This is 2019. I remember back in school around 2008, we had just started hearing the word, digital. How the digital age had dawned upon us with the advent of Android & IOS devises and how the mighty Nokia went crashing down.

It only took 10 odd years, for us to realize here in Pakistan that we need to evolve from within ourselves embrace the digital change. The pace of accepting change is not too bad given other sectors. I believe that has to do with the maturity and forward looking approach of the Banking Institutions in Pakistan.

Digital banking is not just about automated processes or robots performing our repetitive tasks. It is not about just moving the traditional banking activities online. Digital banking is a whole new way of going about the day to day business. It is the ability to attract the millennial workforce. The ability to break away from the traditional thinking. The ability to challenge the status quo every day. The ability to cater to the 21st century customer. The customer who is more tech savvy, more knowledgeable about competitor offerings, a customer who knows what good service means.

These customers are changing their behaviours and expectations quickly, adjusting to a world where products and services are recommended based on past behaviours and where location-based offers are provided instantaneously on their mobile device. They don’t want to go to branches or do banking. They want financial information and the ability to transact fingertip-ready.

The future of banking is to get aggressive on user experience, use of artificial intelligence, data/ analytics, playing the fintech war, incorporating data security, managing regulatory expectation over-management and building talent inventory for the new digital age. Finally, to succeed in serving customers the operating model must:

Deliver through more trust, more humility, more teamwork, more collaboration, more open mindedness, more letting go ego, & more exposure to outside world.

Execute everyday on, (i) people, (ii) data driven strategy, (iii) processes & (iv) customer satisfaction.

Artificial Intelligence (AI) now drives the way leading institutions provide everything from customer service to financial advice.

AI means different things to different people. Banks must initially focus on what some call “weak AI”—machines capable of performing specific tasks that normally require human intelligence such as visual perception, speech recognition, decision-making, and language translation. The approach is to invest in information: collecting it, interpreting it and sharing it.

As high profile incidents of unethical behavior rattle the financial services industry, risk management culture, ethics and trust are in the limelight. Banks of the future must encourage a culture of openness, transparency and self-accountability. With smart tools such as customer onboarding, independent surveys and in-house monitoring of key service indicators shall allow them to build a strong service culture (based on continuous improvement) and trust connect.

The banks of the future must acknowledge that the tone to rebuild the trust, ethics and risk management is planned at the top, monitored and executed at the middle and grass root level. It is from there where real issues arise when managers don’t embed the bank’s culture in their daily activities. The approach is to restructure, bring on or develop specialists and build up resources to address the complexity and build trust.

Transparency becomes fundamental for establishing trust. Bringing in a culture of openness, flexibility, acceptance and open book management through adapting global best practices. The approach requires continuous research / market study and creating & testing of assumptions.

In light of the economic slowdown, Banks must not adopt a knee jerk reaction towards short-term cost cutting. The response to diminishing profits should instead be a proactive organization-wide attempt at improving cost efficiency. The banks of the future will be concentrating on cost containment due to the following primary factors:

With cost of funds increasing, banks are focusing more on non-interest income and investing their liquidity in consumer portfolios.

Customer’s behavior is putting pressure on financial institutions to rebuild their capabilities to meet changing needs based on convenience, technology and innovation. New market entrants especially non-banking players (FinTechs) are providing better and cheaper solutions. Taking away market share due to the traditional mindset brick and mortar banks carry with an expensive legacy infrastructure.

Ensuring compliance to regulations also has a significant cost burden across the industry.

Based on changing ground realities, customer expectations and the future of banking backed with the banks propriety asset of data, experience and vintage, banks of the future need to lay down architecture to prepare themselves for a better tomorrow. A bank which is to survive in the future has to embed the digital architecture in their DNA by continuously redesigning their style of operations and finding innovative ways through collaboration and team work to deliver upon:

Customer experience management (previously customer relationship management)

Real time offers (previously marketing campaigns)

Individualization (previously customer segmentation)

Service offerings (previously product offerings)

Digital as the primary channel (previously branch as primary channel)

Trust is fundamental. But when it comes to trusting people in this digital age, something profound is happening. Technology is creating new mechanisms that are enabling us to trust unknown people, companies and ideas. And yet at the same time, trust in institutions - Banks, Governments and even Mosques is collapsing. So what is happening here and who do we trust?

Companies like Uber, AirBnB, Tinder and Careem are a classic example of how technology is enabling millions of people across the world to take a leap of faith. It is remarkable how the idea works as it is the counter to the lesson most of us were taught as a child: never get in a car with a stranger. A leap of faith happens when we take the risk to do something new or different to the way we have always done it. Trust is an elusive concept, and yet we depend on it for our lives to function. We trust our children when they say they’re going to turn the lights out at night. We trust the pilots who fly us all over the world safely in airplanes. It’s a word we use a lot, without always thinking about what it really means and how it works in different contexts of our lives.

For a customer to put in their credit card details into a website for the first time and make an online transaction is an example of the human being taking a trust leap. Human beings are remarkable at taking trust leaps.

But in this digital world, with over 40.1 Million broadband users in the country which is a 250% growth in the last 1.5 years, with every 1 in 2 person online in urban Pakistan (37.8 Million People), with 67% active internet users using their smart phones as their primary devices (a total population of 16.5 Million, how do we make them trust our banks?

To be continued...