Digital Banking307

DIGITAL
BANKING
FRAMEWORK
Institute for Development and Research in

Banking Technology
Explore, Enable, Excel Established by Reserve Bank of India
Explore, Enable, Excel
CONTENTS
1. Introduction to Digital Banking 02
2. Distinct Functionaries/Dimensions of a Digital Bank 05
3. Building Blocks of Digital Banking 11
4. Digital Banking Maturity Model 38
5. Digital Banking Case Studies 41
6. References 56
7. Contributors 57
An IDRBT Publication, November 2016. All Rights Reserved.

For restricted circulation in the Indian Banking & Financial Sector.
FOREWORD Explore, Enable, Excel
Digital Banking: Goals, Maps and Signposts

D IGITAL Banking is the new paradigm that
offers considerable benefits to banks in
terms of increasing productivity and profitability.
It is accomplished by leveraging state-of the-art
technology infrastructure to bring about
changes in internal processes and external
interfaces. It is expected to improve the 4Cs
cost, convenience, control and customer
experience.
It is difficult to define exactly what digital
banking is and to say when any bank has
become totally digital. It is equally difficult for an
individual bank to make an assessment of itself,
draw plans and take necessary steps to attain
the status of a digital bank. It is in this context
that a need has been felt to provide a framework
that can help banks in their efforts to move
towards digital banking. The present framework
presents a holistic way of defining and designing
sequential levels in transforming itself into a
a digital bank. It provides goals, maps and
digital bank. This maturity diagram can be used
signposts in the digital banking journey.
by all banks in order to assess them as to where
The framework comprises various definitions of they stand and steps to proceed further. A few
a digital bank followed by the overview of international cases of digital banking
distinct functions/dimensions of a digital bank. implementation have also been presented to
Then, the building blocks of a digital bank are help banks.
spelt out followed by recommendation of a
The framework is the result of the collaborated
maturity ladder diagram, which identifies
efforts of the group comprising IDRBT research
team, bankers, IT professionals and
consultancy experts. It is expected that all
banks, especially those which are in the process
of setting up their systems, will be immensely
benefited by the framework.
Date: November 16, 2016 (Dr. A. S. Ramasastri)

Place: Hyderabad Director, IDRBT
Digital Banking Framework 01

Chapter 1
Introduction to Digital Banking
T HE term digital banking, just like any new

buzzword, means different things to
different stakeholders in a service organization.
For instance, for customers, it can mean myriad
new services and products resulting in a
pleasurable buying/spending experience. For
the decision-making team in the organization, it
could mean setting up of state-of-the-art ICT
infrastructure coupled with a good dose of
analytics in order to provide an excellent
customer experience, which is a precursor to business context, analytics can be considered
having sustained and profitable customer as further digitizing the information into new
relationships. For the regulator or third party, it knowledge or insights in order to make a
could mean the ability to provide accurate and decision.
reliable information on the fly. The term digital is typically used to refer to the
storage of data in the form of digital signals
represented using the numbers 1 and 0. Here,
the term refers to information and the format in
which it is stored, such as digital music, digital
customer records, etc.
The term digitalization goes beyond simply
digitization. In this sense, books don't simply
become eBooks, but a complete interactive and
multimedia experience; business processes
give way to online dialogues between parties
Fig. 1. The Digital Information Super Highway that were not previously connected directly.
Thus, an organization in order to become digital
To start with, let us distinguish between the
might focus on the automation of processes to
terms digitization and digitalization.
make it more efficient. A company focusing on
The term digitize describes the process by digitalization might aim to realize more effective
which any form of data is converted into a digital outcomes from those processes by improving
format. For example, converting an analog the customer engagement. In view of the
audio signal into its digital form; converting foregoing, henceforth, throughout the
credit records and applications into a soft copy, manuscript, digitalization would be used as
usually into a database, etc. In a broader digitization (which is a subset of it).
02 Digital Banking Framework

Digital Banking Definition Why To Go Digital Advantages of

We cannot have a standard definition for digital Becoming A Digital Bank
banking. Different people have given different Worldwide, the trends have been very clear and
definitions. Some of them are as follows: consistent:
Digital Bankinga new concept in the area of Customers are becoming increasingly
electronic banking, which aims to enrich comfortable with transactions on digital
standard online and mobile banking services by channels whether for product purchases
integrating digital technologies, for example or services
strategic analytics tools, social media
FinTech platforms and services have
interactions, innovative payment solutions,
responded to e-commerce and mobility
mobile technology and a focus on user
with disruptions across the board
experience.
resulting in loss of opportunities and value
Embracing a fully digital strategy requires end- for the traditional banks
to-end modernization of a bank's often
The cost of meeting tough regulations, has
outdated infrastructure. Equally important, it
eaten into the allocations for investment in
requires a transition from an account-based
business and IT, which then makes banks
view of banking customers to one that knows
less competitive, eventually affecting their
them as individuals and enhances the customer
bottom line even more.
experience with relevant, convenient and
personalized products and services. Basically, banks are facing questions of:
Remaining relevant in view of ever-
Digital Banking is the application of technology
to ensure seamless end-to-end (STP in the 'old' changing consumer behavior and
jargon) processing of banking transactions/ changing business model for several
operations; initiated by the client, ensuring industries
maximum utility to the client in terms of Exploiting the ability to tap into increasing
availability, usefulness and cost; to the bank in digital awareness, and huge amounts of
terms of reduced operating costs, zero errors digital information about the customer via
and enhanced services. social networks
However, any definition of digital banking is only Reengineering extant business processes
centered around enhanced customer service and building technology platform in order
and user experience based on their to manage customer expectations like
engagement, expectations and experience, personalized services and integration of
which can be captured in a variety of datasets information across channels for a seamless
resulting in a huge repository which is akin to a experience
digital super highway (see Fig. 1). Facing challenge of competition from less
regulated and more agile FinTechs

Coping with increasing cost and

complexity of regulations and reporting.
Digitalization is the only way forward to meet
these demands.
Expanding Digital Banking Generates

Even Greater Opportunities
Clearly, offering full-featured digital banking
services can increase customer satisfaction for
Financial Institutions (FIs), but doing so can also
help them reach other business goals. One of
the most immediate advantages is reduced
costs. With the High Networth Individual (HNIs)
customers placed (sited) on online and mobile
channels, FIs have a rare opportunity to make
investments that can increase customer
satisfaction, loyalty and control costs.
Another important business goal is customer
acquisition. Well-developed digital channels
create opportunities for FIs to address this
challenge as well as increase their share of human intervention, can show how customers
wallet and expand their market share. The behave throughout all channels. When data
foundation of these opportunities is the data that from multiple channels is combined, FIs can see
digital channel transactions generate on a clearer, more complete picture of their
customer behavior, such as buying habits. This customers.
data, which is objective and gathered without With an improved understanding of their
customers, FI can personalize the customer
experience and recommend new products and
services, both of which aid customer retention.
These advancements can, in turn, drive
adoption of digital banking services, thereby
improving FI efficiency, and attract new
customers, especially those in younger
demographics.

Chapter 2
Distinct Functionaries/Dimensions of a Digital Bank
I N order to understand the key distinct

functions of a typical digital bank, we need to
understand and appreciate the fact that a bank
Under this framework, therefore, there are
predominantly eight dimensions of a digital
bank as depicted in Fig. 2. Let us briefly describe
has both external and internal facets. While the these dimensions:
external facet refers to the customers (both retail External Face: This dimension subsumes
and corporate) of the bank, the regulator and regulatory and operational aspects of banking.
other competing banks and partners, the In turn, operational aspect subsumes the
internal facet includes treasury, back office dimension of customer/sales and services.
operations and HR department. The extant These are the first two circles in Fig. 2.
literature, including several survey reports, on
Customer/Sales/Services: This is the very
digital banking places a lopsided emphasis on
purpose for a which a bank is set up, primarily
the external facet of the bank for the reason that
because banking is predominantly a service
it improves the bank's bottom line. This
industry. In this dimension, digital banking,
framework takes a pragmatic view on digital
essentially, concentrates on providing a
banking and proposes a comprehensive
seamless, pleasurable customer experience. In
strategy of digital banking that includes the
order to accomplish it, a digital bank is expected
internal facet as well and it is accorded at least
to implement holistic CRM (subsuming
as much importance, if not more, as the external
operational, analytical and collaborative CRM).
one. Thus, this framework looks at digital
Customer Centric Business Models are based
banking in a holistic perspective and hence
on a holistic understanding of the customer, and
differs from the extant literature.
are used to achieve a strong digital engagement,
eventually leading to highly personalized, co-
Customer/ created products and services using data and
Sales/
Services analytics (along the Digital Maturity Continuum1
Regulator/
People
Other Banks with respect to product/ service offering). Such
a model requires strategic focus on:
Digital Developing an Omni-Channel Integrated

Analytics Internal
Banking Platform to enable consistent user
experience across all the channels (online,
mobile and social)
BPR Technology
Developing the capability to acquire,
Data
integrate and analyze multiple sources of
internal and external data to understand
Fig. 2. Eight Dimensions of a Digital Bank the customer and her context better
Limited services provided => Some services provided => Advanced services provided => Co-creating products and services.

Understanding and defining relevance and data warehouse, service oriented architecture,
timeliness for the customer to tailor offering non-critical applications on a cloud,
processes from the point of view of the implementation of sound and best practices of
customer. information/cyber/network security protocols,
Regulatory/Other Banks' dimension comprises security operations center, etc.
seamless communication of several business- The paradigm of SMAC stack plays a
level, fraud-related reports to RBI. This process quintessential role in a digital bank. As is well-
should be made as automatic as possible in order known, SMAC stands for the quadrumvirate
to become fully digital. This dimension also Social-Mobile-Analytics-Cloud. All of them are
involves seamless communication between customer facing, except the cloud aspect.
various commercial banks in order to have Social perspective aims at growing business by
smooth banking operations. getting connected to customers via social
Ability to proactively manage risk (financial, media, listening to and redressing their
operational, reputational) and regulation in a grievances, monitoring customers' sentiments
demanding business environment, with exposure about products and services, redesigning and
to constantly evolving technology platforms, is rectifying products and services based on
the most important benefit to be achieved from customer feedback, detecting fraudulent
digitization. Integration of risk and compliance transactions, providing instant and personalized
within the digital channel must improve, from financial advices, etc. Mobile perspective talks
being based on customer or regulatory about offering entire banking services on a
complaints, to becoming embedded in the mobile device by providing anywhere-anytime
lifecycle/digital strategy for products and banking; analytics dimension acts like the brain
services. This requires the capability to allow of the bank and analyzes customers'
underlying business processes to seamlessly transactional, demographic and psychographic
exchange information access changing sets of data and brings out the insights into the
risk and regulatory requirements, rules and customer purchasing and saving patterns,
constraints as context for (or an aspect of) the target marketing, segmentation, cross-
business process itself, and at the same time sell/upsell, credit scoring, default modeling,
proactively provide necessary data for managing churn detection, fraud detection, etc. Finally,
business risks (which may require collation across cloud perspective talks about bringing down the
business processes and verticals). Fundamental cost of ownership of infrastructure that is
to this capability, is the handling of huge volumes required for running the CBS, CRM, risk
of data at scale, sometimes generated as a management systems, etc., thereby reducing
byproduct of the core function itself. the cost to the bank significantly. The cloud
dimension is different in that a bank can
Technology dimension involves core banking,
become a fully functional digital bank without its
implementation of sophisticated delivery and
services, data, platform, etc. being on cloud.
payment systems such as internet and mobile
While cloud aspect can reduce the capital
banking, e-wallets, m-wallets, omni-channel,

expenditure to a great extent, it is a business call

other dimension of digital banking. Once
a bank has to take considering security,
reasonable customer data quality is ensured,
sensitivity and criticality of customer data.
analytics paves way for a pleasurable customer
Data dimension consists of implementation of experience, successful resolution of several
best practices of data governance that will business problems such as customer
ensure high data quality and master data segmentation, credit scoring, target marketing,
management solutions. Success of digital market basket analysis (cross-sell and upsell),
banking heavily hinges on the data quality default (NPA) prediction, fraud detection, churn
available in a bank. This dimension is described modeling, sentiment analysis, campaign design
in more detail later on. and measuring its success, customer lifetime
Business process reengineering (BPR) value modeling and prediction, etc. Analytics is
dimension advocates redesigning and predominantly of three types: (i) descriptive (ii)
reengineering of extant business processes in predictive and (iii) prescriptive. Descriptive
order to achieve the elusive customer centricity. analytics involves answering complex, high-
Success of digital banking depends on the easy, dimensional queries in a graphical form including
uncomplicated and less time-consuming bar charts, histograms, pie charts, stacked bar
business processes. Unless this dimension is charts, hear maps, box plots, etc. They primarily
taken care of, a bank cannot claim to become convey the information content available in raw
digital, no matter how much investment is made data, which could be historical or current.
in other dimensions such as data, people and Predictive analytics looks for patterns/
technology. Business processes have to be correlations and exploits them to predict future
continually monitored to ensure that they customer behaviour in order to solve the
provide a pleasurable customer experience. aforementioned business problems. It comprises
This dimension also calls for either tweaking or advanced applied statistical algorithms and
total revamping of the extant organization machine learning techniques. Finally, prescriptive
structure within a bank so that redeployment of analytics consists of applying optimization
human resources takes place to ensure smooth techniques to recommend future course of action
conduct of internal and external operations of a based on the predictions made in predictive
bank while embarking on the digital journey. analytics stage. While all the three type of
Therefore, in order to become comprehensively analytics are useful, descriptive analytics tells the
digital, any bank should carry out BPR exercises top management of a bank where the business
in both customer-facing and non-customer- stands as of now, whereas the remaining two
facing departments in parallel. Then, a bank can forms of analytics suggest ways of growing the
claim to have become completely digital. business and profits.
Analytics dimension is the brain of digital banking Internal dimension comprises applications of
without which a bank cannot start and sustain the sophisticated analytics for measurement,
arduous journey of digital banking. This modeling and management of various kinds of
dimension influences the success of almost every risks a bank faces, when it is in operation. They

include credit risk, market risk, operational risk

at the highest level and many other risks at a
lower level. This dimension also calls for
successful implementation of human resource
analytics to optimize various operations in that
department; successful FOREX rate prediction dimension should be accorded topmost priority
has a direct bearing on the efficiency of the because digital banking requires specialists to
treasury department. look after its various dimensions.
People dimension calls for recruitment of well- Whether the goal is to maximize revenues or
qualified and suitably trained specialist meet regulatory requirements or to respond to
manpower in a bank. The positions include data the trends in the market and industry as a whole,
scientist, data warehouse specialist, data digitalization has the potential to transform
steward, information architect, segmentation every aspect of banking. But realizing this
manager, channel manager, business potential will require long-term strategic thinking
analyst/business intelligence specialist, and initiatives around all the functions of the
Hadoop/Spark specialist, etc. People bank as depicted in Fig. 3.
Internal Bank External

