Digital or ‘phygital’ banking: the best of both worlds

Photo: Dominic Adu, CEO, First National Bank Ghana

In recognition of the challenges experienced by most businesses and the rapid reforms in the Ghanaian banking sector specifically, Dominic Adu, the CEO of First National Bank Ghana has shared some insights on how to positively adapt to the new changes to banking service delivery, relevant to the needs of customers.

By now the impact of COVID-19 on the entire world is no more news. This pandemic has over the period of its prevalence forced in a new, digital-oriented way of life for many people.

One key business sector greatly impacted is the banking industry. It is important that even before the standoff, many banks were warming up to the idea of driving digitisation alongside the almost inherent physical service presence with branches. It is predicted that the digitization has come to stay and more evidently, customers are adapting quite rapidly.

Hypothetically, it is safe to advise that banks should not be in a hurry to ‘wipe’ their physical presence altogether with the change in the world order and flow due to COVID-19. Indeed, a combination of both offline and online engagement is the best way forward.

Entering a new phase of what has been described as the isolation economy, the daily lives of people are being conformed to superseding the previous social and sharing phenomenon.

Following all the restrictions that came with the lockdown, digital became the primary channel for retailers, doctors, governments, property, auto sales and banks, indeed every aspect of human interaction. Now, as lockdowns are relaxed, the consensus is that many consumers will take a long time to return to regular physical engagements – and some may not come back.

So, is there a future for ‘brick-and-mortar’ banks? Can one marry the online and offline worlds to create a truly cohesive physical/digital hybrid – a phygital experience?

The pandemic has accelerated most banks’ digitalization initiatives. If the 2008 recession caused a boost in financial technology innovation, appetite for experimentation, and a wave of fintech start-ups, then this time round it is more about delivering real change.

Here banks can learn from the digitalization of other industries such as manufacturing, retail and consumer packaged goods, and utilities. Across these, we see an increasing focus on technological innovations related to voice as a channel, AI-powered chatbots, augmented reality, social virtual reality, hyper-personalisation, gamification, secure video interactions, digital ecosystem plays and others.

Yet the physical branch network remains particularly challenging to shift online.

Not only does a bank branch hold cultural, historical and prestige value for communities – it also is the final bastion for key segments of the population that cling to cash. Typically, these are small businesses, the mainstay of local economies.  And finally provides trust and credibility to customers.

In order to retain this prestige and their important link with communities, the model of branch banking will have to be turned completely on its head in the post-COVID-19 era.

At First National Bank, we believe that banks must break out of the traditional branch model and focus on how to deliver specific, high value, physical interactions and experiences that can complement a digital banking core. In true complementary fashion, digital technologies should also be used to augment physical experiences and make services faster, more secure, and more convenient. This is the essence of a true phygital strategy.

In the new norm, consumers will carefully pick and choose how to spend their time interacting. Bank branches, already a low-priority destination for most, will likely struggle to grab a share of this time.

This means a smaller network of branches providing a wider variety of services and experiences, potentially even beyond finance. This will include banking kiosks that are co-located within other businesses or physical destinations. These embedded experiences will be orchestrated in a way in which technology also matters and makes a difference.

There are many banks that have begun experimenting with new style branches – modelling experience through smaller retail businesses and grocery shops like that of First National Bank’s Agency Plus Partners.

With this Agency Plus concept, our bank partners with existing businesses in various communities to operate as outlets which offer a range of banking services to customers on behalf of the bank. First National Bank Ghana has adopted the initiative as part of its strategic plan to take its innovative offerings to the doorsteps of as many Ghanaians as possible without the need to open brick and mortar branches.

More of these activations should be encouraged. Bank branches need to offer real value to customers by showcasing the best of what a bank has to offer in terms of education, trust, advice and networking.

Indeed, this also enables closer links with corporate clients. As many countries face an unprecedented recessionary environment, consumer spending is going to be tight. Many businesses would welcome their own miniature bank advisor in their store, helping customers understand and responsibly access their finance options through the myriad of solutions First National Bank has.

If the agency banking experience is integrated correctly with the consumer’s online interactions – both with the bank and the business – there could be many opportunities in analysing and sharing data on buyer behaviour and finance capability.

It will be much more important to get ever-more limited physical interactions right. Customers have fully demonstrated that they are comfortable dealing with us via digital platforms outside of the branches.

We should therefore consider ways of providing a one-stop shop and remote banking services to our clients. Whether going with a digital or phygital strategy, or a combination of that with agency banking, banks can leverage the edge in this new normal.  To the customer, the related cost of the extensive branches saved, will be extended to them.

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