Payments are a critical piece – Digital Banking ToolKit

In India, digital and mobile Payments is a really HOT space right now.

  • HDFC Bank introduced PayZapp which intends to be the gateway for all m-commerce transactions, with incremental offers as the initial incentive
  • ICICI bank introduced “Pockets” – a way for even non-ICICI Bank customers to have access to mobile payments
  • Axis bank launched Ping Pay and Lime
  • 11 new Payment Bank Licences have been issued. This not only includes some of the bigger telecom players but also the likes of PayTm.

All this action is triggered by multiple factors including a huge opportunity to move transactions away from cash. In the fact that ecommerce is booming and so is the comfort that consumers have in paying online or through mobile. Mobile, smartphone and 3G penetration is booming etc etc.

But from a bank’s perspective, payments are critical.

Why?

Payments are high-frequency use case

You would probably take 3.5 loans in your life.

Your salary gets credited into the account once a month. If you have a SIP instruction, the investments may also happen once a month.

You withdraw cash probably once a week.

But you make maybe multiple payment transactions everyday. And in most cases, banks do not have an idea of the payments we make.

More transactions allow banks to have more interactions with their consumers and hence move a step closer to being an Everyday Bank (Accenture coined this interesting term to bring banking into consumer’s day-to-day activities).

Payments provide rich-context

During my brief stint in the Life Insurance industry, the key challenge was that post acquisition, there is not much context to go back and start a dialogue with the customer.

The same is true (or will soon be true) for banks that miss out on the payments. Access to payment level data gives so much deeper insights into the consumer.

The bank understands where do you spend (which markets, which segments), when do you spend, your typical ticket size etc. This is really powerful data, which can help generate insights into customer segments and their needs. E.g. a banking customer who pays school fees (for her kids) online has told the bank that she might be a good target to be pitched Children Plans (life insurance).

It can also help the bank design better products that resonate more with the consumers.

Payments will see sticky behavior

In the early days of Digital Banking, it was said that the bank which manages to get Bill Payments on to its account will be a sticky account. If you can get the customer to map his utility payments etc, you were on a path to be the preferred banking account.

Why ?

Because these are important transactions yet not something customer wants to spend a lot of time on. Hence if he gets used to a specific platform/UI – until and unless something changes drastically, the customer would not move. Same reason why I am so loyal to PayTm ever since they made it so easy to pay bills and do set-top box recharges.

The bank or service provider, which onboards customers to a frictionless platform will be tough to unseat.