Backend Biz Operations
Cloud Customer
Hardware Payment Systems
Service Operation Retail
Architecture w CIBIL
Security w Technology
Software Corporate
Service Operation Centre Other Banks
Risk Management Regulatory
Operational Risk
Credit Risk
Market Risk
Treasury
Human Resources
Fraud Analytics Security Analytics Channel Geolocation Analytics Social Media Analytics
Security
Cloud
Core Banking Data Data Lake
Fig. 3. Distinct Functions of a Bank that Can be Digitized

Leading
Co-creation
of Products and
Services
Integrated
Multidigital
Channel
Differentiating Platform
Talent Customer
Management Analytics
CIO Data Quality

Collaboration Management
Foundational Integrated
Digital IT Robust
Risk and
Strategy Security
Compliance
Fig. 4. Digital Banking Framework by PwC: Capability Pyramid
Other Frameworks
A holistic framework for digital banking that
includes foundational, differentiating and culture of collaboration and consistency
leading capabilities has been proposed by PwC from the top down
and is reproduced in Fig. 4. Robust Security: Assess, design and
Foundational Capabilities is a set of behaviors implement security assessment programs,
and capabilities that banks should develop to processes and controls
lay a strong foundation for digital banking. Data Quality Management: Test security
Digital IT Strategy: Internalize and mechanisms with real-world exercises to
prioritize digital banking as a top goal from understand weaknesses in the network
the board on down and application infrastructure, prior to a
hack attack or attempt
CIO Collaboration: Build a CIO-centric
Integrated Risk and Compliance: Use a
comprehensive, structured data quality

framework to limit technical risk, produce

improved data output, and support
business and IT alignment.
Differentiating Capabilities Building on top of
the foundations will allow a bank to break from
the traditional constraints of the past. To get
there, banks should focus on:
Talent Management: Use a talent
assessment framework to identify skills
gaps and transform the bank, such that Leading Capabilities help the banks focus on
learning, recruiting and culture enable their core business values. To evolve as market
innovation and collaboration. Expand the leaders in their areas, banks should seek out and
human capital strategy to recruit from cultivate employees with more sophisticated
think-tanks and tech-savvy RMs. Facilitate digital skills and a strong co-creation agenda.
focused, on-the-job training, mentoring
Co-Creation of Products and Services:
and peer coaching, and promote a culture
Develop a co-creation strategy roadmap to
of collaboration and innovation. Develop
pave a path for program implementation
an innovation centre of excellence to
and to illustrate how value will be delivered
impress the importance of imagination,
and communicate this roadmap across the
creative thinking and inventiveness more
enterprise
deeply into the bank's culture
Develop a platform and alleviate gaps
Integrated Multi Digital Channel
between the current state and the future
Platform: Target and overcome legacy
state of the architecture needed to support
system challenges with streamlined,
a robust customer engagement and omni-
future-state IT approaches. Build and
channel ecosystem. Build communities
deploy secure customer-facing
through customer workshops and engage
applications to reap the benefits of a digital
key internal and external stakeholder
presence. Build the data assets as
communities to drive growth
platforms and enterprise services to enable
Govern the process by facilitating
deeper and wider access to information
throughout the bank engagement among key stakeholders to
establish a culture of innovation and coach
Customer Analytics: Use communities-
teams towards meeting objectives on time
of-interest and voice-of-the-customer
and within budget.
opportunities to promote information
sharing. Use sophisticated data analytics
to build an understanding of customer
behaviors, needs and trends.

Chapter 3
Building Blocks of Digital Banking for Greenfield/Brownfield Bank in India
M ANY industrial giants and practitioners

believe that the predominant building
blocks of digital banking are the customer (sales
Therefore, it is imperative that we expand on
these dimensions in further detail.
Customer Dimension
and services subsumed), data and analytics
dimensions that were already identified in the People all over the world are living digitally at
previous chapter, for the simple reason that work, at home and everywhere in between. The
these dimensions bring about a spectacular rise division between the digital and physical worlds
in the bottom line of a bank, even though we is also becoming increasingly blurred.
recommend an overarching framework here. Technology fuels this duality by smartly using
Customer experience also encompasses more and more signals as consumers fill their
payment systems sub-dimension around which lives with new devices and services.
many innovations are taking place at a The digital needs model quantifies motivations
breakneck speed. Hence, innovations in that drive digital behavior as presented in Fig. 5.
payment systems are also projected here as The model provides a map for marketers and
important building blocks of digital revolution. technologists as they develop tools, content
Digital allows me to explore

the world around me
EXTERNAL
RA
EXPLO TION
Dis
co
Fun
ve
ry
FORMANCE
CONNE TION
Statu ess
s t hern Digital enables me
Digital lets me Toge
to have shared
focus on myself ME WE
C
experiences with
as an individual
ent Inti others
PER
evem ma
Achi cy
ce
Or
lan
de
Ba
CONTROL
INTERNAL
Digital helps me manage
internal needs
Fig. 5. The Digital Consumer Needs Model

and experiences for consumers across digital devices and platforms.

These two axes result in four dimensions:
Digital as external exploration
Digital as internal control
Digital as individual performance
Digital as shared connection.
These four dimensions result in eight need states as presented in Table 1 and Table 2.
Dimension Dimension Description Need States
Digital helps me to explore the Discovery: Search of new products & experiences
External Exploration
world around me Fun: Looking for pure entertainment
Digital helps me manage my Balance: Seeking equilibrium

Internal Control
internal needs Order: Manage uncertainty
Digital lets me focus on myself Status: Cultivating external image

Individual Performance
as an individual Achievement: Aiming for personal best
Digital enables me to have Togetherness: Feeling part of bigger whole

Shared Connection
shared experiences Intimacy: Deepening relationships
Table 1. The First Four Need States
These need states do not exist in isolation and these need states influence the customer behavior
along the customer journey. Since 2014, there have been tremendous investments by banks in the
space of mobility and payments. Banks also need to look beyond mobility and payments and
understand the customer experience journey and map their digital strategy to the customer
experience journey. Fig. 6 depicts a sample customer journey for a customer looking for banking
products:
Fig. 6. A Sample Customer Journey for a Customer Looking for Banking Products

Expectations in the customer journey in banking

Dimension Need Status
scenario
Discovery: Search of
Customers expect to be able to discover banking products
new products &
whenever and on whichever channel they prefer
experiences
External Exploration Customers are not looking for colorful and static web
Fun: Looking for pure brochures of the products; they are looking for a fun way
entertainment (e.g., gaming) through which they can learn more about the
products
Customers are looking for interactive smart digital planners
Balance: Seeking
and simulators through which they can balance their
equilibrium
financial income and needs
Internal Control Customers do not like being chased with mails and calls
about products, but they are expecting the banks to
Order: Manage
provide expert advice to be able to deal with uncertainty
uncertainty
better; and the customers expect this advice through digital
channels
Customers are seeking to establish their relationship with

Status: Cultivating
the banks that reflect their external image; the banks' image
external image
Individual is reflected through the digital transformation
Performance Customers are also expecting the banks to make the
Achievement: Aiming
financial products available immediately rather than
for personal best
making them go through lengthy paper-based processes
Customers are expecting the banks to engage with them
Togetherness: Feeling through social channelswhether it is servicing through a
part of bigger whole social channel or engaging with them with offers through a
Shared Connection social channel
Intimacy: Deepening Customers expect the banks to provide face-to-face
relationships interactions with the trusted advisers
Table 2. The Other Four Need States
These need states are driving the digital trends Top Digital Trends
that offer both challenges and opportunities to
Value Me (Quid pro Quo)
the businesses. Microsoft is empowering
businesses with the technologies that enable Customers expect being valued as depicted in
them to leverage the opportunity provided by Fig. 7. Offering an advertising message that the
the top digital trends. customer doesn't like is SPAM and offering an
advertising message that the customer can use
is a service. Consumers are increasingly aware
that their digital information has inherent value.

The more consumers understand the utility of screen and complete it on another
the value exchange and can see how they channel/another screen.
benefit (instead of only brands benefiting), the
RATION
E X PLO
more open they are to sharing data. Brands have
Dis
yet to prove the full value of data usage. About
co
BRANDS NEED TO
ve
CONSUMERS WANT TO
Understand consumer
ry
half of the consumers see how data can benefit
FORMANCE
CONNE TION
Be more productive signals and be more
Access to the right responsive
brands, but say they don't know how they can Provide the right
C
content at the right time.
ent
Make more timely vem
PER
experience at the right
Achie
trade and get value in return. Until brands can decisions time
Curate content
Or
de
connect the dots for consumers, consumers will
r
continue to question why they should be sharing CONTROL
information. Fig. 8. IntelligentlyON Lights Up 'Achievement', 'Order' and 'Discovery'
E X PL
ORATION
Real: Redefined
Now, consumers are shifting to embrace what
Dis
co
ve
we once referred to as IRL (in real life)

ry
BRANDS NEED TO
FORMANCE
CONNE TION
CONSUMERS WANT TO
Stay on top of things Prove value of sharing

Feel in Control Provide a sense of experiences in purely digital environments;
C
ent control
Make smarter decisions vem
PER
Achie Be open about data

many of these purely online experiences have
Or
become just as real as anything one might touch

de
r
CONTROL and feel. Consequently, digital experiences are

Fig. 7. Value Me Lights Up 'Achievement', 'Order' and 'Discovery'
becoming just as important as offline
experiences as presented in Fig. 9.
There are opportunities for marketers to use
RATION
E X PLO
personal, social and big data to enrich lives
through enhanced suggestion and
Dis
co
ve
CONSUMERS WANT TO BRANDS NEED TO

recommendation.
ry
FORMANCE
CONNE TION
Find new ways to use Remove friction
digital more effectively Simply and integrate
IntelligentlyON Be more efficient
C
online/offline experiences
ent
Make the mundane new vem Spark excitement with
PER
Achie
again technology
Consumers want digital experiences to allow

Or
de
r
them to be more productive, do more of the

CONTROL
things they want to do, and make better

Fig. 9. Real: Redefined is anchored in 'Achievement', 'Order' and 'Discovery'
decisions. And IntelligentlyON is where this
Fig. 5. The Digital Consumer Needs Model
consumer desire meets the marketer need to When the customers have to track their physical
use data and technology in the right place, the experiences (e.g., movies, cars, restaurants,
right time, and on the right screen as presented etc.) and have to track how their bank (or even
in Fig. 8. Customers expect continuity in their which of their banks) is fulfilling their need
interactions with the banks. This is where banks through offers, it creates a friction. Banks can
should build intelligence omni-channel banking. reduce this friction by making available an
Customer should be able to initiate a transaction intelligent personal digital assistant that
or an interaction through one channel/one recommends the right banking choices and

actions by knowing the customer's needs.

Banks should also consider integrating virtual
reality in their interactions with the customers so
that customers can experience the products or
services through virtual reality and immediately
sign up for financing with the banks.
Right to My Identity
Today, we are starting to see a shift away from a Banks could also leverage the social profile of
privacy focus as consumers are growing customers to provide personalized and
increasingly aware that they cannot hide their exclusive experiences through advanced digital
footprint. With this shift comes a growing desire branches.
to control their digital narratives. Interest in more The New Age of Discovery
automated tools to manage digital identities has
Consumers expect brands to drive discovery.
grown (see Fig. 10). This new trend is a threat to
They are looking for recommendations, not just
the digital advertising industry. The less
based on things they like or activities they've
information that consumers make available
done; they are also seeking experiences that
online, the more challenging it is to target them
give them the option to move outside their
with relevant, contextual advertising
comfort zone (see Fig.11).
experiences. However, it is also an opportunity.
Through their digital footprint customers are E X PLO
RATION
leaving digital signals that the banks can

DI
SC
OV
connect to build a social profile of their CONSUMERS WANT TO BRANDS NEED TO

ER
FORMANCE
CONNE TION
Y
Satisfy curiosity Open up new worlds

customers. Though this involves giving comfort Feed passions Play to consumers
C
Open themselves up to curiosity
to customers that their privacy is not being Drip feed interesting
PER
new
thoughts/experiences nuggets
invaded, banks can leverage big data

technologies to build a consolidated view of a CONTROL
social profile presented by the customers

Fig. 11. The New Age of Discovery
through publicly available information.
ORATION
If brands can feed curiosity, ignite passions and
E XPL
get consumers thinking in a new way, they can

BRANDS NEED TO forge more inspiring relationships with their
CONSUMERS WANT TO Offer Social and cultural
FORMANCE
customers. Invite consumers to keep coming

CONNE TION
STAT
US
Cultivate Image capital to help consumers
stand out
Court attention and Help build ideal identities back by seeding interesting content, ideas and
C
admiration
PER
for their consumer

Broadcast a better me Provide aspirational,
exclusive experiences products that consumers may not have thought
of before. For this the banks need to forge newer
CONTROL
alliances outside the banking domain and offer
Fig. 10. Right to My Identity triggers Achievement and Order surprising and delighting experiences to the
customers.

