Phygital Banking

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 its type. Though digital makes it convenient to perform most routine transactions, the decisions pertinent to finances and the trust underlying 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 visit a branch in-person to get a new account opened. Therefore, given the contemporary banking scenario and the continuously changing consumer behaviour, neither digital nor branch banking seems to be sufficing customers’ needs alone.     

Hence, it is time for the banking industry to go phygital, a term coined by combining two different words—physical and digital. In this blog, let’s learn 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 won’t be wrong to say that digital-born customers are restless. They demand real-time solutions for their problems, an expectation brought to the fore by digital. However, relying just on the digital-only approach can possibly leave customers with broken experiences.  

The question is will you be confident in parking your hard-earned money with a bank that exists virtually and not physically? The answer for many is a big NO. The more the branches, the more confident the 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 experiences. It is about being available anytime, anywhere. It is about consolidating the experiences of conventional banking and modern banking to make customers' journey seamless and complete.

Top 5 Benefits of Phygital Banking

By now, many of the banking businesses around the world have started modernising their legacy systems or building innovation-intensive technology platforms. However, there are instances where banks, which implemented a 100% digital-only approach, were forced to reconsider setting up the physical infrastructure. Let’s read the top 5 benefits that phygital banking offers.

  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 the 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 of the customers visiting the branch.
      
  2. Improve 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 banks. They can use their mobiles, tablets; leverage the digital facilities installed in a branch such as touch-tables, digital walls to get the 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 big data that the banks generate. These technologies segregate individualised data, which enables banks in anticipating what a customer might need in the future and deliver 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 instil 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 work 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 the availability across platforms. It leverages FinTech solutions and self-service platforms to build trust at every touchpoint and facilitate all sorts of experiences that make the entire banking journey hassle-free and satisfactory for 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 multiple ways, phygital will largely harmonise the elements in the ecosystem to fulfil all the parameters that define rich customer experiences.