The economic climate, increased regulatory intervention and competitive challenges are forcing banks to embrace digital innovation as the new path to growth, says Michiel van Selm of PwC Singapore.

Date: June 2012

Tags: Technology, Digital, Mobile

In the last decade, “digital” has evolved from basic online banking to a broad, rich set of features and capabilities which have revolutionised the banking experience.

This digital revolution has been majorly triggered by a number of innovators seeking to capture value across the banking value chain. While banks are continuously innovating their eco-system, digital customers are becoming more and more informed exposing them to multiple choices and innumerable platforms to express their opinions.

PwC’s digital tipping-point study has deeply delved into the behaviour of digital customers across the globe and the dominant factors that lead to their engagement and advocacy towards certain brands. As a part of PwC’s global research, we have found that Singapore banking customers are among the most digitally-engaged in the world.

Tapping the potential

For Singapore banks, this means there is an excellent chance to engage with customers online and capture the digital opportunity. The response on incidents are immediate and in enormous volumes expressing strong opinions.

For example, in the wake of an ATM fraud in December last year, the digital engagement of the bank involved across web platforms increased more than 20-fold.

Though Singaporean banks demand high engagement on the web, our research observed that their engagement is still around more basic banking and product capabilities like ATMs and security, while some of the best-practice banks in the world are able to engage customers and their sentiments around their digital eco-system of platforms and services.

Singapore banks have to work on improving the customer sentiment or risk losing market share to international competitors or new entrants. This would be achieved by a strategic dichotomy of resolving “real world” practical issues of banking services like security, fraud and at the same time living up to the expectations of Generation Y by providing a holistic digital experience with the help of timely innovations.

Thus, to innovate in the digital channels and become truly innovative Singapore banks have to offer a new digital feature set that has advanced user-experience through interactive, game-like interfaces where the boundaries between the real and the virtual start to merge, and bring data to life through rich visualisations.

Singapore banks also need to offer advanced services through mobile devices and networks such as enhanced digital security and the ability to access banking services from anywhere including partners like property sites.

At the same time, they need to launch innovative tools that provide social media and predictive analytics, driving deeper insight into customer’s behaviour and enabling highly targeted and relevant treatment strategies to be executed through digital media.

They also need to implement new channel integration technologies, enabling a seamless customer experience across the plethora of digital platforms.

Making client connectivity count

The implication for banks is that as business models are transforming by the shift to digital channels, it opens up new opportunities for engaging and interacting with customers to build relationships and grow revenues by charging customers for digital services that they value.

For banks that manage to engender a similar shift in their own distribution models, similar opportunities await. With the battle lines being redrawn amongst banks, the winning bank should focus on taking steps to develop deeper relationships with their customers.

Focusing on gaining trust, building engagement and creating value for the consumer should be the guiding principles for doing this. Our analysis has shown that there is a significant opportunity for Singapore banks to innovate in the digital channels and for example improve online sales.

Based on customer behaviour, online engagement, sentiment analysis and the digital improvement possibilities we estimate that on average a 20- to 30-fold increase in digital sales is possible for banks in Singapore.

The Generation Y of banking customers represents a highly-important customer segment for banks, as they are starting to reach the peak age of financial consumption and will be an important source of value for banks. As Generation Y “grows up” with digital, it will be more important for banks to match their digital expectations.

For the Singapore banks to capture this opportunity we believe the most important elements in getting started are:

• Develop a vision and strategy: acknowledge that the new digital feature set is changing the way consumers interact with their banks. Understanding the different needs of different customer groups is essential, as a one-size approach will prove insufficient to meet the range of needs of customers
• Be prepared to partner: banking will necessarily become increasingly intertwined with customers’ digital lives. New business models and means of interaction will be required to be successful in this changing business context
• Achieve first-mover advantage or become a high-quality, fast-follower: given the benefits that digital can bring – both for existing customers as well as Generation Y – banks need to act now to avoid being displaced.

The full extent of what digital can offer customers goes beyond the basic mobile and internet banking services that are now widely provided. Digital banking will evolve into a richer set of offerings, providing new value for banks and their customers through a new “digital feature set”.

We believe that the perfect storm banks are facing today will produce some clear winners. Successful players will be those that recognise the changing eco-system and set out a clear digital vision for securing customer relationship primacy. Others will see the challenging environment of today as a distraction at best and continue persistently with old ways and methods, eroding value in the process by disengaging the customers.

For more information, please contact:

Michiel van Selm
Director, Financial Services Industry Practice
PwC Singapore
T 65 6236 3313
E michiel.van.selm@sg.pwc.com