Customer Experience
According to a recent report, customer
experience looks set to overtake price and
From a different perspective, digital customer product as the key brand differentiator by 2020.
expectations are captured in Fig. 12. Companies need to examine their customers'
digital journeys and evaluate their experience in
order to be successful. In the process, fixing
broken journeys and identifying and resolving
areas customers find problematic is essential.
This in turn helps companies anticipate the
needs of their customers, provide proactive
customer care, and display more relevant
marketing messages or promotions. The impact
on the bottom line could be huge at present, it is
estimated that brands in the U.K. are losing
nearly 15 billion annually due to poor customer
service.
All that what a customer expects from a bank is
Fig. 12. Digital Consumer Expectations from Their Banking Organization captured in Table 3.
S No. Customer Expectation Description
1 Find me Finding customers not only on demographics, also on specific characteristics

using visualization and analytics
2 Ask me Consult customer on products, services and social issues
3 Advise me Advise customer based on their transactional data, social data or whatever data
banks have
4 Know me better Get a 360-degree view of a customer to understand their need
5 Stick with me Cover customer and family throughout life
6 Excite me Surprise and delight your customer with unexpected service
7 Compare me Provide peer analysis, i.e., who is buying what
8 Trade with me Offer better products and value in exchange for customer data, location and new
ideas
9 Educate me Offer digital education and financial tips
10 Alert me Alert customer about changes in market use real-time predictive analytics
11 Let me choose Offer multiple choices in payment, investments, services and let the customer choose
12 Protect me Provide multi-factor security which should protect instead of irritate.
Table 3. Customer Expectations from a Bank

DATA DIMENSION
Data Infrastructure for Digital Banks Not All
Data is Created Equal
Few industries have evolved as quickly as data
processing, thanks to the effect of Moore's Law
coupled with Silicon Valley-style software
innovation. So it comes as no surprise that
innovations in data analysis have led to new
data, new tools and new demands to remain individual level. And this extends to all the
competitive. Market leaders in many service different channels that the customer has used to
industries are adopting these new capabilities, contact the brand, whether that is website,
fast followers are on their heels, and the mobile apps, streaming or social media as well
mainstream is not far behind. as all the devices they use for those interactions.
Timely, Granular Data Moreover, companies need the data quickly. In
Too often companies rely on data that is a recent survey, 59% of marketers believe that
aggregated or trending data. This is not data can speed up decision-making. If a
sufficient to truly understand the customer on an company knows how an individual customer is
individual level. Neither is the approach of interacting with the company's digital channels,
collecting data by tagging, as it is impossible to it will be able to react in a timely manner with
determine if the right components have been appropriate responses that can influence the
tagged. Companies need to collect all data at an customer's buying decision.
web analytics/aggregated web data

customer purchase/transaction data
customer demographics
customer interaction/CRM data
customer survey data
individual online behaviourial data
social data
mobile location data
third party data
other
0% 10 20 30 40 50 60 70
Fig. 13. What Kind of Customer Data Do You Collect?

Trying to build a 360 view of the customer without But the best fit for data platform technologies is
timely individual-level digital data is impossible and not as universally understood at this time.
this is an issue that many companies are currently Unified Data Architecture allows the analytics
struggling with. Over 70% of respondents in a renaissance to flourish while controlling costs
recent survey admitted to relying on aggregated and discovering new analytics. As guideposts in
data (see chart in Fig. 13). this expansion, we have identified workloads
By capturing and analysing every browse, click, that fit into built-for-purpose zones of activity:
on-site search, device type and mouse over, the Integrated data warehouse
company can then have a better and deeper Interactive discovery
understanding of the motivations behind the Batch data processing
customer. This information, when integrated General-purpose file system.
with the data that companies already hold on
By making use of this array of analytical
their customers, such as age, gender, purchase
environments, banks can extract significant
history or credit score, can allow them to be
value from a broader range of data much of
more effective when sending personalised
which would have been discarded just a few
offers or optimising website and mobile apps.
years ago. As a result, business users can solve
This renaissance has affected the nature of data more high-value business problems, achieve
warehouse in many ways. In the 1990s and greater operational efficiencies, and execute
earlier 2000s, the Massively Parallel Processing faster on strategic initiatives. While the big data
(MPP) relational data warehouse was the only landscape is spawning new and innovative
proven and scalable place to hold data both products at an astonishing pace, a great deal of
internal and external to a bank. In the late 2000s, attention continues to be focused on one of the
an explosion of new data types and enabling seminal technologies that launched the big data
technologies led some to claim the demise of analytics expansion: Hadoop. An open source
the traditional data warehouse. A more software framework that supports the
pragmatic view has emerged recently, that a processing of large datasets in a distributed
one-size-fits-all approach whether a applications environment, Hadoop uses
traditional data warehouse or Apache p a r a l l e l i s m o v e r r a w fi l e s t h r o u g h i t s
Hadoop is insufficient by itself in a time when MapReduce framework. It has the momentum
datasets and usage patterns vary widely. and community support that make it the most
Technology advances have expanded the likely to eventually become the dominant
options to include permutations of the data enterprise standard in its space in a new breed
warehouse in what is referred to as built-for- of data technologies. However, MapReduce is
purpose solutions. recently being challenged by ApacheSpark.
Yet, even seasoned practitioners who embrace With its Resilient Distributed Dataset (RDD)
multiplatform data environments still struggle to feature, Spark is able to execute machine
decide which technology is the best choice for learning tasks in orders of magnitude faster
each use case. compared to MapReduce.

Business Value Density To illustrate the concept of BVD, consider a

Oneofthemostimportantconceptsforunderstanding dataset made up of cleansed and packaged
the Unified Data Architecture is BVD, defined as the online sales information for a given time period
amount of business relevance per gigabyte of such as the previous three months. This dataset
data. In other words, how many business insights is relatively small and yet highly valuable to
can be extracted for a given amount of data? There business users in operations, marketing, finance
are various factors that influence BVD, including and other functional areas. This sales data is
when the data was captured, the amount of detail in considered to have high BVD; in other words, it
the data, the percentage of inaccurate or corrupt contains a high level of useful business insights
records (data hygiene), and how often the data is per gigabyte (see Fig.14).
accessed and reused. In contrast, imagine capturing web log data
Before the digital revolution, organizations representing every click on the bank's website
established clear guidelines to determine what data over the past five years. Compared to the order
would be captured and how long it would be data described previously, this dataset is
retained. As a result, only the dense data (high BVD) significantly larger. While there is potentially a
was retained. Lower BVD data was discarded, treasure trove of business insights within this
compounded by the absence of identified use dataset, the number of people and applications
cases and tools to exploit it. querying it in its raw form would be less than the
dataset made up of cleansed and packaged
The digital movement has brought a fundamental
sales. So, this raw website data has sparse BVD,
shift in data capture, retention and processing
but is still highly valuable.
philosophies. Declining storage costs and file-
based data capture and processing now allow ANALYTICS DIMENSION
banks to capture and retain most, if not all, of the
How to Get More Value From Your Customer
information generated by business activities. Why
Data
capture so much lower BVD data? The reason is
that the low BVD does not mean no value. In fact, Analytics is the fastest-growing and fastest-
many organizations are discovering that sparse changing dimension of digital banking. Every
data that was routinely discarded not so long ago bank today wants to know how its customers
now holds tremendous potential business value are thinking and behaving online. And it is now
but only if it can be accessed efficiently. possible to know about, understand, and even
predict digital activities by customers and
Data Parameter High BVD Low BVD
prospects with great precision.
Age Recent Older
Analytics is not just used for marketing
Form Modeled Raw
purposes. They can also be used for defensive
Hygiene Clean Raw
purposes reducing transaction-related fraud,
Access Frequent Rare
cyber frauds, process-related frauds or
Reuse Frequent Rare
identifying customers likely to attrite or default
Fig. 14. Factors Affecting Business Value Density on their loans or creditworthiness, etc.

Accordingly, analytics has many manifestations and machine learning techniques that shed light
in a digital bank. They are customer analytics, on virtually every aspect of customer behavior
aka analytical CRM (subsuming Marketing and attitudes. Banks who want to be able to
Analytics, Channel Analytics, Social Media paint a far more detailed and complete picture of
Analytics, Collections or Recovery Analytics, their customer interactions need to record and
Collaborative CRM, etc.), Fraud Analytics capture every browse, click, on-site search,
(subsuming Cyber Fraud Analytics and Process device type and mouse over. And with data
Analytics), Risk Analytics, Operational Analytics becoming this granular, companies need to
(ATM location and replenishment decision employ newer and more advanced types of
making), HR Analytics, Network Security analytics. Analytics that can:
Analytics (see Fig. 15). Interestingly, in all these Enable the actions of individual customers
distinct applications of analytics, the three across digital touch points to be pieced
flavours of analytics viz., descriptive, predictive together to create that elusive Single 360o
and prescriptive have immense role to play. Customer View
Anticipate which customers are most likely
to buy and serve the right offers and
promotions to them
Optimise the digital customer experience,
for example, ironing out areas where
customers are getting stuck or dropping off
your website or mobile app
Maximise return on marketing investment
by identifying which combinations of
activities, campaigns and channels drive
the highest value customers.
In all the six applications of analytics in a digital
bank, except HR Analytics, Customer Data,
directly or indirectly plays a significant role either
in micro level or a macro level. In Customer
Analytics, all business problems such as churn
Fig. 15. Analytics Dimension
prediction, market basket analysis (cross-
Every organization wants to know its customers sell/upsell), customer segmentation, default
better and anticipate their needs, and it has prediction, sentiment analysis, customer
become impossible to do so without employing lifetime value modeling loan recovery modeling,
analytics. What were once simple bar charts of etc., are solved using analytical techniques. In
unique visitors or length of stay have Fraud Analytics, various kinds of cyber or non-
become sophisticated, multivariate statistics cyber frauds are predicted and analyzed. In risk

analytics, all kinds of quantifiable risks viz. credit do, there is a feeling that there is much that their
risk, market risk and operational risks are data is not telling them. This is why more
modeled, analyzed and predicted. In marketers today (87%) than in 2013 (46%)
operational analytics, all operational problems consider data their most under-utilised asset. In
of a bank viz., ATM cash replenishment strategy, reality, armed with the data and analytics
balanced score card based assessment of a available today, companies can drill down
bank's growth, assessment of a bank's deeper than before in areas such as digital
performance w.r.t profitability, solvency, marketing effectiveness, customer experience
productivity, liquidity, etc., modeling grid-lock and business efficiency.
scenario in inter-bank payments, etc. In security Putting Data and Analytics in the Hands of
analytics, vulnerability analysis, advanced Business Users
persistent threat prediction, intrusion detection,
The longer a company takes to collect the data
data exfiltration detection, anomaly detection,
and analyse it, the longer it would take for crucial
etc. Finally, in HR Analytics, HR chiefs now can
decisions to be taken that could affect a
apply analytics to identify and recruit the right
customer's buying journey.
person for the right job at right remuneration,
predict possible attritions by performing The best way to ensure that does not happen is
analytics on their social media pages, etc. to put the ability to query the data in the hands of
the employees, at an operational level, and not
Adopting an Agile Analytics Mindset
just strategic or middle-management levels.
For companies wanting to understand the This means employees can get timely insights
relationships and dependencies between that inform decision-making. For marketing,
different multi-structured datasets such as web sales, call centre operatives and customer
browsing, free form text fields and geolocation, it services, this provides awareness of all the other
is not just new analytical tools that are needed. A touch points and conversations that a customer
whole new mindset has to be adopted by the has had with the brand. This allows them to take
organization. the right actions to individualise their response
Instead of finding the right answer to a set of to the customer.
predetermined questions, companies need to According to a recent study, 37% of companies
discover the right questions to ask. Employees struggle to achieve this due to a lack of analytics
should be encouraged to explore and experiment expertise within the business. The technology
with the data, scope their questions and identify exists to provide pre-built analytics with easy-
the signal or golden nuggets of insights. With this to-use interfaces in the hands of business users
new model, companies are geared to learn, test and analysts, without putting strain on IT
hypotheses and either act quickly or move on a resources.
very agile fail fast mentality.
Marketing Effectiveness
To date, many companies are just not collecting
McKinsey estimates that global marketing spend
data that is granular enough. And for those who
now exceeds US$1 trillion. However, they

estimate that up to one-fifth of that annual

intuition alone will not suffice in this fast-moving,
marketing spend could be refocused with little or
data-driven environment. One of the solutions to
no impact to return on investment, if companies
help marketing departments gather a 360 view
deployed better marketing analytics.
of the customer and automate their decision-
Whether it is about the number of sales making, based on the vast pool of Big Data
generated as a result of an email campaign, or that's available both in and outside the banks is
evaluating whether the budget was better spent the concept of a customer decision hub (see Fig.
on online display advertising or social media, 16). It can be conceived as a holistic, fully
markets want to understand just how much integrated end-to-end customer intelligence
value has been generated by their budgets. With engine that establishes value-driven marketing
four in five companies planning to increase their with true contextual, omni-channel
investment in digital marketing in 2016, timely communication across all channels.
data and analysis is needed to determine if value
The proliferation of technology and growing
for money is being delivered to the business.
consumer engagement with all things digital are
Moving Forward on the New Marketing changing many aspects of customer behavior,
Journey from product research to buying patterns to
In the digital banking era, there is simply too banking. Consumer expectations are growing,
much customer information that changes too too: Consumers now expect a seamless, high-
fast, spread over too many touch points, quality experience across all digital channels,
channels and campaigns for one CMO or even including online and mobile. Financial
an entire corporate marketing team to capture, Institutions (FIs) are responding to consumer
grasp and assess. Gut feeling, creativity and demand by providing these channels and
Marketing Campaigns
Service Activities
Sales Programs
Regular communications
Contact Strategies
Priorities
Strategic Decisions
CUSTOMER Contact Rules
DECISION HUB
Restrictions
Channels Restrictions
Analytical Models
Event Triggers
Transactional data
Potential, Risks
Historical
Fig.16. A Sample of a Customer Decision Hub

developing new systems and features to satisfy

customers. They are already reaping some of operate more efficiently, deepen their
the rewards of digital banking capabilities, but relationships with customers and acquire new
much of transformative potential of digital customers. The first step in achieving these
banking remains untapped and unrealized. benefits is recognizing what customers want
Digital banking channels give FIs access to that they're not currently receiving a task made
customer data that is generated in real-time and is possible by integrated marketing automation
unprecedented in its amount and detail. That data and advanced customer analytics tools. Then
can catalyze FIs to improve their results, but it also comes understanding how to integrate
presents challenges, including combining innovative new features into omni-channel
information from disparate sources and detecting enterprises so that they generate convenience
patterns in massive datasets. Therefore, FIs are and value. It's those FIs that take these steps
likely to find sophisticated but easy-to-use that will be best positioned to realize the full
analytics tools to improve customer experience potential of digital banking.
and to compete with global banks who will master
TECHNOLOGY DIMENSION
analytics capabilities. The best analytics programs
help FIs thoroughly understand their customers so Technology is driving the change in digital
they can design products and services and target banking enablement. The following levers
them to the customers most likely to buy. These enable end-to-end digital banking.
tools can also facilitate more efficient customer Connected and customized products and
service in the increasingly omni-channel services enabled through Internet of
environment. For example, customers no longer Things
have to repeat their problem to a call centre agent Differentiated customer experiences using
after attempting to resolve it themselves online. digital channels through CRM and Omni-
Instead, the agent sees what the customer has
channel delivery platform
done and can quickly clear up the issue. This level of
Automated business processes
service matters to customers, even those who love
connecting people and systems enabled
to use digital channels.
through workflow systems and robotic
With analytics tools providing real-time
process automation
decisioning of personalized communications to
Data-driven business decisions through
customers who are in-session, FIs can
accelerate progress to simultaneously improve analyticsandmachinelearningcapabilities
satisfaction, revenues and profits. As FIs Security Operations Centre
develop and execute on their omni-channel Data lake/federated or logical DWH
initiatives, high-quality analytics tools become
Cyber security infrastructure
essential.
Blockchain
As FIs broaden and improve their digital banking
offerings to meet customer demand, they can Cloud

