INDUSTRY WATCH

In emerging markets significant amount of payments and remittances are done outside conventional banking channels. what value proposition they bring to the customer, and they can offer it on a joint basis without actually having the customer alter his daily routine,” continues Zakhour.

Can digital banking work with the African way of life? In emerging markets including North Africa and Middle East, a significant amount of payments and remittances are done outside conventional banking channels. These large inflows and outflows of remittances naturally become an important target component of digital banking. However, in these markets, the simplified front ends for customers and the scale of reach to drive down costs, are driven by telecom companies, post office, remittance providers, and other niche technology providers, not incumbent banks.

Banks have traditionally competed fiercely with each other for deposits and customers. In the past, banks across North Africa and Middle East were kept afloat by government deposits which contributed to their growth, but this has changed in the present day scenario. This has put increased pressure on banks to compete for deposits and rightfully earn those deposits. While there has been much discussion about Omni-Channel experience for new-age banking customers, digital banking is different.

Explains Charles Habak, Principal at Booz Allen Hamilton MENA,“ Digital banking brings in a much lower cost play. It provides an opportunity for far simpler and far more automated processes and services and allows you to interact with customers in new ways, all the while lowering the cost base. This means customers who were less appealing to you as a bank in the past, are now suddenly very much interesting, particularly when you start to capture larger portions of those segments.”

So what are the characteristics of digital banking?

• Digital banking involves identifying new business models and services for existing or new customers, and providing solutions that are integrated with customers’ lifestyles in new markets

• Services and processes are simplified, shortened, and easy to understand, and leverage a digital customer experience

• Lower costs are leveraged and these are passed on competitively to customers through lower fees, higher interest rates, and reduced time through simplified processes

• Customer experience in digital banking leverages digital elements like location, images, and videos

Since the emphasis of digital banking is to integrate into the customer’ s existing way of life, finding partners who are already engaging with the target customer segment or target markets is important.“ You really have to think about the customer and their everyday routine, and how you can offer solutions that will not greatly disrupt their way of life,” explains Lutfi Zakhour, Senior Vice President at Booz Allen Hamilton MENA.

“ You need to take a look at the different partners that already interact and interface with customers today. Each one involved in the partnership knows

“ From what we are seeing emerging from around the world and increasingly impacting the region – there is no choice but to partner with these Fintech companies. The key is to balance that partnership by leveraging each other’ s strengths,” remarks Habak.

Incumbent banks therefore need to offer valued services to their existing and potential customers through transaction partners who already exist in customers’ lives, provided these FinTech partners are effectively integrated with the banks. Banks therefore own the financial relationship and financial aspect of any such service interaction with these customers, while FinTech partners engage with customers at the front end through better scale and experience and provide faster and cheaper services. What banks need to look at closely is where to partner with Fintech companies to provide the best value for their customers, while maintaining and owning the relationship with their customers.

Since the bank is meeting the needs of its customers or providing a service for its potential customers, which partner is engaging with the customer becomes secondary, according to Habak.“ It is not who is providing what, it is knowing that the bank at the end

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