It was recently announced that Citibank was developing the technology and tools to support the launch of a national digital consumer bank sometime within the next three years. “I am not making an announcement right now, but I would be really disappointed if it was anything close to being three years away,” CFO John Gerspach said at an investor conference. “We really are laying the groundwork for having a national digital bank.”
This development is not entirely a surprise for an organization that only has branch support for consumers in six large U.S. markets. In fact, Citigroup, the fourth-biggest U.S. bank by assets, has less than 700 U.S. branch offices compared to more than 4,000 at the three biggest bank (Chase & Co, Bank of America Corp and Wells Fargo).
According to Gerspach, the bank does not want to promote a national digital bank to consumers until it can digitally open and service accounts over mobile phones and computers to the satisfaction of very demanding digital consumers. The bank is in a position to leverage a large credit card base in the U.S. to jump-start a totally digital endeavor.
What caught my attention with this announcement was not that one of the major financial institutions would introduce a separate digital-only bank. It was the time frame the Citibank executive alluded to. Three years? In today’s rapidly changing digital world, three years is a lifetime. Over 36 months, technological advances and consumer expectations can completely change how banking services are delivered.
Building a Digital Bank … In 9 Months
Singapore’s DBS bank opened a “mobile-only” bank in India called Digibank in April of 2016. By mid-2017, the platform claimed to have 1.2 million customers and projected that by 2021, it would have at least five million. While not massive when considering India’s population of 1.3 billion people, the growth is impressive.
More impressive is the fact that the mobile-only bank was introduced after only a 9 months development process. The bank decided to create a separate group that was independent of business as usual, allowing for Agile development. Throughout Digibank’s nine-month development period, all components of a digital platform were tested, from product features and handling peak transaction periods to app updates and user designs.
The iterative test-and-learn process was not only followed during development, but also after development to continuously improve the design and delivery aspects. It also helped to determine the target market for the product. “This process helped define the customer base of the mobile bank, which is the rising affluent and tech-savvy population living in major cities in India, and which would be predisposed to use mobile phones to access the Internet,” stated DBS Group CIO David Gledhill.
Initially, Digibank had planned a weekly update of its mobile app, but the bank switched to a monthly update schedule to coincide with mobile and technology update cycles.
A Paperless and Branchless Solution
India is not only highly digital, but also a very mobile phone driven population. The combination of these behaviors with the hurdles to partnering or buying an existing bank with a physical distribution network, made it clear that going digital was the only way for DBS to scale its business.
Digibank used technologies like biometrics, AI, and natural language technology and processing to support the mobile-only banking platform. All that was required for authentication was Aadhar, a biometrics-enabled ID card, which has been issued to over 1 billion Indians (considered to be the world’s largest biometrics identification program, according to DBS).
The mobile-only bank did away with all forms that are traditionally required to open a new banking relationship. There are no bank branches and ‘wet’ signatures are not required. Instead, account opening can be done at an extensive network of outlets run by DBS’ partners, including more than 500 locations of Café Coffee Day, a popular chain. An AI-driven virtual assistant handles all inquiries and performs banking transactions, such as verifying past transactions or transferring funds, so the bank only needs a small call center.
In an interview with McKinsey, Piyush Gupta, Chief Executive Officer and Director of DBS Group, stated, “There are no checks or checkbooks. If you can do payments well, can do online lending well, and you can kill paper, you can change the customer experience immeasurably. We believe we can run a bank of this sort with 10% of the head count needed to run a traditional bank. Today, we are at 25%, but we think in another year or 18 months we will get to 10%.”
With the economies provided by digitization, the bank was able to offer new account holders 7% interest upon introduction, helping the bank to quickly gain market share. It also allowed for better customer engagement since there are no minimum balance requirements.
A Latte and a Banking Account
Customers of one of more than 500 of India’s Café Coffee Day stores can open a Digibank account at the same time they pay for coffee. All they need is their biometric-enabled Aadhaar ID card and the Digibank app for real-time account opening. Each cafe uses a thumbprint reader for online authentication of customers. After this is confirmed, the bank’s software interfaces with the café’s cash register, captures the information, and opens the bank account.
Other partnerships also stimulated growth, including an ewallet to offer cashback and reward points tomore than 100 million customers of a conglomerate, Reliance. The white labeled ewallet has a feature which makes Digibank the mobile bank of choice should a Reliance customer want to open an account.
Introducing Insurance and Desktop Solutions
About a year after introducing the mobile-only Digibank solution, DBS unveiled India’s first open architecture platform for distributing non-life and health insurance policies from multiple companies through the bank’s application. The open architecture platform enables consumers to compare not just products and prices but also qualitative features such as how the insurer fares in claim settlement.
The bank also has introduced desktop access to the Digibank account. “The reason we did not have this facility was because mobile was turning out to be the primary channel for accessing accounts and we did not want to give an impression that this is an omnichannel account,” said Surojit Shome, CEO, DBS India. However, the bank found that there was a segment of users who wanted a desktop option.
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Expansion Beyond India
After being introduced to more than 1.5 million subscribers in India, DBS Bank has since introduced Digibank in Indonesia. Similar to India, the Indonesian digital consumer population is expanding exponentially. According to DBS, there are 132.7 Indonesian internet users or 51.8% of the population. Of this, around 91% of the citizens have access to mobile phones and 47% within this segment possess smart phones. The number of consumers who conduct e-banking services have risen from 13.6m in 2012 to 54m in 2016, with the frequency of transactions growing from 150.8 million in 2012 to 406.6 million in 2016.
Similar to India, Digibank Indonesia will include:
- Paperless banking and biometric technology – A consumer can open a new account any time and anywhere on their mobile phone at hundreds of outlets staffed by Digibank agents. The product will be supported by Indonesia’s biometric-enabled ID infrastructure – E-KTP – which is already in place in the country.
- Artificial Intelligent Virtual Assistant – Customer support will be provided primarily by automated chatbots. The system will also offer an option for human interaction.
- Real-time insight – Immediate feedback is provided on the customer’s spending history, debit card details, etc. A budget optimizer helps customers do their budgeting, track expenses and analyze purchasing trends.
- Security – Embedded soft token facility that avoids OTPs delivered on SMS through smart phones – which have been found to be susceptible to security risks.
Similar to what was done in India, there will be a promotional interest rate from the first deposit, without a minimum balance. There will also be no transaction fees for the account or for bank-to-bank money transfers via ATMs
The First Mover Advantage
Digibank is not the only mobile banking solution in India. It competes against digital payment solutions developed up by companies Paytm, Fino and Airtel. Most of these organizations each have hundreds of physical facilities across the country to supplement their mobile apps. But DBS has leveraged an intense customer experience focus, strong well-known partnerships and market-leading offers to gain over a million customers in a very short time-frame.
The ability to move quickly in both development and implementation of Digibank provided the bank a head start and runway for growth in India and other countries. Developed by a team of professionals that worked unencumbered by the legacy banking organization, the Digibank solution was introduced in months rather than years.
In a digital era where speed is of the essence, it is more important than ever to think like a digital organization, where agile development and test-and-learn mentality can bring solutions to market first as opposed to being a fast follower.