PAYMENTS DIMENSION
Why Digital Banking? Why Customers Are
Adopting It?
People are moving from personal banking to
digital banking because of convenience, ease of
use and accuracy of information at their
fingertips. Most bank customers would trade
personal banking for digital banking (Source:
Gallup http://www.gallup.com/). In a survey customer experience in each of those channels,
conducted with 6,000 banking customers (not in preferred by them to retain and increase
India), it has come out that 53% would give up numbers of customers.
their personal banking in favour of digital Worldwide, we are seeing mobile banking is
banking. In India, people using digital banking picking up very fast. With smartphone
(multiple channels) like ATM, bill payment penetration going up very rapidly in India, banks
through online banking and check deposit should focus on mobile banking. The survey
through kiosk has increased enormously. Banks conducted in 2014 in a foreign country has the
must go out of their way to ensure a satisfying following statistics (see Fig. 17).
Fig. 17. The Mobile Banking Trends

Presently, the above statistics may not be true in

India, but with tech-savvy people using it,
mobile banking would increase the adoption
drastically. With limitations in the infrastructure,
traffic conditions in urban and major cities would
force customers to adapt to digital banking.
Safety/Security: The level of enhanced
In 2014, smartphone users share in India was security available to protect identity and
21.2% of the mobile phone users. It is expected funds access. Improving a banks digital
to reach 39% by 2019 (Source: http://www. maturity ensures higher efficiency in some
statista.com/). However, while focusing on processes (e.g., account opening, on
digital banking, Indian bankers should keep the boarding, credit offering, etc.) and improved
following survey findings in mind: interaction and customer experience. To
Digitize account opening and onboarding: reap maximum advantage in an increasingly
This can be achieved in India because e- digital society, organizations will need to
KYC through UIDAI is enabled and legalized provide above average performance in all
Content and Functionalities: The ability to categories. Banks will have to increase their
offer basic as well as value added content operational efficiency and improve the
and functionalities through digital channels customer experience if they want to keep
their position in core markets. Non-
Design and Ergonomics: The simplicity of
traditional and digitally mature companies
design, availability of contextual offers and
are winning market share partly because
ability to personalize the experience
they are able to match the digital
Navigation: The ability to leverage expectations of the 21st-century customers.
customer insight for improved information
Table 4 presents products offered by some of
access
the mobile-only banks, which surely has
important inputs to brown-field banks.
Region Name of Description Products/Services

the Bank
UK Atom Bank Founded in the year 2014 by Anthony Thomson with Mobile banking app,
funding of $167.16Mn in two rounds from four investors savings account
As a mobile-only challenger bank, Atom brings biometric
banking to the UK, using biometrics instead of passwords
in their innovative mobile app
Atom Bank was listed at eight in KPMG's Global FinTech
Innovators 100
Atom is building the UK's first bank designed specifically
for the digital realm, offering easy and convenient banking
along with unique and engaging ways to manage money.


the Bank
Monese Founded in the year 2013 by Norris Koppel with funding Branchless mobile
of $1.8Mn banking, cash
Monese is a digital banking service that lets users open a
withdrawals, card
payments and
UK banking account on their mobile in minutes
international money
regardless of their citizenship transfers, current
It targets immigrants who face daunting tasks in opening account
a UK bank account as a foreigner by letting the user open
a current account and get a Visa debit card in 3 minutes
with a snapshot of their passport and a selfie.
Osper Founded in the year 2012 by Alick Varma with funding of Osper App,
$11.22Mn Osper Link,
It is a prepaid debit card and mobile banking service that
prepaid debit card,
Osper Allowance, etc.
empowers young people to manage their money
responsibly
It offers a safe MasterCard prepaid debit card and a
simple mobile banking app with separate logins for
young people and parents.
Mondo Founded in the year 2015 by Gary Dolman, Paul Rippon, Mondo App for digital
Jonas Huckestein, Tom Blomfield, Jason Bates with banking services
UK funding of $3.14Mn
It provides smart banking services to make money easy
for everyone by pricing it at a low cost
Users are given access to Mondos iPhone app and a
MasterCard prepaid debit card
They can load money onto the card every month and
spend it at shops, ATMs and online. The users also
receive real-time feedback regarding their spending.
Starling Founded in the year 2014 by Anne Boden with funding of D i g i t a l b a n k i n g
$70Mn services using real-
Starling is aiming to lure mobile-focused customers and
time intelligence
technology
provide a superior current account service to those
offered by the incumbent high-street banks.
Tandem Founded in the year 2013 by Matt Cooper and Ricky Full-service digital
Knox with funding of $34.79Mn banking
In December 2015, it was granted a license by the Bank
of England
It is in the process of constructing its technology platform
and meeting capital requirements.


the Bank
Simple Founded in the year 2009 by Shamir Karkal, Alex Payne, Budgeting tools, bank
Joshua Reich with funding of $15.29Mn account
Simple combines technology, user experience and
behavioural economics to help its customers spend
smarter and save more
The company offers a bank account that has all the tools
users need to manage their money built right in
The companys banking services are accessible via
intuitive web, iPhone and Android apps
In 2013, it recorded a 330% growth and more than $1.7
billion in transactions
Simple was acquired by BBVA in 2014.
Moven Founded in the year 2011 by Brett King, Alex Sion, Mobile banking app,
Richard Nearn with funding of $24.41Mn savings account, debit
Moven is a mobile-centric banking app
c a r d , contactless
payment
Movens app, debit card and contactless payment
sticker provide real-time spending insights to its
US customers to make smarter decisions and save more.
BankMobile Founded in the year 2015 by Jay Sidhu, Luvleen Sidhu Free checking account,
It is the first bank to offer free checking and savings remote check deposit
accounts without any fees as well as a line of credit, and picture bill pay,
P2P payments, online
access to over 55,000 surcharge-free ATMs, and a
Banking, high-yield
higher savings rate than the top four banks in the country. savings account
GoBank Founded in the year 2013 by Green Dot Corporation Online banking and
It is the first bank account designed from scratch to be c h e c k i n g a c c o u n t
opened and used on a mobile device with direct deposit
and bill pay, cash &
It enables checking balances, viewing transaction history direct deposit, photo
and transferring funds between accounts from check deposit, etc.
supported mobile devices
Its owned by Green Dot, which is an active player in card
management industry in US
It offers its products and services exclusively online or
over the phone, because it does not operate through
physical branches.


the Bank
National Founded in the year 1982 NAB Flik, Quick

Australia The Group is a financial services organisation with over Balances feature, ATM
Bank 12,700,000 customers and 42,000 people, operating locator tool, schedule
your funds transfers
more than 1,700 stores and business banking centres
and BPAY transactions,
globally. NABs online banking platform has around international payments
900,000 logins on average per day using real-time rates,
Its major financial services franchises in Australia are transfer funds, pay your
Australia
complemented by businesses in New Zealand, Asia and bills on your phone,
the United Kingdom transfer up to $20,000 a
day, etc.
Each of its brands is uniquely positioned, but built on a
common commitment to provide customers with quality
products and services, fair fees and charges, and
relationships built on the principles of help, guidance and
advice.
India digibank by Founded in the year 2016 Paperless, Signature-
DBS Not only does it let you deposit, withdraw and transfer less and branchless
money with lightning speed, it also lets you set goals and banking, virtual debit
card, digiSavings
draw out a plan to achieve them
account, 247 Virtual
It is Indias first ever bank that lets you open an account A s s i s t a n t , b u d g e t
without any paperwork or signatures optimizer and e-wallet
Only Aadhaar number and biometrics are required for
authentication
Customers can start with an e-wallet and convert to a full
bank account at any time.
Positioning to Cashless Payments it easy for citizens to use and pay for everyday
Building Less Cash Societies Smart services securely. This is not limited to
accessing your work place, but it can also
Cities Initiative
provide a digital wallet with a simple tap and go
RBI's Vision Statement for Payments is To convenience. This can be extended to use NFC-
proactively encourage electronic payment enabled mobiles to eliminate the card if photo
systems for ushering in a less-cash society in identification is not necessary.
India.
Smart cities rely on technologies that put
Smart cities can issue to its citizens an NFC- citizens first and promise social, environmental
based identification card which enables smart and economic sustainability. A vast array of new
city citizens to unlock services and facilities technologies, as well as social and economic
across the entire city in a secure way. This will be trends, will enable cities to deliver on this
a unique identification and payment tool making promise. Technical trends such as context-

aware devices, displays and mobile devices

everywhere that connect to everything, human-
centric computing and continuous access to
Smart ID Card can enable the digital wallet
massive amounts of data will make city workers
facilities of transferring one time from the bank
and citizens more efficient at work and
account to the wallet and use the wallet as many
continuously connected to family, friends and
times as they want with the convenience of the
information. This common Community (Citizen)
mobile or Smart Card. When receiving medical
Card for people of smart cities not only serves as
services, card holders can access community
an integrated identity and payment tool, but can
medical services, including disease prevention,
be envisioned providing various applications in
health care and treatment, rehabilitation, health
the areas of public services, utility services and
education, and family planning guidance.
business services using a simple and quick
secured Tap and Go convenience. When it comes to utility service payments,
working people are often inconvenienced by
People often need to carry multiple cards to
having to spend time queuing up to deal with
enable them to access public services, which
matters such as payment of electricity and water
can be inconvenient. The Community Card can
bills and for other essential services or
enable a user to access a range of public
provisions. The Smart City Card, a small e-
services, a welcome development arising from
wallet, can be used to pay for public utilities
the policy of sharing the fruits of advanced
such as water, electricity, gas and cable TV
technologies with the general public as people
charges at one time. The Smart City Card can
go about their daily activities.
also be used by employers to pay wages to
Card holders can pay for medications bought employees, thereby improving business
from designated drugstores, pay for medical efficiency.
services received at designated hospitals and
For cultural and tourism services, the Smart City
clinics, pay pension premiums, and access
Card can be used to pay for the public library,
personal social security account information.
cinema, museum, gym, theatrical performance
No need to worry about the change for small
and amusement park tickets or entry, a
transactions like auto and bus fare, and no need
complete change from the existing methods and
to worry about how small and how many times a
far more streamlined.
person can do the transaction without much
cost per the transaction. In the transportation services, the card can be
used to pay for the bus, taxi, ferry and metro
When linked to a bank account, card holders
train fares. It can also be used to pay for highway
can access their bank account records to check
and bridge tolls and for fuel and parking.
the balance, payment and withdrawal records,
personal loans, and so on, only when needed. Banks can position to get the benefits out of
All small ticket transactions can be done without promoting small-ticket and high-volume
touching the bank account. payments without touching the bank account
unless it is necessary.

Digital Payments Mobile Wallets

Prepaid Instruments
Prepaid card mobile wallets were introduced All the wallet holders are provided virtual
with a view of withdrawing or using a small account numbers which are linked to the escrow
portion of the account balance; the customer's account. The various modules of the digital
main balance doesn't need to be exposed. wallet platform are mentioned below:
Secondly, to handle small ticket payments
End-to-end Digital Wallet Platform consists
without touching CBS would reduce the load on
of the following modules.
the core banking system. Each transaction
Call Centre Dashboard
touching the core banking system is expensive
MIS Reports
in terms of transaction time it takes, costs per
Bank Integration
transaction, etc. More importantly, a bank
Gateway Integration
account is not necessary to perform an
RECON Process
electronic transaction. Benefits of cashless
Settlement Process
payments are manifold (see Fig. 18).
Smart Card / Mobile App
Banks can position themselves to provide wallet
Kiosk, PoS, Tablet Ready
services to reduce the cost and increase the
Integrated with Aadhaar for Authentication
customer convenience without compromising
or e-KYC
the security and not exposing their entire bank
IMPS and AEPS ready
account. The digital wallet platform should be
Mobile Top-ups, Bill Payments
built as per RBI's norms under the Payments
and Settlements Act and has many modules to Lower Txn.
Fee
provide many functions of the wallet service. Secure Debit/Credit Create Loyal
The platform can facilitate transactions from Payment
System
Customer
Base
smart cards or mobile applications. It is
imperative to support feature phones to bring Real time Save on
report to Cash Mgmt.
digital banking to the masses, where simple Management Activities
OTP and SMS are used as an authentication

mechanism. Brand
Save on
Visibility by
Telecom
Private label
expenses
Card
Tendering
Less waiting
the exact
time at
monetary
Queue
change Loyalty &
Reward
Source: Transaction Analysts (India) Pvt. Ltd.
Fig. 18. Benefits of Cashless Payments

e-KYCAadhaar-based Payments for providing a Unique Identification Number

Direct Benefit Transfers (named as Aadhaar) to all residents of India. As
part of this exercise, while generating Aadhaar
Background number UIDAI has collected and stored the
RBI has mandated banks and other financial following information of the individual:
institutions to strictly follow the instructions Demographic details such as the name of
regarding Know Your Customer (KYC) to ensure the resident, address, date of birth, and
the authenticity of the customer and the gender
information provided by them. To access any Biometric details (3) such as the
financial product, proof of identity and proof of fingerprints, iris scans, and photograph
address are key requirements. Till now these Optional fields for communication, such as
things are being produced in paper form by the the mobile number and email address.
person requiring the services. The originals are
UIDAI started providing Aadhaar authentication
taken, copied and attested by the competent
service wherein Aadhaar number, along with
authority and submitted. Then, the person
other attributes (demographic/biometrics/OTP)
accepting the same verifies it by referring to the
is submitted to UIDAIs Central Identities Data
original or writing to the concerned authorities to
Repository (CIDR) for verification; the CIDR
confirm its correctness. This is time-consuming
verifies whether the data submitted matches the
and also has some element of risk by way of
data available in CIDR and responds with a
forgery. It also creates a lot of work for the
Yes/No. No personal identity information is
institution concerned. There is also a process of
returned as part of the response.
scanning the documents once received and
sent to the verification agency in the email, The above services are provided through ASA
which delays the verification completion and AUA.
process time by a day or two. The UIDAI has set up a scalable ecosystem for
At present most of the financial service the purpose of instant authentication of
providers have used ID cards issued by the residents. The UIDAI has appointed a number of
government authorities (like Election Authentication Service Agencies (ASAs), who in
Commission ID Card, Passport, PAN Card, turn are appointing various government and
Driving License, Ration Card, Aadhaar Card, ID non-government organizations as Authentication
issued by Central/State Government) as proof of User Agencies (AUAs). The UIDAI, in partnership
address/identity and also telephone bill, rental with STQC (Standardisation Testing and Quality
agreement, bank account statement, letter from Certification), has also laid down the technical
any recognized public authority, electricity bill, standards for biometric devices, and certified a
etc. are used as proof of address. number of them.
In January 2009, Government has established Aadhaar authentication is a process wherein the
Unique Identification Authority of India Aadhaar number, along with other attributes
(hereinafter referred as UIDAI) with the mandate (demographic/biometrics/OTP) are submitted

