Phygital Banking: A Robust Trust Model to be Reckoned With

“The believers of digital-only banking are changing their minds. They have eventually realised that neither digital nor branch banking alone stands tall to the customer experience (CX) parameters and they must take the ‘Phygital’ leap to exploit the FinTech revolution.”  

Banking transactions are largely a trust affair, irrespective of transaction type. Though digital makes it convenient to perform most routine transactions, the decisions pertinent to finances and the intrinsic underlying trust still require us to walk into a physical branch. According to an article published by Reuters: customers in the US do not find digital-only banks as legitimate as banks with branches. Some of the reports say that 63% of consumers in the UK and 60% of Americans still want to physically visit a branch in-person to open a new account. Therefore, given the contemporary banking scenario and the continuously changing consumer behaviour, neither digital or branch banking seems to be meeting customers’ needs alone.

Hence, it is time for the banking industry to consider going Phygital.  A term coined by combining two different words—physical and digital. In this blog, we will explain what Phygital banking is and what its top five benefits are.

What is Phygital Banking?

Phygital banking is a disruption model (according to Forbes), that combines all types of banking—convenience banking, mobile banking, internet banking, experience banking, personalised banking, and so on. It has the potential to integrate confidence with experiences that have eventually become an important parameter for customers. 

Phygital banking considers employing the human workforce as well as disruptive technology forces to serve customers. Some of the technologies that can drive growth and deliver competitive advantages for banks include:

  • XR (Extended Reality) can help create immersive, simulative experiences for customers and provide better training to employees and agents 
  • Blockchain can support better cash management and implement DLT (Distributed Ledger Technology) in the banking core 
  • Video conferencing can be used to simplify product complexity and offer financial advice
  • Conversational AI can be deployed to handle customer queries, round the clock, where bots deliver humanised experiences to customers 

    Why is Phygital in Banking the Need of the Hour? 
     

    Considering the progressive approach of the banks, it wouldn’t be wrong to say that digital-born customers are restless. They demand real-time solutions for their problems, a requirement brought to the fore by digital. However, relying just on the digital-only approach can possibly leave customers with experiences that fall short.  

    The real question is: would you be confident in putting your hard-earned money into a bank that exists virtually and not physically? The answer for many, at least for now, is a big NO. The more the branches, the more confident todays customers are. According to a McKinsey survey report, despite using mobile banking, “75% of the customers” want a physical branch to exist for keeping their money. 
        
    Therefore, to run a successful banking business and gain a wider market share, banks should opt for Phygital banking. Phygital is the lever that connects the two wheels of the banking business—customer confidence and required experiences. It is about being available anytime, anywhere while consolidating the experiences of conventional banking and modern banking to make the customers' journey seamless and complete.

Top 5 Benefits of Phygital Banking

  1. Increase Customer Value and Reduce Costs 

    As banking businesses continue to invest in building new capabilities, Phygital banking significantly cuts costs and delivers increased value to customers. Phygital banking automates repetitive backend and frontend tasks and reduces the time required to process documents and open a bank account. Banks no longer will have to employ a large workforce or invest profusely in real estate. Although branches will never disappear, they will have a few but highly trained employees to solve problems when customers visiting the branch.
     
  2. Improved Omnichannel Customer Experiences

    Digital-born customers want instant and convenient access to all the options available, be it digital or branch banking. Phygital banking gives them the most viable solution, where they can seamlessly shift their choice of engagement with their bank. They can use their mobiles, tablets; leverage the digital facilities installed in a branch such as touch-tables, digital walls to access product knowledge; or talk to bank staff to discuss their queries in person. 
     
  3. Gain Valuable Customer Insights and Anticipate Needs

    Phygital in banking leverages technologies such as AI (Artificial Intelligence), ML (Machine Learning), and data analytics to extract valuable insights from the data that the banks generate. These technologies segregate individualised data, which enables banks to anticipate what a customer might need in the future and deliver targeted bespoke products and services.
     
  4. Secure Wider Market Share

    Digital is not widely accepted in rural areas due to lack of knowledge and confidence. Phygital in banking is probably the best way to build confidence. At a juncture, when the world discusses open banking regulations to help banks become more compliant, transparent, and secure (with respect to data), Phygital banking can act as a true facilitator. Phygital banks build a connected ecosystem where they can find prospective customers among 1.7 billion of the world’s total adult population, who still do not have a bank account. 
     
  5. Improve Banking-Customer Relationship

    Phygital in banking offers everything required to strengthen the relationship with customers. It ensures the existence of branches and availability across platforms. It leverages FinTech solutions and self-service platforms to build trust at every touchpoint and facilitate personal choice in relation to customer experience.  Make the entire banking journey and customer experience both hassle-free and satisfactory for banking customers.     

    Harmonise the Ecosystem Where Physical and Digital Co-exists 


     From engagement and interaction to integration, Phygital in banking brings real transformation that supports holistic growth. In the first phase of digital transformation, where technologies such as IoT (Internet of Things) created a connected ecosystem, the cloud made the banking functions mobile, and mobility empowered customers in a multitude of ways, Phygital will harmonise the elements within the ecosystem to fulfil all the parameters that define a rich customer experiences.

 

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