In the digital age, many consumers now utilise applications to complete their financial administration and will only venture into a physical bank branch for a particular reason. In fact, statistics show that 73% of people globally use online banking at least once a month. Traditional banks, which previously largely relied on physical footfall to engage with customers in-person, are now being forced to pivot in the face of the digital revolution. For example, it’s now critical for banks to ensure a simple online account-opening experience, driving the need for face-to-face processes to be quickened in comparison.
However, many fintech customers continue to have physical bank cards in their wallets, with these providing the foundation for digital payments and offerings. With a divided narrative forming, how do banks now offer the right balance between digital and physical banking to meet the individual requirements of a customer? The solution is a mix of the two: “phygital”.
The shaping of the phygital future
With digital-only competitors and fintechs entering the market, banks are increasing their competitiveness by accelerating their digital transformation strategies. As personalised experiences expand, the payment world has been forced to leverage new technologies and customise its products and services to both strengthen customer relationships and enable long-term growth.
In-person banking also took a hit during the Covid-19 pandemic. With customers wanting to avoid the virus and banks restricted by in-branch capacity due to social distancing requirements, consumers further embraced online banking and mobile payment. While the global health emergency has made the digital shift more noticeable, consumers were already coming around to the benefits of low-touch experiences, including contactless payments.
However, customers still want a personal touch in their banking journey. As such, banks must find a way to adapt to their customers’ needs and lifestyles. The physical payment card can be this physical touchpoint. It acts as a unique brand element and is the symbol of the connection between the bank and the customer.
By combining physical touchpoints and smart digital solutions, banks will be equipped with the tools for success, with both helping to create a competitive advantage and excel at the customer experience. To enable a phygital approach, financial institutions can firstly offer personalised bank cards with a tailored design that can then be activated by digital means. This facilitates the use of online tools to transform the physical experience. Many digitally-focused consumers may find the traditional card activation process, where the PIN number is sent via mail, a cumbersome one. As consumers become increasingly cautious of their carbon footprint and environmentally damaging actions too, they may even find it an unsustainable one.
Bringing the PIN into the digital age will not only enable a more seamless experience but also resonate with green consumers. At the same time, for sustainability-minded consumers, the payment card itself – when its first-use plastic is replaced 100% with eco-materials – offers a great way to show their commitment for change.
In the space where physical and digital meet, a more automated approach can be taken in the card issuance and activation process. Self-service kiosks can allow customers to print their own cards, shortening the time between customer acquisition and card issuance, while still allowing for expertise in the branch should they need it. Branches offering self-service solutions that enable customers to pick up new or replacement cards at a time of their choosing will be able to better meet the growing need for speed and convenience across all consumer generations.
Another example is leveraging application programming interfaces (APIs). In the card issuance example, banks can use dedicated APIs to engage with customers by providing real-time updates about the status of their card, or by sending personalised notifications concerning PINs. In the midst of the neobank/fintech revolution, adopting and embracing such a multi-channel approach can help banks find the right balance, transform internal processes, and ultimately, satisfy the needs of contrasting customers.
Adopting new technologies
Moving into phygital also allows customer data to be leveraged. This provides the invaluable and much sought-after insight to understanding the customer journey and purchasing behaviours and habits. If properly utilised by banks, this data can better map out the journey from customer acquisition to provision of further services, improve a wide range of offerings and provide a unified brand experience, both online and physically. Omnichannel data can then be harnessed as a component in a hyperpersonalisation strategy to enable real-time services to be offered.
For example, augmented reality (AR) can be utilised to provide customers with details regarding their card product or banking service. Artificial Intelligence (AI) can power hyperpersonalisation to the fore by closely analysing available data, paving the way for relevant services to be offered. Additionally, the retail sector has successfully utilised loyalty programs to provide digital benefits to consumers, such as offers from partner companies, and this is also now making its way into the finance industry.
Enhancing security in payments
To ensure that consumers carry the same confidence into digital transactions, phygital strategies require strong levels of security that replicate the physical experience. Consumers are now demanding more transparency and security when it comes to the way that information is stored, shared, collected and used, along with greater personalisation via digital means and sustainable offerings.
A tokenised infrastructure enables safe provisioning of payment credentials and secure customer payments across all relevant touchpoints. This is particularly crucial as regulations such as PSD2 (Payment Services Directive) and Strong Customer Authentication (SCA) demand strong authentication requirements. In terms of consumer benefits, the use of a token allows card details to be automatically updated for subscription services when an existing one expires for example, without comprising on security. By using biometrics such as fingerprint scanning or facial recognition to verify a user’s identity, multi-factor authentication can be facilitated. This adds another level of security for consumers and peace of mind that their financial and personal details are protected.
Keeping phygitally fit
Every end user is different, and their unique banking preferences have been highlighted by the strategy for further digitalisation. It’s therefore vital that banks adopt the perfect blend of phygital strategies to meet the demands of digitally native Gen Zs and Millennials, those who prefer in-person touchpoints, those who still experience poor connectivity in rural areas, and customers who would rather utilise the best of both worlds for maximum convenience.
Bridging the gap between online and offline
In a true complementary fashion, following a phygital approach will encourage greater personalisation strategies, allow data to be harnessed via new methods, facilitate utilisation of emerging technologies to power the customer experience and ensure that user data is kept secure and protected from cyber threats. Banks can harness the power of digital technologies to bridge the gap between an online and offline world, augmenting physical experiences while ensuring compliance with privacy and fraud regulations. Phygital is the combination that will drive bank’s success now and in the future, increase resilience and lower operational costs, all whilst taking their customer experience to the next level.
Eric Megret-Dorne is Head of Card Issuance Services and Service Operations at Giesecke + Devrient