to UIDAIs CIDR for verification. The CIDR authentication packets and receive the
verifies whether the data submitted matches the authentication results. Examples include
data available in CIDR and responds with either PCs, kiosks, handheld devices etc. They
a yes or a no. are deployed, operated and managed
Unique Identification Authority of India directly by the AUA/sub-AUA, or through a
(UIDAI): UIDAI is the overall regulator and technology service provider
oversees the Aadhaar authentication Aadhaar Holders: These are holders of
system. It owns and manages the Central valid Aadhaar numbers who seek to
Identities Data Repository (CIDR) that authenticate their identity towards gaining
contains the personal identity data (PID) of access to the services offered by the AUA.
all Aadhaar-holders The Aadhaar e-KYC service provides an instant,
Authentication Service Agency (ASA): electronic, non-repudiable proof of identity and
ASAs are entities that have secure leased proof of address along with the date of birth and
line connectivity with the CIDR. ASAs gender. In addition, it also provides the
transmit authentication requests to CIDR residents mobile number and email address to
on behalf of one or more AUAs. An ASA the service provider, which helps further
enters into a formal contract with UIDAI streamline the process of service delivery. e-
Authentication User Agency (AUA): An KYC may be performed at an agent location
AUA is any entity that uses Aadhaar using biometric authentication, as well as
authentication to enable its services and remotely using an OTP on a website or mobile
connects to the CIDR through an ASA. An connection.
AUA enters into a formal contract with UIDAI Salient Features of the e-KYC Service
Sub-UA: An entity desiring to use Aadhaar Paperless: The service is fully electronic,
authentication to enable its services through and document management can be
an existing AUA. Examples: (i) the IT eliminated
Department of a State/UT could become an Consent-based: The KYC data can only
AUA and other departments could become its be provided upon authorization by the
sub AUAs to access Aadhaar authentication resident through Aadhaar authentication,
services, (ii) a Hoteliers Association becomes thus protecting resident privacy
an AUA and several hotels could access
Eliminates Document Forgery:
Aadhaar authentication as its sub AUAs.
Elimination of photocopies of various
UIDAI has no direct contractual relationship
documents that are currently stored in
with sub AUAs
premises of various stakeholders reduces
Authentication Device Technology the risk of identity fraud and protects
Service Provider: These are the devices resident identity. In addition, since the e-
that collect PID (Personal Identity Data) KYC data is provided directly by UIDAI,
from Aadhaar holders, transmit the there is no risk of forged documents

Inclusive: The fully paperless, electronic, the service provider to directly store it as
low-cost aspects of e-KYC make it more the customer record in their database for
inclusive, enabling financial inclusion purposes of service, audit, etc. without
Secure and Compliant with the IT Act: human intervention making the process
Both end-points of the data transfer are low cost and error-free
secured through the use of encryption and Regulation-Friendly: The service
digital signature as per the Information providers can provide a portal to the
Technology Act, 2000 making the e-KYC Ministry/Regulator for auditing all e-KYC
document legally equivalent to paper requests. The Ministry/Regulator can
documents. In addition, the use of establish rules for secure retention of e-
encryption and digital signature ensures KYC data (e.g., storage method, the period
that no unauthorized parties in the middle of storage and retrieval among other
can tamper with or steal the data things). The data provided to the service
Non-repudiable: The use of resident provider is fully in compliance with the
authentication for authorization, the Information Technology Act (IT Act), 2000.
affixing of a digital signature by the service The e-KYC service is compliant with the latest
provider originating the e-KYC request, standards notified in the Information Technology
and the affixing of a digital signature by (Certifying Authorities), Amendment Rules 2011
UIDAI when providing the e-KYC data 25th October 2011(GSR 782(E) and GSR 783(E)-
makes the entire transaction non- Standards (Hash & key Size), usage period of
repudiable by all parties involved private keys, and verification of Digital Signature
Low Cost: Elimination of paper Certificate.
verification, movement and storage The Aadhaar e-KYC API22 can be used (only
reduces the cost of KYC to a fraction of with the explicit authorization of the resident
what it is today through biometric/OTP authentication) by an
Instantaneous: The service is fully agency to obtain latest resident demographic
automated, and KYC data is furnished in data and photo data from UIDAI. The resident
real-time, without any manual intervention servicing agency is called the KYC User Agency
(KUA). The KUA accesses the e-KYC service
Machine Readable: Digitally signed
through a KYC Service Agency (KSA). The KSA
electronic KYC data provided by UIDAI is
provides connectivity to the UIDAIs Central ID
machine readable, making it possible for
Repository (CIDR).
KYC user KYC user

Auth Agency (KUA) Agency (KUA) Aadhaar Auth
Device (AUA With KYC (AUA With KYC KYC API API
Permission) Permission)
Fig. 19. The Data Flow for an e-KYC

The e-KYC front-end application captures notifications from the sector regulators
the Aadhaar number along with the accepting Aadhaar as a valid KYC
biometric/OTP of resident and forms the document. The Aadhaar e-KYC service is
encrypted PID block (see Fig. 19) in full compliance with the provisions of the
The KUA forms the e-KYC XML by IT Act, 2000 and later amendments.
encapsulating the PID block, affixes the Closed Group Payment Systems
digital signature and sends it to the KSA
Smart card-based solution is specially designed
(the digital signature step can be delegated
for universities, colleges, residential complexes,
by the KUA to the KSA)
large medical hospitals.
The KSA forwards the e-KYC XML (affixing
The smart card-based products allow students
the digital signature if delegated by the
to pay tuition, exam and library fees, and also
KUA to the KSA) to UIDAIs Aadhaar KYC
pay canteen transport and any other service
service
available in a university or college campus. The
The Aadhaar KYC service authenticates cards can be funded online from banking
the resident. If the authentication is channels (NEFT) or by cash. The student does
successful, it responds back with a digitally not need a bank account.
signed and encrypted demographic and
The very easy tap and go technology facilitates
photograph in XML format
quick service at the touch points and improves
The demographic data and photograph in efficiency. The security of the transaction is
response are encrypted by default with the taken care of by using PIN or biometric
KUAs encryption key. Upon the KUAs authentication. All information stored on the
request, this may be instead encrypted chip of the card is completely encrypted and
with the key of the KSA cannot be duplicated at all.
The KSA sends the response back to KUA, The smart card can also be used as an ID card,
which interprets the result for service attendance card, access control card and library
delivery. The e-KYC service can greatly card along with the payment services offered by
reduce the KYC risk in the financial and products. The integration with other
telecom sectors. The PMLA (Prevention of applications can be done easily. The biggest
Money laundering Act) Rules, 2005 have advantage of the smart card is that it is truly
been amended in 2010 vide Government of multifunctional and can be integrated with
India, Gazette Notification GSR 980 (E) multiple applications.
dated 16th December 2010. This
How Does the Technology Work?
amendment includes the letter issued by
the Unique Identification Authority of India The Closed Payment products provide linkage
containing details of name, address and to a pool account with a bank and using the
Aadhaar number in the list of officially valid NEFT process get the funds transfer advice from
documents. This has been followed by the bank from time-to-time. These products

maintain all virtual accounts of card holders and for information and payment using cards
maintain the balance details of each account Mobile Recharge: Students can use the
holder. touch screen kiosk to recharge their mobiles
Any transaction from PoS reaches the central from any operator using their cards
server which takes care of all the card-level Mobile to Mobile Transfer: Students can
transaction details. During the day, for all the transfer money to their friends using their
transactions which are done, the end of day mobile.
settlement process would take care of Some of the Benefits to Various
settlement to various physical accounts. So, in
Stakeholders are as Follows:
case, the cards were used in the canteen during
the day, the end of day process would take care Benefits to Banks
of settling to the canteen account automatically. One more product to the banks' bouquet of
Benefit of Smart Cards consumer products and assured revenue
earner
The smart card is a multi-functional card which
No long queues in front of cash counters
can be used as an ID card, access control card,
library card and attendance card. The card Increases operational efficiency and reduces
carries the e-wallet for the students which they operational expenses as the need for
can use to keep funds and pay for various fees handling cash is reduced
and services inside the college or university Assured float for the banks as C3 is a
campus. The smart card secures the prepaid card
transactions and students do not have to worry Itisahighlysecuredwayofhandlingvoluminous
about theft or small change in the campus. low-value transactions.
New Features Added to the Carry Cash in Benefits to Students
Card Product No need to carry wads of currency notes
Smartphone Support: Mobile application Simple plastic does the magic
which is linked to the same wallet as the No worry of loss or theft as it cannot be used
card. This would allow card holders to use by anyone as it is biometric-enabled
their mobile too for payments. Again the Avoid long queues to pay for any services
balance in the account can be distributed by using any of the PoS terminals
to card and wallet usage as per the
requirement of the customer Highly secure Card can be used only by
the owner
Rewards Program: Points-based reward
system to encourage the use of cards. Above all No hassle of maintaining a bank
A student can accumulate points which account
they can redeem in canteen or cafeteria No change problem.
Touch Screen Kiosk: Touch screen Benefits to Universities/Colleges
payment and information kiosk which can be
No long queues at the cash counters
installed in the reception area of the college

One Card Multiple uses Student ID,

attendance monitoring and access control
Reduce operational expenses as the need units, working in adherence to the standards set
for handling cash is reduced by the BBPS. NPCI has been mandated by RBI
Ability to provide secure cashless to implement an integrated, interoperable,
transactions to students across their entire accessible and scalable bill payment system in
campus the country which will provide the customers the
Enhance the college reputation facility of anytime, anywhere payment of bills.
Daily reconciliation of all transactions and The Bharat Bill Payment System (BBPS) will
receive funds the same day or the next day function as a tiered structure for operating the
Return on investment in the first six months. bill payment system in the country under a single
brand image. National Payments Corporation of
Bharat Bill Payments (Source NPCI) India (NPCI) will function as the authorized
Bill payment is a major component of the retail Bharat Bill Payment Central Unit (BBPCU),
payment transactions in India and is characterised which will be responsible for implementing
by the presence of a large number of billers who business standards, rules and procedures for
provide a variety of payment options to their technical and business requirements for all the
customers. However, a large number of participants. NPCI, as the BBPCU, will also
payments continue to be either through cash or undertake clearing and settlement activities
cheque. The present payment infrastructure related to transactions routed through BBPS.
arrangements are mostly biller-specific and do Existing bill aggregators and banks are
not provide an interoperable payment system envisaged to work as Operating Units to provide
which allows seamless and efficient bill payment an interoperable bill payment system
mechanisms to the customer. These challenges irrespective of which unit has on-boarded a
in the service delivery presented an opportunity particular biller.
for a centralised bills payment system in the The BBPCU will not own any transaction
country. Considering the requirement of an financially from a payment system perspective,
interoperable bill payment system in the country, working only as a medium to connect multiple
RBI constituted a GIRO Advisory Group (GAG) to billers and agents through various Operating
study the feasibility of implementation of GIRO- Units. In addition to setting standards and
based payment systems under the chairmanship ensuring transaction security for the entire
of Prof. Umesh Bellur (IIT, Bombay). ecosystem, it will also ensure that queries,
The GAG recommended a tiered-structure requests and complaints raised by customers are
wherein the Bharat Bill Payment System (BBPS) monitored and resolved on time. The BBPS will
will be the authorized standard setting body act as an independent brand and is expected to
(also handling the settlement functions) while increase the confidence level of the customers
the Bharat Bill Payment Operating Units with respect to transaction convenience, security,
(BBPOUs) will be the authorised operational reliability and accessibility.

Unified Payments Interface Blockchain Technology

The Unified Payments Interface offers Blockchain technology is picking up very fast
architecture and a set of standard API across the globe.
specifications to facilitate online payments. It
A blockchain is a place to store any data semi-
aims to simplify and provide a single interface
publicly in a linear container space (the block).
across all NPCI systems besides creating
Anyone can verify the information publicly and
interoperability and superior customer
securely. The blockchain behaves like a
experience.
database, except that its header is public. The
The key aspects of the Unified Payments data stored can be a token of value or a crypto
Interface are: money balance. The blockchain acts as an
The Unified Payments Interface permits alternative value transfer system that no central
payments via mobile app, the web, and authority or potentially malicious third party can
other applications tamper with because of the encryption process.
The payments are both sender (payer) and The blockchain is based on the public/private
receiver (payee) initiated hegemony, which is the yin-yang of the
blockchain public visibility, but the private
The payments are carried out in a secure
inspection. The blockchain transfers authority
fashion aligned with the extant RBI
and trust to a decentralized virtual network and
guidelines
enables its nodes to continuously and
The payments can be done using mobile sequentially record transactions on a public
number, Aadhaar number, virtual address, block, creating a unique chain. Each
account number and IFS code successive block contains a hash (a unique
1-click, 2-factor authentication, biometric fingerprint) of the previous code; therefore,
authentication and use of payer's cryptography (via hash codes) is used to secure
smartphone for secure credential capture, the authentication of the transaction source and
etc., are unique features. removes the need for a central intermediary. The
combination of cryptography and blockchain
UPI App Approach
technology together ensures there is never a
Independent Mode Bank developing a duplicate recording of the same transaction.
separate UPI app, and/or converting their
Digital banking will promote all these initiatives
existing mobile banking application to be
to reduce the use of cash and secure electronic
extended to facilitate UPI services.
payments. Banks should have a strategy and
Embedded Mode The UPI compliant plan in place to be part of this financial
app/module is embedded in other (merchant) transformation.
apps by bank giving the binary/SDK to the
merchant to integrate into their apps.
Merchants may choose to include more than
one UPI compliant app from different banks.

