441% and 223%. The explosion of Instapay and Pesonet in 2020. Why are Rural Bank customers demanding electronic transactions asap?
Did it surprise anyone really? Should we ponder on why the exponential growth of digital or electronic transactions happened?
Not really. All over the globe, e-commerce is experiencing a boom, due to the changing patterns of consumer and business behaviour.
Once you can not go to the shops, to bank branches, do you stop transacting? Does life stop, do we not have the usual urges and needs? Not really.
E-commerce and digital have been around for 20-odd years, with gradual adoption happening, somewhere faster, somewhere a bit slower. What the Pandemic did was unify the globe in the Accelerated Adoption of Anything Digital.
Customers of Rural Banks are, of course, not an exception. They still need to repay their loans (or do they?), pay their electricity bills, send money to family members throughout Philippines and let’s not forget – receive money, remittance from the family members working abroad.
And those customers, especially the ones of senior age groups, have gotten used to (and prefer!) doing things the old, physical way – take a walk (ride) to the local bank branch, have a nice social encounter, have a teller perform the business for you, get a receipt and walk away content that you got a task done. One to two hours of your life were invested in this episode.
Enter Pandemic. Lock-downs. You can manage to go to the store occasionally, bank branches are mostly closed, no tellers to help you – but still the world does not stop turning. Your loan and bills are still patiently waiting for your payment – making people (and banks!) restless.
When there is a pressing need, and when there is a way to settle this need quickly, people find a way to adopt new patterns of behaviour. Even senior citizens that can not exactly be put in the bucket of Digital natives.
Once the customers, even by being forced to try and adopt temporarily the electronic transaction methods, start using them, they will perform their tasks relatively quickly. Quicker each time they to this again, and again. By merely executing transactions, they will get an immediate mental reward – and reinforce their behaviour.
Electronic transactions can be executed from a smart phone, using an app, that is the usual way. But that is not the only way, and it is surely not a single way smart Rural Banks are introducing electronic channels to their customers.
Electronic transactions can be executed though a very local agent network – from example a Rural Bank can present these services through local shops or Sari Sari stores. Even older customer base, traditionally wary of technology can then make use of the most critical set of bank’s services (re-payments and payments) – the way they are used to. No big change in customer behaviour, still going to the physical location at their village, where human help may also be readily available. Smartphone not needed in this case.
The compounded effect of all this is that there will be no real way for customer to go back, even for older generations, to the old ways of doing business. Digital and electronic will become the default for everyone – sooner than any of us might expect.
Smart Rural Banks have already picked up on this trend, some have introduced new electronic payment methods, some are in process of integration, some are thinking of it. If you are in the letter group, please make sure you do not think too long.
Because your customers need a solution today. And you need to make collections.
And there are alternative choices for customers readily available from your competitors.
So, let’s think for a minute, what is a prerequisite for any of those digital transactions, so that the bank customers can perform their business without a teller, without physical access to the branch?
A Core Banking System that can easily connect external electronic payment channels, the likes of Pesonet and InstaPay.
A trusted partner company at the heart of this Core Banking System which has existing integrations of electronic payment channels to their (and bank’s) system working and producing transactions.
A way to connect external services, be they InstaPay, PesoNet, ATM machines or any external agent network – practically anything that can secure uninterrupted Cash Flow for the Bank, through the means of loan repayments, deposits, bill payments, bank transactions or remittances. In the Cloud Core Banking System, this means of fast connection of external digital or electronic transaction channels – is called an API.
Does this mean that any bank system provider that boasts a product with a technical integration (an API) can get you connected into an electronic transaction system? Far from it. There’s more to that than a technical integration, much more, which Oradian has seen and gathered experience in many different situations. Real-world situations with real-world Rural Banks and financial institutions, on two continents.
A technical integration is merely a tool, which can be sharp, blunt, rounded, twisted, straight, adapted for the task or completely inadequate. A technical integration does not solve your business need. And most importantly an integration of a new service does not guarantee customer adoption. A useful, effective tool needs a team to adapt it and connect it to the right pipes. Leaks are not welcome in the banking world. With leaks, there is always revenue loss associated.
An integration needs to be followed by an effective training of your staff on best practices, how to present, use and launch the service. That is the pre-requisite of good customer adoption.
A trusted, long-term partner that has been there and done that, brings something much more valuable than the tools and pipe connectors. A true partner brings experience. And if you manage to find a partner whose business model is actually tied to your business success, not to the work and time invested in pipe connections, who only makes revenue from a tiny fraction of water that start flowing through the pipes, whose interest is to keep the water flowing without any leaks, who is incentivized to find and suggest the best water sources – then you might be onto something. Something that can and will help your ride out this storm.
Schedule a free advisory session with one of our experts to get more insights on the growth of the digital payments industry, what it takes to connect it and make it work for a Bank. As part of the free advisory session you will receive a useful deeper insights file.