital and deploy a ‘phygital’ (physical + digital) model for achieving better long-term digital outcomes.
Way Forward
Conclusion
As we tread ahead on the growth path after the pandemic, India’s rightful place in the global economy will be built on a sound, stable and resilient financial system. Banks and NBFCs, being the power engines of our economy, must undergo continual metamorphosis to accelerate this transformational journey.