Chapter 4
Digital Banking Maturity Model
B Y now, it is abundantly clear that digital

banking is a long journey and Indian banks
are at various stages of this journey. Therefore,
to help banks (both greenfield and brownfield
ones) gauge where they are and what lies ahead
for them, a maturity diagram is provided here in Level 1: Initiated
Fig. 20. In what follows, the constituents of all To start with, all technology-related people with
the four stages of the maturity diagram are requisite skillsets and experience are recruited
described in detail. Further, we also spell out at various levels. Technology paraphernalia
what needs to be accomplished in order for including necessary hardware, software are
bank to move from one level to another. procured and installed in order to have the
capability of internet banking, mobile banking,
LEVEL-4
Governed omni-channel; security-related software is
tested and installed. Security department is
LEVEL-3 formed informally. Importance of quality of
Optimized
customer data in bringing about growth in
LEVEL-2 profitability and improvement in customer
Managed
relationships is thoroughly understood and data
LEVEL-1 quality tools are procured and installed.
Initiated
Business processes are re-engineered in order
Quality of Customer Data Needs Continuous Improvement
to bring out perceptible change in the way
customers are serviced. Analytical thinking and
reporting is initiated and inculcated in the bank
Fig. 20. Digital Banking Maturity Model at the top level using visual analytics or
descriptive analytics. Operational CRM is fully
implemented, wherein sales and services are
carried out through the OCRM software. A data
scientist is recruited to take care of analytics
initiatives.
Apart from the above qualifying criteria, in this
level, banks start analyzing all business related
activities such as business per branch and zone,
business per employee, ROE, ROA, fraudulent
incidents, security related incidents, etc., using
visual analytics tools.

Level 2: Managed
Data about customers should be collected and
stored in a centralized repository such as data
warehouse (either federated or logical or
traditional enterprise wide) in order to achieve
the elusive 360o view of the customer. Data
warehouse specialists such as data modeler,
ETL specialist, BI specialist should be recruited. Level 3: Optimized
Modern security-related software is procured Data quality becomes a separate function within
and specialist is recruited to head this a bank and Chief Data Quality Officer is recruited
department with a team of CISOs. IT to take care of data quality improvement at
governance structure is fully in place. Customer every level of customer touch point. Data
data quality is improved throughout the bank. stewards and information architects are
State-of-the-art analytical tools with text recruited. Master data management tool is
analytics features are procured in order to solve procured to take care of data quality issues.
some of the business problems having Data warehouse of central repository becomes
structured data alone. In other words, analytical fully functional and it covers almost all branches.
CRM is implemented in some form. Campaign Chief Analytics Officer (CAO) is recruited to the
management is conducted with the help of analytics team having half a dozen data
ACRM and OCRM tools. A couple of data scientists and business a nalysts. The
scientists are recruited. BPR is carried out to organization structure is tweaked so as to
bring in customer-centricity and enhancing accommodate the CAO to whom a bunch of
customer experience. Security department is specialists such as data miners/scientists,
formally formed and analytical tools are channel managers, segmentation managers,
procured to monitor and analyze past events etc., report. Bank starts analyzing the
and predict future events. unstructured data in the bank such as call centre
Apart from the above qualifying criteria and data and social media data to understand more
having tasted success in the previous level, about customers' needs, interactions,
banks in this level start building customer churn transactions and observations. Full-fledged and
models for churn prediction, which in turn help in matured analytical CRM is implemented. State-
effective customer retention and perform target of-the-art fraud detection analytics tools are
marketing based on scientific customer procured to analyze, react and proactively
segmentation (based on clustering algorithms). identify transaction-related frauds in almost
Lift charts are built to aid in decision making in real-time. Digital and mobile wallets are
churn and customer acquisition. introduced. BPR encompasses more areas so
that new business and technology initiatives are
in total alignment and aim towards getting
maximum customer satisfaction.

Apart from the above qualifying criteria and

having tasted success in the previous levels,
banks in this level start building market basket
analysis models for performing cross-
sell/upsell, default prediction models, fraud
detection models, customer sentiment analysis
models etc. As a consequence, cross-sell ratio commodity. Collaborative CRM, where
increases and default rates will come down, analytical CRM is performed while servicing the
fraudulent incidents will come down and based customer, and geo-location analytics for better
on customer sentiments, products will be service to customers is fully implemented with
improved and services will be bettered. big data analytics in the bank. Security
Operations Center is in place to take care of all
Level 4: Governed
security-related issues in the bank. Marketing
Data governance structure is fully in place with automation and optimization is completed. New
appropriate organization structure to technology initiatives with many possible
completely take care of all data quality-related ramifications in business such as blockchain,
issues. Data lake is fully established to take care etc., are attempted and put in place after
of both structured and unstructured data of thorough testing. BPR continues to be carried
customers and achieve full 360o view of the out at frequent intervals in order to have
customers. All forms of analytics become all- customer-centricity.
pervasive in every department of the bank
Apart from the above qualifying criteria and
including customer-facing and non-customer-
having tasted success in the previous levels,
facing departments. Analytics becomes a
banks in this level start building customer life
time values models, credit recovery models
based on unstructured data analysis, etc.
Customer life time value is estimated and based
on that personalized marketing is performed,
which is the holy grail of marketing. Geolocation
analytics models are built to personalize
marketing efforts. Full-fledged operational, risk,
fraud and HR analytics will be implemented and
their benefits are felt throughout the bank.
At every stage, data quality is improved, new
positions are created and people are recruited
to take care of all analytics initiatives.

Chapter 5
Digital Banking Case Studies
INTERNATIONAL BANKS portfolio management; social customer
relationship management; and how to capture,
Nedbank
store and analyze large sets of big data.
Nedbank Group is a large banking group in
With input from Microsoft Services Enterprise
South Africa with US$74 billion assets. The bank
Strategy Program, Nedbank launched pilot
provides banking, insurance and asset
initiatives. To help the bank meet changing
management services through a set of 1,100
demand for technology, the Enterprise Architect
customer-assisted outlets. As Nedbank has
helped Nedbank produce a strategic plan, an
seen growth through mergers and acquisitions,
architecture plan, and a business case for
the IT landscape is highly duplicated and it
adopting a diverse array of end-user computing
resulted in different productivity, collaboration
devices.
and CRM environments distributed throughout
The Enterprise Architect played a key role in
the enterprise. Nedbank wanted to standardize
delivering a cohesive unified communications
and simplify the IT infrastructure. They wanted
plan for internal and external collaboration via
to integrate technology plans with business
technologies such as the Microsoft Lync 2010
plans.
client for instant messaging and web
Solution: Nedbank initiated with adoption of
conferencing. Microsoft Services Enterprise
Microsoft Services Enterprise Strategy for three
Strategy Program helped Nedbank to enhance
years. Certain critical domains for prospective
business processes, identify prospective areas
change have been identified following the
of cost reduction, and realize more technology
engagement between Nedbank senior IT and
value. It resulted in 5-15 percent real estate
business leadership. As part of developing an
costs and realize additional savings with
integrated channel strategy, Nedbank used
solutions that improve employee productivity
Microsoft Enterprise Architect to build a
and help them balance their work and home
strategic roadmap and evaluate ways of
lives. Enterprise Strategy Program helped
interacting, communicating and transacting
Nedbank to improve value realization from
more efficiently with its customers. Using
technology. The bank is also driving business
Microsoft Enterprise Architect, Nedbank was
and IT innovation in bringing the products such
able to develop solutions to manage customer
as video-banker program that will deliver more
relationships and resolve issues regarding the
customer value.
use and scalability of Microsoft Dynamic CRM,
Microsoft Lync Server 2010, and Microsoft Metro Bank
SharePoint Server 2010. The Enterprise Metro Bank is a new age bank established in UK.
Architect organized sessions for Nedbank It has focused on eliminating the all-too-familiar
business and IT leaders on application of pain points experienced at a bank the long

waits, complex rules, confusing processes and user-friendly, searchable knowledge system
barrage of marketing offers. It has used multiple that inspired employee adoption, engagement
measures to address these aspects. and everyday use. Some of the new features
Increasing the Speed of Business: Technology include:
Reduces Wait Time Customization to fulfill Metro Bank
Usual processes involved with the customers employees search and functionality
are made more efficient. If a customer requires requirements
more complex banking needs, the right Ease in creating, editing, publishing and
colleague can be messaged to solve the sharing content
customer's needs immediately. Communication
Real-time ratings and feedback to make
within employees of Metro Bank is managed
quick improvements and add to content
through Yammer, a Microsoft Enterprise Social
Network. Various activities of the bank such as A customer service focus that empowers
monitoring branch traffic patterns or a front-line agents, who can be confident
customer's account activity are performed they are delivering the best, most current
using Dynamics CRM Online and Power BI for and consistent answers across every
identifying and addressing the problems before channel.
they affect the customers. Juntos & Bancolombia: Automated Mobile
In order to create happy customers, Metro Bank Messaging Driving Usage among New
understood that this proposition begins inside Accountholders
out with happy employees. Employees with As access to basic financial services expands
easy access to consistent, current and correct globally, in most part due to the ubiquity of mobile
information can respond to customers faster, devices, adoption and usage of said services has
creating a positive experience for everyone. To become a critical and complex next step in
achieve this, Metro Bank uses Microsoft achieving full financial inclusion in developing
technology for its internal knowledge system, markets. Despite growing mobile money usage,
Metropedia. It provides employees with active use of low-cost digital financial services
information on everything about the bank's remains low. Latest numbers from the Grupe
services and customer service from how to Spcial Mobile Association (GSMA)2 depict this
open an account or apply for a loan, to how to challenge: In 2015, 37 markets around the world
consistently provide positive communication carried 10 times more mobile money agents than
and experiences for customers. Metropedia is bank branches and at least 19 markets boasted a
instrumental to Metro Bank's commitment to greater number of mobile money accounts than
turn customers into fans. bank accounts. However, from the 411 million
Using Microsoft Dynamics Employee Self- registered mobile money accounts globally, only
Service, Metro Bank turned Metropedia into a 134 million were considered active recorded at
2015 State of the Industry Report on Mobile Money. GSMA Mobile Money Programme.
www.gsma.com/mobilefordevelopment/wp-content/uploads/2016/03/SOTIR_2015.pdf

least one transaction in 90 days by the end of

need and voice concerns without feeling
December of 2015.
overwhelmed.
Juntos is a Silicon Valley technology company,
Deploying Juntos
created as an interactive mobile messaging
platform aimed at bridging the engagement gap Before a deployment, Juntos conducts in-
between Financial Service Providers (FSPs) and country ethnographic and market research to
customers. Juntos started in 2010 at the understand what triggers people's financial
Stanford School of Design and drew attention behavior and potential issues around trust.
from investors and FSPs as a way to drive Leveraging these insights, Juntos configures its
customer engagement. It has received the G20 platform to address the local context, using
Innovation Award for Financial Inclusion at the human-centered design concepts. For the first
2012 Mexico G20 Summit. deployment with Bancolombia, a large
commercial bank in Colombia, this initial
Juntos' platform promotes real-time, two-way
research took two weeks and involved in-depth
customer interactions using an automated,
interviews with approximately 10 consumers.
conversational SMS platform. Leveraging behavioral
Juntos then designed initial messages for
research and customer data analytics, the platform
testing and recruited a randomly selected group
communicates with newly banked customers with
of consumers (not necessarily customers of the
low usage rates through text messages and adapts
FSP partner) to refine tone and content of the
the frequency and content of messages based on
messages. The sandbox testing is a fast,
customers' reactions. The tool is designed to be
iterative process during which potential
conversational and adaptive. A customer can text a
mistakes or misperceptions can be quickly
question to Juntos, not only to receive a helpful
identified and corrected.
response, but also answers to potential follow-up
questions and encouragement to act on key topics, During the first couple of months of a deployment,
suchassavingsforaspecificgoal. Juntos runs many concurrent A/B message
testing with small numbers of users for example,
Juntos is focused on building a relationship with
six batches of 200 customers at a time
the customer, helping break the lack of
observing how customers respond or not to the
understanding on how financial products work
various messages. Once deployed, the system
and the isolation it can cause through an
adapts its message frequency to individual user
informal and friendly text message conversation.
behavior, sending more responses if the
Lack of confidence and trust are often significant
customer is highly engaged, or fewer messages if
barriers for people's interaction with FSPs and
the customer is not as responsive.
use of financial services. Newly banked
customers often shy away from clarifying Juntos also ensures that customers do not have
questions with bank representatives in person, to pay for their SMS replies. In addition, in order
fearing embarrassment. Having an informal and to comply with local regulations, in some
somewhat anonymous communication channel countries Juntos is required to ask customers to
helps some customers get the information they opt-in to the service to kickoff engagement.

Bancolombia Results aim to provide immediate value (such as

information about agents where customers
In the deployment with Bancolombia, Juntos
can transact for free) and consistent flow of
has achieved some promising results when
content. At the same time, Juntos requests
considering customer response rate, targeted
little to no personal information from
behavior change, and increased trust and
customers during this time. These strategies
confidence of customers.
help Juntos build trust with consumers.
Customer Response Rate: Juntos' Three months after the introduction of
response rate increased from 4% after one Juntos, active new accounts increased by
month to 32% after 3.5 months. This is 32.5% and average account balances by
considerable, especially when compared 50% compared to the control group during
to other similar tools, such as email the pilot phase.
marketing, which typically generate less
At the six-month mark, compared to accounts
than 1% response rates. Bancolombia
that were not exposed to Juntos, inactivity rates
conducted a randomized phone survey
were 14% lower and balances increased almost
asking its customers about the mobile
twice as much in six months. The effects were
money product and the service provided
largest with customers who actively engaged
by Juntos. In this survey, nine out of 10
with Juntos.
customers on average indicated they were
very satisfied with the service Following the deployment in Colombia, Juntos
has already made successful strides in
Transactional Behavior Change: Juntos'
replicating similar results with partner-FSPs in
platform was successful in driving many
Mexico, Tanzania, and the Philippines, among
customers to use more efficient agent and
other countries.
mobile channels, or to simply make a
transaction using a mobile wallet. This Using Big Data and Consumers' Digital
behavior change resulted in per customer FootprintstoScoreInvisibleBorrowers
cost reduction transaction costs at a bank
Extending loans in underserved markets has
branch were approximately five times higher
always been challenging to formal lenders. In
than the cost of transactions at agents;
the absence of easy-to-access information
increased savings balances; and drove
about the creditworthiness of unbanked or
revenues from withdrawal fees still a lower
underserved consumers, lenders had to resort
cost to customers than visiting a branch
to cost-intensive, high-touch models for credit
Trust and Confidence: Juntos targeted due diligence or not lend to them at all. Even
Bancolombia's customers' right after though these segments have steady income
account opening, which appears to be a and resources to invest in their future, they still
crucial time period to successfully engage find it difficult to get access to credit, because
new clients. During this early stage of the they lack a formal credit history. In India, more
customer relationship, Juntos' messages than 400 million people borrowed money in

