Digital banking to be the norm by 2015, says recent PwC report

Preference for digital is now globally pervasive among banking customers

Mumbai (January 16, 2012): Digital banking is set to overtake branch networks as the main way customers interact with their bank by 2015, predicts a new PwC report ‘The new digital tipping point’. PwC conducted research with over 3,000 banking customers across nine developed and emerging markets and found that most consumers, including those in India, are willing to pay more for digital banking services if they believe they offer convenience and value.

The report suggests that despite a strong demand for digital banking products from consumers (even in India) and the fact that customers are willing to pay for these services, banks have been rather slow to respond to the digital innovations that have radically changed business models and redefined customer experience. This may result in banks missing a vital new source of revenue growth.

Robin Roy, Associate Director, Financial Services, PwC India, said:

“Commerial Banks have generally been slow to openly embrace the digital innovation, which customers now expect from other industries, such as retail or travel. With “Gen Y” customers’ expectations changing quickly in response to a multitude of innovation in Information Technology and the way they can now access information, this approach has to improve if banks are to hold on to their existing customers and attract the next generation, as the quality of a bank’s “digital offering” will become a key determinant for customer stickiness. There is already a move locally to look at SB account portability, analogous to the number portability we see in telecom.

“There are legitimate concerns around security, customer identity management and the sheer mobility of people due to increased urbanisation has increased customers’ appetite for new and innovative digital banking offerings. It would appear, that they are willing to pay for these and yet the majority of banks still only provide basic mobile and internet banking services. The convergence one sees in telecom and other retail industries, is also looming over banks and they are clearly missing a trick, if they don’t start to invest in their digital offerings but see digital only as a way to reduce costs!

“The lack of investment under this initiative is perhaps even more surprising considering banks are struggling to grow revenues at a time of increased regulation and an increasingly volatile economic environment. Digital products are a significant opportunity for banks to grow revenues and serve their customers in a way that they want.”

Some of the other key findings of the report are:

  • More and more consumers are using online and mobile channels to access financial products.
  • 69% of those surveyed said they currently use the internet to purchase financial products.
  • While a lower number of respondents (33%) currently use mobile to purchase financial products, mobile banking is expected to follow a similar usage curve to internet banking, with China, India and the United Arab Emirates currently leading its adoption.[1]
  • Currently, 70% of respondents in India use internet and 56% use mobile to purchase financial products.
  • In terms of customer profile, it is not surprising that Generation Y[2] leads the way, with 67% of respondents saying they currently use or are considering using mobile channels for banking.

According to the report, to grow revenues and combat high customer inertia, banks need to focus on attracting the next generation of customers – which will be largely made up of Generation Y and the unbanked population. For these customers, a bank’s digital services will be more central to their decision-making process than branch location or even brand.

Generation Y are now choosing their main banking provider and represent an important source of future value for banks. Banks need to take their digital products to the next level if they want to secure these customers as they expect a rich digital experience that is both mobile and social and integrates their banking needs with their digital lives. If banks are too slow off the mark, they risk being overtaken by new entrants or non-traditional financial services providers, who already place digital at the heart of their offerings, the report added.

The banks that provide a differentiated digital experience, with advice and relationship management elements tailored to the individual customer, will secure deeper engagement and more profitable relationships with their customers.

Notes to editor:

PwC conducted research with over 3,000 banking customers across nine developed and emerging markets in May and June 2011. Participants were from Canada, China, France, Hong Kong, India, Mexico, Poland, the UAE and UK.

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[1] 56% of respondents in India, 48% of respondents in China and 42% of respondents in the United Arab Emirates said they currently use mobiles to purchase financial products.

[2] Generation Y refers to people born in the 1980s and 1990s.