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Essential resources for banking executives:Enter ‘Banking Reinvented’

Development of financial wellness apps by retail banks could bridge the gap between India’s rich and poor

Development of financial wellness apps by retail banks could bridge the gap between India’s rich and poor

New data revealed in a Backbase commissioned study conducted by Forrester Consulting published this week reveals India’s retail banking sector is moving to fully embrace developing digital financial wellness apps as a means of interacting with their customers. This move by the sector could contribute to increasing the rates of India’s digital literacy and bring money management, budgeting, and savings tools to new consumers, addressing the imbalance of financial progress across India’s wealth divide.

Yet to be fully embraced by India’s banks, financial wellness and digital money management apps are moving into the mainstream around the world, with large traditional banks using them to compete in the digital space. Of the Indian retail-banking business decision-makers interviewed as part of the report, 96% said their financial institution was ‘planning to’, or ‘actively expanding’ its financial wellness and money management tools, and 50% said it was of ‘critical priority’, revealing India is on the cusp of a big change.

Talking about the findings of the study, Iman Ghodosi, Regional Vice President for Backbase Asia Pacific discussed what this could mean to Indians who have not been privy to financial decision making tips: “Digital money management via a mobile device is the great leveler, as everyone can now have access to financial tools such as spending analysis, budgeting, and assistance with saving goals, wherever and whenever they want. This could have huge implications for helping to improve the financial decision-making of those most in need.

Our research shows the retail banking sector in India is rapidly increasing its spending in this area with 62% of respondents saying their spending on financial wellness apps is going to dramatically increase over the next 12 months. The business case for this is also compelling – these apps, when developed correctly, bring exceptional customer engagement, and a deep well of data that can be collected and used by the financial institutions who own them.

Iman Ghodosi, Regional Vice President for Backbase Asia Pacific

India’s explosion of digital banking

It’s no secret that India is digitizing rapidly. An average smartphone user currently consumes more than 8GB of data per month, which exceeds the average in more digitally advanced countries such as China and South Korea. India’s economy has also been a hotbed of financial services innovation over recent years. Numerous fintech startup businesses have formed, spanning the banking and financial markets industry.

“The urgency, focus, and action we see in the report are as a result of the number of major players building apps in this space,” adds Mr Ghodosi, who sees the next six months as an inflection point in the space. “India’s highly digitised population is ready and waiting – people want a high level of customer focus and flexibility for financial services. They want access to their personal finances anytime, anywhere, through any channel, and tools on how to manage their money.”

“Now more than ever, it is important to own the relationship with your customer. We’ve now entered the Engagement Banking Era, an evolution that stresses a one unified platform approach for banking. The number one priority in this new era is to completely re-architect the bank around the customer, moving away from siloed technology investments.. At Backbase, we help banks to adopt and build modern, cloud-native banking platforms to keep pace with changing consumer demands, gain a 360 degree view into banking behaviours, and grow market share across all lines of business. We focus on customers before products, and create digital money management tools that match individual needs.”

But it’s not without its challenges according to Riddhi Dutta, Regional Director for Backbase ASEAN & South Asia. Unlike nimble and dynamic digital banks, legacy financial institutions struggle with many aspects of implementing such mobile-first digital services. 74% of the Indian retail banking business decision-makers that were interviewed said ‘outdated technology’ was a major challenge in developing such tools. 64% said a ‘lack of understanding of customer needs and outcomes’ was a challenge and 56% said ‘organizational silos’. “One can see how fintechs and digital disruptors have a head start”, Mr Dutta added, “But incumbent banks like HDFC Bank are also trying to keep pace with some rolling out their own digital-only offerings and apps.”

New financial care and protection capabilities

One of the most interesting findings uncovered by the report was the ambition by India’s retail banking sector to offer more care and protection to their customers through such apps. Through advancements in AI, and data analytics from the spending habits and financial decision-making of app users, banks can now assist their customers in new ways. This technology will open up financial literacy, lead to better decision-making, and avoid debt and exploitation for many poorer Indians, who didn’t have access to these types of tools previously.

Of the retail banking business decision-makers that took part, 80% said ‘offering financial literacy tools’ through wellness apps was important. 70% said their company plans on using such apps to ‘prevent the exploitation of vulnerable and older customers’, and 68% of respondents said ‘identifying risks of vulnerability and financial difficulty’ in their customers is one of their agenda.

“Our study shows that advancements in financial wellness and digital money management tools are overwhelmingly a force for good in India and that any customer with a smartphone will benefit, no matter their standing in India’s wealth divide”, Mr Ghodosi adds.

The data points to financial wellness apps being a primary interface between banks and their customers as we move into the future. As a market leader in engagement banking platforms enabling the disruptors of the banking industry and incumbents alike, Backbase is primed to address this real need. Our unified engagement approach is helping banks to launch modern, cloud-native banking services that keep pace with change, while offering superior customer experience for both consumers and employees across all touchpoints and all lines of business of the entire bank.

Iman Ghodosi, Regional Vice President for Backbase Asia Pacific