2014, but fewer than one in seven were Generating the Lenddo Score
approved for a formal loan.
Lenddo has analyzed over 2.6 billion individual
The digital revolution is rapidly changing these pieces of digital information to create its
dynamics and creating new opportunities to decision-making algorithms. The data is loaded
address many of the longstanding barriers in into Lenddo's proprietary platform and through
financial services and India is poised to seize complex modeling and statistical techniques,
these opportunities. Well over 650 million adults the algorithms are trained to comb through all
in India four out of every five already have a this information to surface insights into
mobile phone in their pocket, and most of these consumers' attitudes towards credit. For a
devices will be smartphones by 2020. More than typical borrower who applies for a loan and
400 million Indians have access to the internet opts-in to share their private data, Lenddo
and 125 million have a Facebook account. analyzes as much as 12,000 data points,
Seven in 10 users of mobile broadband generating a score using multiple derived
smartphone in the country regularly stream features. After years of lending in multi-markets
videos on their phones. to train algorithms and perfect the technology, in
And every time these individuals make a phone January 2015, Lenddo made its Application
call, send a text, browse the internet, update Program Interface (API) available to traditional
their status on social networks, or top-up their and alternative lenders globally.
mobile accounts, they deepen the digital In Colombia, Lenddo was able to test their
footprints they are leaving behind. These digital model alongside a commercial credit bureau. An
footprints are helping spark a new kind of online lender issued more than 2,000 loans,
revolution in lending in emerging markets capturing each borrower's commercial credit
around the world. In India, this new approach to score and a Lenddo Score. Lenddo's
risk assessment can potentially bring between calculations estimate that, using a traditional
100 and 160 million new customers to the credit history score, a bank would likely only
consumer credit market, which would mean approve the top decile (10.26%) of a pool of
tripling the current addressable market for retail prospective loans, but would still have a high
lenders in the country. default rate of 20.45%. With the same pool of
Lenddo, a technology solutions company, is an prospective loans, the model combining
early contributor to this revolution. Through its traditional credit scores and the Lenddo Score
innovative proprietary algorithms, Lenddo is achieved a default rate of 9.57 percent. The
helping formal lenders, such as traditional combined model also improved approval rates
banks, non-bank and online lenders, to extend by 52% and reduced risk in 12%. These results
credit to consumers in the aspiring middle-class clearly benefit both borrowers and lenders.
by using non-traditional data such as In a recent survey with Colombian consumers,
consumers' digital footprints to verify their about 70% of the participants indicated they
identities and assess their credit risk. were willing to share information they consider

private such as social media activity and web (e.g., Capital Float), etc. Disruptions in the
browsing history with companies like Lenddo payments industry is already well-known
to improve their chances of getting a loan or a as witnessed by the large PE inflow into
bigger loan. companies like PayTM and MobiKwik.
Market Customization and Machine Anonymous Case Study: Identifying and

Learning Targeting Mortgage Prospects using
Analytics
Lenddo's algorithms are continuously
A leading financial services provider wanted to
improving through machine learning techniques
identify quality leads for their sales and
and with each new market, lending partner and
marketing teams. They decided to look at how
potential borrower, the model accesses more
customers may show interest in a mortgage
data, becoming more accurate. Lenddo also
before even starting an application. They
builds custom algorithms to meet the needs of
thought that by looking at the sequence of web
specific clients and tailors and customizes its
pages browsed, the combination of pages
data collection and analytical models for their
browsed and the complete journeys that
specific use cases.
customers took through their website, before
Smaller Case Studies and Success Stories
filling in an online application form, they would
ING Direct was one of the earliest in the be able to quickly identify pre-purchase intent.
digital-centric model and successful
The company used browsing data from
(including the ING Direct USA sale for USD
customer sessions, including the pages visited,
$9 billion to CapitalOne)
the clicks registered, the time spent and the
Movenbank is a good international number of visits a customer made to their
example of how mobile-first approaches website in the past month to predict a
are bringing about disruptive change to the customer's propensity to buy a mortgage.
process of retail banking and payments.
They then created new variables using these
Numerous FinTech startups closer to home
pre-application interactions and introduced
are disrupting all traditional financial
them to their existing analytical models to better
services arms in some way or the other
predict which customers were most likely to buy
(some examples are provided here, a
mortgages. The results were impressive. They
comprehensive overview of how blockchain
achieved a 50% uplift in mortgage conversion
technology is going to displace banks from
while at the same time expanding the pool of
its intermediary position)
high-performing leads. Instead of passing leads
Disruptions in India are already happening on to sales teams monthly, they were able to
in the credit sector, like for instance pass them on daily, improving the timeliness of
servicing the needs of the unbanked any follow-up actions. Finally, the company put
retail borrowers (e.g., CreditMantri), in place a programme to win back visitors that
commercial loans for digital-based SMEs had abandoned the application process. These

insights generated many millions of incremental Anonymous Case Study: Preventing Lost
sales revenue, a great result. Opportunities by Decoding Customer
Anonymous Case Study: Improving Online Conversations
Forms and Processes for Better Customer For a bank, the free-format text generated by the
Experience and Profits web chat facility on their website proved to be a
A retail bank knew that many of its customers treasure trove of valuable information about how
were dropping out at various points in their their customers felt about the bank's products
online application processes, but did not know and services. In order to analyse the free-format
why. The bank wanted to recreate customer text, the conversation logs had to be put into a
journeys by time sequencing interactions in structured format. Next, text analytics was used
abandoned sessions in order to identify to group conversations based on key words or
customer pain points. phrases. This enabled topics of conversation to
be identified, such as usability issues, new
Using visualisation of the most frequent paths
feature requests, hot leads or difficult
though the website, they identified the main
processes.
points at which customers were rejected, where
on the page or form this was happening, and the Then, sentiment analysis was used to detect
experience for the customer when this whether the words or phrases used in each topic
happened. It turned out that if a particular field had a positive or negative connotation. For
was completed in a particular way it would send instance, words such as poor, not as good
customers back to the start of the process. This as, or disappointed would all fall into the
affected over 50% of customers attempting to category of negative sentiment.
complete the form. Further analysis revealed the As a result of continually monitoring the topics of
nature of the bug which the existing web conversation and their sentiment, the bank
reporting had not been able to identify. The root could identify and resolve customer issues
cause related to a validation rule sitting behind quickly and effectively. The bank was able to
the field which was very simple to fix. Resolving reach out to disgruntled customers to win them
this, had a huge positive impact on form back with a specific action or offer. In another
completion and customer experience. instance, the company found usability issues
This analysis was then repeated across a range with their website and put in place a new design
of online processes and application forms and to remove those issues. These actions were
the bank was able to pinpoint which forms instrumental in recovering the customer
needed to be redesigned, and which customers experience and increasing revenue for the
had been affected by problems previously. company.
A side benefit of this analysis was the reduction in Anonymous Case Study: Business Efficiency
calls to the call centre by visitors unable to An Insurer Uses Predictive Campaign
complete their online applications, freeing up Optimisation to Maximise Conversion of High
valuable resources and lowering operational cost. Value Customers: For many companies, the

conversion rate for visitors to the website is By using predictive campaign optimisation, the
around 1% to 2%. For one insurer, this marketing department now had the insight to
represented a big missed opportunity as the dynamically allocate resources and budget to
customers in the country which this insurer the most appropriate activities much earlier than
operated in, could only change their insurance previously, thereby minimizing spend and
supplier on a set date once a year. As such, this maximising results.
insurer decided to focus on the 98% of visitors
to their website that they had not managed to
NATIONAL BANKS
convert. HDFC Bank Journey in Digital Banking
To do that, this insurer wanted to identify which The emphasis of HDFC Bank has always been
campaigns were most valuable, not in terms of digitizing the entire enterprise in every aspect.
driving lead volumes but, more importantly, The bank began the digital journey by launching
generating the most profitable leads. First, the Net Banking services in 1999, and SMS banking
team built data models comparing the online in 2000. Since then, the bank has progressed on
behaviour of visitors from different online this journey, having developed a mobile site and
marketing campaigns in order to understand subsequently a mobile application for its
which campaigns were driving the highest-value customers. The bank implemented a strong
visitors. They tracked every action a visitor data warehouse and analytics through analytics
performed on the site in realtime, and attributed CRM system in 2005 and also implemented a
a value to the complete online customer journey, robust analytics on credit and lending portfolio
from the first visit to the last visit. They then through Enterprise Data Warehouse and Basel
developed predictive models which allowed programs. The bank setup an in-house credit
them to predict, with more than 90% accuracy, and analytics team and developed in-house
whether a visitor was likely to convert on this or a skills on data statistics and data modelling. The
future website visit based on their online bank clinched the top position in mobile banking
behaviour. transactions across India's banking sector for
By applying these models to their marketing the period 2014-15.
campaigns, the team could predict whether a Customer convenience is central to the concept
specific campaign would be successful or not of being digital. As part of the bank's Go
within 24 hours of its launch. Prior to that, they Digital offering, it launched Bank Aap Ki
had to wait a few weeks for enough data to be Muththi Mein, an initiative that virtually
collected in order to be able to judge a transforms a smartphone into a bank branch. It
campaign's success. And with a short annual offers customers the option of carrying out a
campaign period of around three months, wide range of over 75 financial and non-financial
waiting weeks to reallocate spend meant time transactions without needing to visit a branch or
and resources wasted on a campaign that was an ATM. It is a technology-agnostic initiative
not working. available on the three popular smartphone
platforms of iOS, Android and Windows.

The focus of digital is all about speed and Chillr also acts as an important tool for financial
design. In this regard the bank deployed a inclusion in rural markets, allowing migrant
strong origination and underwriting platform, workers to remit money to their families back
coupled with intelligence from Credit Bureau home in a secure manner. The bank also piloted
data. It was able to approve and disburse loans the use of Chillr for its Sustainable Livelihood
within 10 seconds a unique achievement in the Initiative (SLI), a programme that reaches out to
banking industry. The bank also implemented a people at the bottom of the pyramid by
strong SOA framework to make the business providing them with livelihood finance and skills
process agile and had a strong focus on STP training. In just five days of its launch, Chillr was
(end-to-end) to make the enterprise truly digital among the Top-10 Free Financial Apps on
and responsive. The bank has launched an array Google Play Store. Chillr has been a
of internet and mobile applications in the last phenomenal success among customers which
couple of years which are described below. has resulted in exponential growth in both
Smart Buy Hyper Market Place downloads and cashless money transfers.
As part of the digital journey, HDFC Bank PayZapp

launched its Smart Buy offering. Smart Buy is a PayZapp is a comprehensive mobile payment
comprehensive online bulletin board giving a 1- application, where users can link their multiple
click browsing experience and best offers credit and debit cards and make one-click
across all the merchants to facilitate One View & payments on partner sites, without having to
One Stop Shop for our customers. Smart Buy load money into a prepaid wallet (no other bank
has a variety of offers for flight and hotel or PPI wallet has this functionality). Services
bookings, movie ticketing, online bill payments, available in PayZapp are: merchant payments, bill
recharges and e-tailing offers. pay/recharge, money transfer, booking flights,
Chillr Application bus, hotels, movie tickets, gifting all with an in-
app shopping and payment experience.
In March 2014, the bank launched Chillr in
partnership with MobMe, a technology firm Subsequently, the bank launched PayZapp for
based in Kochi. Chillr is a mobile app that is Business, a utility which enables merchants to
linked directly to the customer's bank account send a bill to customers through SMS or email,
and allows them to instantly transfer money to using a desktop/laptop/tablet/mobile and for
any contact in their phonebook 24 hours a day, the customer to make instant payment using
seven days a week. With this app, customers no any bank card with any smartphone device. This
longer have to ask for account information and initiative targets conversion of Cash on Delivery
wait for a set duration of time in order to add to Card on Delivery and also advances/balance
beneficiaries when they wish to transfer money. payments into digital mode. This product can be
Further, no passwords are stored on the phone used by merchants for bulk collections as bulk
and the app can be accessed only with an M- SMS/ email facility is supported. Some use
PIN known to the customer alone. cases are home delivery, education institutes,
cable operators, service providers, etc.

HDFC Mobile Banking Lite application allows the ICICI Bank

banking transactions to be done without ICICI Bank, the largest private sector bank in
requiring internet connection. It uses SMS India, has always prided itself on being a
banking for achieving this, making it work in technology bank. The focus on technology
remote areas also where internet connectivity is served multiple strategic objectives enhance
poor. HDFC Home Loans application allows convenience for the customer with any time
both prospective customers and existing access, optimise operating costs by reducing
customers to know various details about loans. load on high cost channels like branches and
Existing customers can get information like push the boundaries of technology driven
account statements, payment details, banking. At the core of this strategy is the
disbursement details and also an option 'customer', as is most aptly captured by the
allowing users to get their tax details. banks brand promise of 'Khayaal Aapka'.
Prospective customers can get all the
The digitisation journey for ICICI Bank began
information about loans such as home loan and
very early, right from the days when the Bank
car loan, and they can even interact with a loan
was set up in the 1990s. Technology was one of
advisor through the application.
the key elements of our strategy that would
HDFC Mobile Banking application seamlessly allow us to leapfrog the strong presence of the
integrates with the Apple Watch product. The incumbent banks in India. As technology cycles
customer who sets up the mobile application become shorter, new opportunities arise and
with the watch will be able to do traditional move from concept to mass adoption much
applications usually performed on the mobile to faster. So what began as a strategic choice to
be performed on the watch. HDFC provides an adopt technology as part of our early years has
application to manage mutual funds too. The now evolved into a digital way of life. As
HDFC SMS banking provides a unique option individual consumers we are exposed to the
allowing users to get mobile recharges with a same trends in digital technology and with
mere missed call to a designated number. higher global connectivity at the same time as
Family members of the account holder too can the rest of the world, sometimes even before the
avail this facility. Focusing on the troublesome rest of the world. The original guiding principles
cycle a customer goes through in purchasing an of customer convenience, optimising costs and
automobile, HDFC has built an application challenging what can be done with digital
called Autopedia, making all the requisite technologies will continue to be a driving force.
information about the automobile models
The strategy at ICICI Bank revolves around
available for the customers at one place. These
various pillars or objectives.
are some of the customizations HDFC has been
doing to facilitate the users' interaction with The first is to provide best in class services and
HDFC to be hassle-free. features on all the digital channels of the bank,
and ensure that customers can avail of the most
comprehensive list of services on the digital

