Physical or digital banking? Why not both?

by Joe Burgess, sales manager, financial platforms, Giesecke+Devrient (G+D)

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Never have consumers been given so much choice regarding how they pay for goods and services. A similar level of personalisation also applies when it comes to customers’ interaction with their banks. The shift to an ecosystem combining physical and digital touchpoints has introduced new banking and financial services dynamics. That concept combines the “best of both worlds” with digital services that are instant, convenient, and ubiquitous, as well as in-person interactions that many consumers still highly value. This applies to customers across different generations, from “Boomers” to Gen Z. 

Therefore, financial institutions are advised to embrace the concept of digital banking to create a truly customer-centric experience. There are some practical ways that banks can incorporate a digital strategy, and emerging technologies such as artificial intelligence and large language models (LLM) applications can also play an integral role.  

Streamlining the card issuance journey

While digital and mobile wallets are becoming mainstream payment channels, the physical payment card will remain a consumer wallet staple over the coming years. However, digital improvements can be made to the card issuance journey. With people often on the move and living fast-paced lifestyles at home and work, a card and corresponding PIN being sent via two different postal letters for security purposes may be a challenge. 

Waiting for each to arrive in the mail, which can be delayed or lost, is inconvenient for people who travel often for work or are about to embark on a holiday. Instead, consider the ease of activating your PIN, which is transmitted digitally via a mobile banking app. A kiosk close to them enables customers to take control of getting their bank cards personalised from a nearby self-service kiosk.

Banks can also take consumer control to the next level by empowering consumers to create their individualised card design using an artificial intelligence (AI)-based tool. This tool basically captures the user input (text or voice) as a description of their imaginative design and finally turns it into their physical/digital card image. Along with that, copyright infringements, which are a concern for the industry, are solved in a nice way.

Simplified access to premium services

Previously, the familiarity of a physical bank branch on every high street reassured customers that they could walk in to discuss new products and services with experts. With physical bank branches on the decline, the onus is on banks to integrate and leverage digital offerings to replicate that feeling of the human touch.

For example, streaming a fully personalised AI-generated video triggered by tapping the physical card to the phone can assist cardholders in navigating through, at times, complex features of their banking service. AI chatbots can offer more specific product information as needed, and bank staff can jump in to help the customer with a consultation. These are just a few examples of a perfect convergence of hyper-personalised physical and digital banking services.

While many people may find the notion of physical branches and digital services competing with one another, the complete opposite is true. In fact, McKinsey & Company found that despite bank branches in developed markets declining by 9%, the activities were actually up by 20% back in 2021. 

In an ever-evolving digital world, phygital banking is crucial to meet varied customer needs and improve experience. Everyone, from those more digitally adept to people who either struggle with online banking or may need tailored approaches due to a specific disability, must be catered for. Both physical cards and branches, alongside digital innovations, must blend seamlessly to enable the best possible user experience. 

Encouraging sustainable action

Brand values like environmental, social and governance (ESG) commitments have become a key differentiator for many customers. In fact, according to Deloitte figures, one in ten consumers will make a purchasing decision based on the availability of carbon footprint data. 

Phygital applications can be deployed in a way that aligns with and supports a customer’s sustainability values. Customers are provided with information about the environmental impact of their transactions by linking bank card spending to an app that calculates the carbon footprint generated by purchases, orders, and bookings. It can even go one step further and offer actionable insights and options to help encourage carbon offsetting and empower individuals to make a difference to the planet through spending. Another example could be providing a digitally delivered emergency card in case of loss without making carbon-intense courier shipments to, e.g. vacation destinations in case of card losses.

A rich landscape of digital options

As the evolution of payment methods brings a rich landscape of digital and physical options, phygital banking strategies are essential to meet consumers’ varied needs and preferences. Emerging technologies like AI can enable banks to streamline services such as card issuance processes and enhance customer engagement through personalised and interactive experiences. Banks can also align with consumer values by incorporating sustainable practices into their offerings. The future will not be dominated by either physical or digital payments but a nuanced combination of the two.

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