Our research for this story started with this real-life anecdote from Meeta Malhotra, Founder, The Hard Copy. This is what she said:
- My mother has a long standing priority account with a private bank
- She forgot her password and her debit card expired during the lockdown
- The only way to reset the password online requires a valid debit card number
- In the absence of a debit card, she was directed to call and speak to an executive
- But the only way to speak to an executive on the IVR, is to have a valid debit card number
Sound familiar? Most of us have had similar experiences. Banking app reviews tend to use colourful language – mostly around usability, or lack thereof.
In a 2020 study of apps from five big Indian banks (Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank and State Bank of India), market research company Forrester concluded that most apps fell short. On a test involving thirty nine functionality and twenty four user experience criteria, nearly all banks fared poorly.
“Despite the renewed push for digital due to the COVID-19 pandemic, most Indian mobile banking apps are behind the curve on functionality”The Forrester Digital Experience Review™: Indian Mobile Banking Apps, Q3 2020
Tell(er) Me Why
On one hand, the pandemic has accelerated digital adoption for all financial transactions. On the other, there are astonishing cases like the Reserve Bank of India stepping in to chastise HDFC for a non-functioning app.
Why are well-capitalised banks such digital laggards? And will they ever catch up? The answers are as relevant to startups as they are to big banks.
Sticky by Default
Banks already have massive, captive customer bases, created through regulatory advantage and further preserved through historical factors like branch location and corporate salary accounts.
The head of CX at a large bank breaks it down. “80% of the visitors of a bank’s website are current customers using Internet banking. Even if your bank’s app is terrible, you are unlikely to churn just because of that.”
If the data continues to show increasing customers and transactions, where is the motivation or to deliver a better experience? People venting on social media is hardly unusual or likely to provide an impetus for change.
A Fundamentally Different Approach to Product
Speak to bankers about ‘product,’ and they will assume you are speaking of financial products like loans, and not about the site or app, as commonly understood in the digital world.
Typically, financial products are developed by different departments. The responsibility for their automation lies with the IT department, whose core competency is infrastructure and security, not product experience. The digital head of a large bank, for instance, admitted that their new app was being developed by the IT team and they had brought in the advertising agency to ‘choose colours and make the interface more aesthetic.’
“The automation of traditional banking products is determined by a department-wise approach, not a customer-centric one. The interface and experience reflects the organisational and inter-departmental debt, instead of customer needs.”Gaurav Sharma, Founder of Fintech company Atlantis
Banks carry the burden of legacy, technology systems, which in many cases have become multi-headed hydras. Says the director of a consulting firm, with deep experience in the banking sector, “You can’t have a shiny front-end, and a back-end that is straight out of the 50s or 60s”.
Unfortunately, this is the case with most big banks, making true innovation difficult. One banking manager said it would be “near impossible to fix core banking interfaces,”often finding it easier to deploy standalone microsites for campaigns and new products.
If there is one single reason that underlies the poor banking user experience, the people we spoke to unanimously agreed it would be culture. A digital-first world requires nimbleness and that is the one thing banks lack.
The time taken to re-haul digital offerings is often longer than the CEO’s term, and even well-intentioned projects are scuttled before they see the light of day.
“There are just too many stakeholders, approval hierarchies and mandates, technical and regulatory compliances. This means building a new interface or feature takes forever”Parul Soni, former brand lead at a multinational bank and now an independent consultant
The Rise of New Business Models
Financial services are being disrupted by two new groups of players, in addition to traditional competition by entities like Non-Banking Financial Companies (NBFCs).
- The first group comprises technology giants, both global (Google, Amazon) and home-grown (Paytm, PhonePe, Razorpay). These well-funded companies already have large customer bases and deep data stores.
- The second includes fintech players like neo-banks (branchless, cloud-based players who offer better, technology-based experiences like Open, Niyo, Jupiter, Neo). These must acquire customers through marketing and the promise of a better banking experience.
However, until some of them get banking licenses and evolve into challenger banks, the sad truth is that the competition from these players may not prove enough to spur your bank to offer you a better user experience.
Amit Saxena, Global Deputy Chief Technology Officer at SBI says that Yono, SBI’s digital bank, has built a valuation of $40-50 billion in three years. That’s impressive, by any standards.
We expect to see several digital banking apps launched by mainstream banks in the near future. Like DBS, they may choose to set up separate, agile teams to do this, or they may acquire or collaborate with the fledgling Neo-banks. Their ultimate success, however, will not depend on table stakes like moving infrastructure to the cloud or catchy marketing. It will depend on overcoming the ‘culture’ hurdle, which can only happen through training and investment in people.
While DBS has a minuscule footprint in India, their CEO Piyush Gupta, is widely acknowledged as carrying out one of the most successful banking digital transformations in the industry.
In this 2019 annual report, he says, “Digital transformation is only possible with an innovation culture, which doesn’t create itself. You have to deliberately drive that and put in the processes and frameworks to encourage innovation, risk taking, and entrepreneurship – it’s about knowing it’s OK to try and fail. For this, investment in our people is imperative and re-training is key.”