platforms. The bank strives to ensure that overall transactions of the bank happen through
services on digital platforms are extremely these Digital Channels.
convenient and easy to use. The second important goal of the bank is to drive
Banking transactions are now a routine part of innovation in this space and be ahead of the
everyone's life. The primary focus for the bank is curve in bringing the new services. In line with
to provide a comprehensive suite of services this goal, the bank introduces first in category
and products to all customers on digital or self- products across its platforms, and has been
service platforms. The digital channels also driving innovation in payments and social
provide complete view of all relationships of the banking. Over the last few years, ICICI Bank has
customer with his bank including accounts, been introducing new to industry products and
term deposits, cards, loans, investment services with this strategic objective in mind. A
accounts etc. Internet and mobile are the two few examples include introduction of social
primary digital channels which the bank banking through transactions on Facebook,
focusses on to provide this comprehensive where ICICI Bank was one of the first to do this
customer experience. globally. The Bank also introduced India's first
ICICI Bank is the pioneer in Internet Banking in digital bank on mobile, 'Pockets'. This
the country, and this platform now provides comprehensive application allows anyone, even
more than 250 services. The customer has been those who are not customers of ICICI Bank to
empowered to choose from multiple options to instantly download, fund the wallet from any
transfer funds, pay bills to 1000+ billers, and bank account and use it. 'Pockets' is also the
make payments to thousands of online world's first mobile application to integrate
merchants. Customers can also service the mVISA payment solution that enables QR code
accounts like statements, account modification, based payments.
cards services and tracking of deliverables. Then again, as part of an industry-first payment
Another example of a comprehensive digital innovation, ICICI Bank recently unveiled
platform is the bank's flagship retail mobile 'touch&pay' on 'Pockets', the country's first
application, called as iMobile. iMobile is an end- contactless mobile payment solution to
to-end Banking solution for customers enabling facilitate instore payments using smart
then to perform over 150 services on their phones.
mobile phone, effectively serving as a bank on Thirdly, the bank believes that true digital
the phone. This application has consistently transformation can only be achieved by an end
brought innovation in the form of new age ways to end digital and holistic journey, and just as
of servicing such as live chat, better front end channels need to change and improve
authentication through use of biometrics as well over time, transformation must also be achieved
as new products such as card-less cash at each stage of the customer journey starting
withdrawals. As a testimony to the acceptance from front end channels to mid-office to back
and wide use of these two key channels of office processes and application.ICICI Bank has
internet and mobile, today close to 65% of the therefore endeavored to embrace digital

technologies in all stages from front end sales to This imposes significant costs on the economy
backend processes and has emerged as a in terms of cash minting and handling costs,
strong and mature digital organization. fraud and counterfeiting costs, and evasion
Continuous digital transformations are carried costs from non-traceability of transactions.
out across processes and products, from Hence, RBI's overall regulatory policy stance is
account opening, lending products to SME oriented towards promoting a less cash/less
product solutions and branch processes to paper society, and hence the increased
name a few. For example, the bank has been emphasis on the use of electronic payment
using software based robotics in its operations products and services that can be accessed
shops successfully in various operational tasks anywhere and anytime by all at affordable
to automate the services, reports generation prices.
and bring about TAT improvement. As part of
At SBI, ATM transactions have grown at 18.66%
overall transformation, the bank has also
as opposed to 17.22% for the industry as a
invested in self-service at all customer touch
whole. However, the rupee value of ATM
points. For example, the bank has deployed
transactions at SBI has grown at 5.48%, as
cash deposit machines and Insta banking
against a 13% growth rate for the industry as a
kiosks at branches to enhance self-service, and
whole. This indicates that SBI's customers tend
these have seen wide scale adoption by
to perform more small-ticket transactions than
customers.
the average banking customer in the country.
The bank has simultaneously invested in
This is also reflected in the fact that PoS
platforms and technologies such as a multi-
transactions for SBI customers have grown at
channel campaign management architecture as
86.95%, while the rupee value has grown at only
well as Big Data platforms to ensure that best in
35.01%. The corresponding figures for the
class use of data and analytics is guaranteed in
overall industry are 48.3% and 24.33%,
customer engagements.
respectively. [2] Moreover, PoS transactions
State Bank of India & The Buddy Wallet account for only 4.1% of ATM transactions (by
According to the RBI Vision Document on value) at SBI, as compared to 6.0% for the
Payment Systems, the value of banknotes and industry as a whole, again highlighting the over-
coins in circulation as a percentage of GDP reliance of the average SBI customer on cash
(12.04%) is very high in India when compared to transactions. This is exacerbated by the large
other emerging markets, like Brazil, Mexico and rural footprint of SBI's branch network, where
Russia. Similarly, the number of non-cash there is a paucity of PoS acceptance devices.
transactions per citizen is very low in India (6 While the growth in transaction volumes is a
transactions per inhabitant) when compared to natural outcome of a growing business, the cost
other emerging markets.[1] of servicing a transaction is relatively inelastic
for a given channel, irrespective of the
transaction size. So, it is more cost efficient for
[1] RBI: PAYMENT SYSTEMS IN INDIA VISION 2012-15
[2] RBI: Bank-wise ATM & POS Statistics March 2015 to March 2016

the bank to have a large ticket withdrawal than a advantages and disadvantages, but it is
small ticket transaction. Our analysis shows that electronic Prepaid Payment Instruments (PPIs)
SBI customers conduct over 4.4 million small that come closest to meeting the requirements
cash withdrawals (Rs. 500 or lesser) a month of the seven 'A's above.
from ATMs and at Teller stations. There is a far It is in this context that SBI's Wallet program,
greater occurrence of these small ticket Buddy, acquires increased significance. Buddy
transactions in Urban- and Semi-Urban is a full-functional Wallet launched by SBI in
branches than in Metro-branches, because of August, 2015.
the relatively lower penetration of electronic
It is a fully electronic Prepaid Payment
payment modes in these centres.
Instrument (PPI) which allows customers to
A fraction of the 10 million plus retailers in the transfer funds from the user's wallet to any third
formal sector in India have card payment party, thus enabling Peer-to-Peer payments as
acceptance infrastructure. SBI has 296,000 PoS well as Merchant payments of various kinds. Its
terminals across the country, compared to capabilities include Wallet Loading, Merchant
HDFC Bank's 281,000, Axis Bank's 258,000 and Payments including Utility and Bill Payments,
ICICI Bank's 200,000 PoS systems. These four Peer-to-Peer transfers, initiated either by sender
banks together dominate this space and
contribute to three-fourth of the total 1.4 million
PoS terminals deployed in India and this
infrastructure needs to be grown exponentially
to effectively cover this sector. During 2016-17,
SBI plans to add a further 100,000 terminals to
enhance card acceptance infrastructure,
particularly in Tier-3 and below centres.
Of the merchants currently on SBI's platform,
there are over 37,000 small retail merchants
[average ticket size Rs. 1,000 or lesser]. It is
expected that the number of cash transactions
at these merchants would be large and that
these merchants represent a significant
opportunity for migrating to Buddy and thus
reducing the overall volume and cost of
servicing the cash transactions.
The key elements to realizing the vision of a less-
cash society are: Accessibility, Availability,
Awareness, Acceptability, Affordability,
Assurance and Appropriateness. Different Fig. 21. Distributions of Buddy Customers and
payment mechanisms have different Wallet Loading Transactions

or payee, and other user conveniences. Buddy

is bank agnostic and allows its users to fund the
wallet from any bank account through net
banking, debit card or through IMPS.
Buddy usage is capped at Rs.10,000 of
incremental funds loaded during a calendar
month, making it ideal for small ticket transactions.
Buddy has clocked up some impressive growth Integration of the Buddy app with the SBI
numbers since its launch. mobile banking platform, and auto-
SBI's Buddy team launched the Hello Buddy enrolment of customers
campaign, which offered incentives to both Enhanced features on Buddy to further
customers and staff to boost the popularity of improve ease of use including Geo-
the newly launched initiative. For the distribution contextual search and selection
of buddy customers see Fig. 21. Marketing and media campaign focused
The campaign owed its success partly to the on Urban- and Semi-Urban centres to
continuous engagement of the staff across the boost Buddy awareness, including
branch network, and partly to the widespread Outdoor, television, online and ATM
marketing efforts which involved print, outdoor screens.
and television media. Promotion of Peer-to-Peer transactions
Stringent metrics collection and publication Promotion of Green-Channel banking
processes were put in place to monitor the transactions to familiarize customers with
progress of the campaign. electronic payment modes
A strong platform having been set, the bank has Key Performance Indicators tracking and
now plans in place to further boost the growth monitoring
and usage of Buddy. Awareness and Acceptability
number of active Buddy users, and
a r e t w o d i m e n s i o n s w h e r e s i g n i fi c a n t
activity levels
improvements are being planned to ensure that
Buddy grows to its full potential. number of active merchants, and
activity levels
Expand merchant enrolment in Buddy to
cover a large proportion of its existing PoS number of transactions (Peer-to-Peer
merchant network, including incentivising and Merchant)
merchants to boost Buddy acceptance reduction in cash transactions
over cash corresponding to growth in Buddy
Enhanced features for Merchants to usage
maintain their own micro-sites that will be product awareness and preference
featured on Buddy tracking.

References
McKinsey Digital Banking in Asia 2014

Report
PwCs Global Digital Banking Survey:
Eyes Wide Shut Global Insights and
Actions for Banks in the Digital Age
BAI Special Report: Digital Banking &
Analytics
Customer Intelligence in the Era of Data-
driven Marketing White Paper
SAS Customer Decision Solution Brief Transaction Analysts (India) Pvt. Ltd.,
Using SAS to Deliver Analytically Website
Injected Digital Personalization for Online Omidyar Network has an equity
and Offline Data investment in Juntos since 2014 and has
http://thefinancialbrand.com/56464/ funded policy and research initiatives from
digitalbankingresolutionsstrategiesgoals the Consultative Group to Assist the Poor
2016/ (CGAP) through non-profit grants since
All information on the deployment of the 2008.
Juntos platform with Bancolombia is from http://www.softwareag.com/blog/
the Consultative Group to Assist the Poor reality_check/index.php/authors-for-
(CGAP) working paper titled Juntos home/what-are-businesses-aiming-for-
Finanzas: A Case Study, published in to-be-digital-digitized-or-digitalization/
October 2015 by Myra Valenzuela, Nina http://www.carolinemoeckel.com/
Holle, and Wameek Noor defining-digital-banking/
www.cgap.org/sites/default/files/Workin https://www.cognizant.com/
g-Paper-Juntos-Finanzas-A-Case- InsightsWhitepapers/Digital-Banking-
Study-Oct-2015.pdf Enhancing-Customer-Experience-
2015 State of the Industry Report on Mobile Generating-Long-Term-Loyalty.pdf
Money. GSMA Mobile Money Programme. h t t p s : / / w w w . fi n e x t r a . c o m / b l o g s /
www.gsma.com/mobilefordevelopment/ fullblog.aspx?blogid=10390
wp-content/uploads/2016/03/SOTIR
Holistic CRM and Analytics framework for
_2015.pdf
Indian Banks, IDRBT
Data Quality Framework for Indian Banks,
IDRBT

Contributors
Prof. V. Ravi,
Co-ordinator, IDRBT
Mr. K. Vijaya Kumar Mr. Basudev Banerjee,

State Bank of India Microsoft
Mr. Kajal Ghosh, Mr. Rangarajan Vasudevan,

State Bank of India The Data Team
Ms. Abonty Banerjee, Mrs. Smita Aggarwal,

ICICI Bank Omidyar Network
Mr. Sudesh Puthran, Mr. Katuri Srinivasa,

HDFC Bank IDRBT
Mr. Manish Desai, Dr. S. Nagesh Bhattu,

SAS Institute IDRBT
Mr. Jeremiah Joseph, Mr. S. Lalit Mohan,

IBM IDRBT
Mr. Nizamuddin Jehangiri, Mr. Patrick Kishore,

Teradata IDRBT
Acknowledgements
Mr. Kumar Ravi, Research Fellow, Mr. B. Shiva Krishna, Mr. Yogesh Khandelwal
and Mr. K. Rakesh Varma Research Associates, IDRBT
An IDRBT Publication, November 2016. All Rights Reserved.

For restricted circulation in the Indian Banking & Financial Sector.
FRAMEWORKS
FROM IDRBT
These Frameworks can be downloaded from www.idrbt.ac.in.

Institute for Development and Research

in Banking Technology
Established by Reserve Bank of India
Castle Hills, Road No., Masab Tank, Hyderabad - .

EPABX: + , Fax: +
Web: www.idrbt.ac.in, e-mail: publisher idrbt.ac.in

Digital Banking307

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Digital Banking307

Uploaded by

Copyright:

Available Formats

DIGITAL

Institute for Development and Research in

2. Distinct Functionaries/Dimensions of a Digital Bank 05

3. Building Blocks of Digital Banking 11

4. Digital Banking Maturity Model 38

5. Digital Banking Case Studies 41

An IDRBT Publication, November 2016. All Rights Reserved.

Digital Banking: Goals, Maps and Signposts

Date: November 16, 2016 (Dr. A. S. Ramasastri)

Digital Banking Framework 01

T HE term digital banking, just like any new

02 Digital Banking Framework

Digital Banking Definition Why To Go Digital Advantages of

Digital Banking Framework 03

Coping with increasing cost and

Expanding Digital Banking Generates

04 Digital Banking Framework

I N order to understand the key distinct

Digital Developing an Omni-Channel Integrated

Digital Banking Framework 05

06 Digital Banking Framework

expenditure to a great extent, it is a business call

Digital Banking Framework 07

include credit risk, market risk, operational risk

Internal Bank External

Core Banking Data Data Lake

Fig. 3. Distinct Functions of a Bank that Can be Digitized

08 Digital Banking Framework

CIO Data Quality

Fig. 4. Digital Banking Framework by PwC: Capability Pyramid

Digital Banking Framework 09

framework to limit technical risk, produce

10 Digital Banking Framework

M ANY industrial giants and practitioners

Digital allows me to explore

Digital Banking Framework 11

and experiences for consumers across digital devices and platforms.

Dimension Dimension Description Need States

Digital helps me manage my Balance: Seeking equilibrium

Digital lets me focus on myself Status: Cultivating external image

Digital enables me to have Togetherness: Feeling part of bigger whole

12 Digital Banking Framework

Expectations in the customer journey in banking

Customers are seeking to establish their relationship with

Table 2. The Other Four Need States

Digital Banking Framework 13

information. Fig. 8. IntelligentlyON Lights Up 'Achievement', 'Order' and 'Discovery'

we once referred to as IRL (in real life)

Stay on top of things Prove value of sharing

Achie Be open about data

become just as real as anything one might touch

CONTROL and feel. Consequently, digital experiences are

CONSUMERS WANT TO BRANDS NEED TO

Consumers want digital experiences to allow

them to be more productive, do more of the

things they want to do, and make better

14 Digital Banking Framework

actions by knowing the customer's needs.

leaving digital signals that the banks can

connect to build a social profile of their CONSUMERS WANT TO BRANDS NEED TO

Satisfy curiosity Open up new worlds

invaded, banks can leverage big data

social profile presented by the customers

get consumers thinking in a new way, they can