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India's digitization agenda faced with 'contrary reality' on the ground

July 4, 2017

Despite the impetus provided by demonetization, digital banking has yet to become pervasive in India.

The branch continues to dominate banking channels; 94 percent of retail banking customers have visited a branch at least once in the past 12 months, according to the 2017 Oracle J.D. Power India Retail Banking Study.

"Most banking relationships still begin and continue at the branch," Gordon Shields, senior director J.D. Power, said in a press release. "If this is the alternative to in-person banking at the branch, a stronger emphasis must be placed on improving overall service.

"Amongst the 48 percent of customers who have yet to download a banking app, one-fourth state lack of security is a key reason for non-usage. The success of digital banking rests clearly on its ability not only to engage with customers but to do so in a secure and trusted manner."

Additional findings of the study:

• private banking customers are more likely to recommend their bank to friends and relatives (89 percent) than public banks (86 percent).
• almost one-fourth (23 percent) of less satisfied customers are more likely to switch to a different bank, compared with 18 percent of highly satisfied customers; and
• among the 78 percent of smartphone users, 42 percent use at least one mobile wallet. The vast majority (59 percent) use PayTM. Only 5 percent of customers say they use their banking app as the main app.

"As India embarks on its digitization agenda, results on ground exhibit a contrary reality," Kiran Kumar Kesavarapu, APAC leader of industry innovation advisors for financial services at Oracle. "A large majority of India's urban retail banking consumers still prefer to go to a bank — our study estimates this to be as high as 94 percent. … We believe the issue lies in customer engagement models that Indian banks employ today and related security uncertainties when transacting online. This can be addressed easily and quickly."