Woman with a mobile phone in front of a digital wall
#Payment Technology

Go Digital First: make phygital work

Global Trends
4 Mins.

Consumers today are adopting digital life at a pace we’ve never seen before. The financial market segment is no exception: a Digital First banking service offering is clearly a major factor for today’s customers in their decision-making. Organizations that offer Digital First services to their customers are positioned to benefit the most from this megatrend.

Recent experience, better technology, and greater levels of societal adoption of that tech have brought great changes in consumer expectations – and how banks and others in the financial sector seek to fulfill them. This now includes the expectation that services be immediately available, at all times. Adopting a digital strategy from the beginning enables banks to fulfill the expectation of their customers in this regard.

Younger demographics skew ever more toward a preference for digital services. This trend is unlikely to be reversed anytime soon (if at all). As younger people acquire more financial firepower, their needs and desires must be front-of-mind for all financial service providers. This isn’t to suggest that only younger people appreciate a digital financial offering: consumers across age groups are verifiably open to moving their financial lives online, provided they are given well-designed, secure options to do so.

In line with this trend, traditional service providers, including banks, have had to reposition themselves from being primarily physical entities with nods to a digital presence, to fully fledged digital entities that see consumer journeys as a mix of physical and digital, or “phygital.” To acknowledge this reality is to get on board with the Digital First paradigm.

Digital customer acquisition

Consider the use case of the Digital First issuance of a payment card. Let’s imagine an applicant: a 20-something digital native, who takes pride in keeping up with current trends, puts in their application using a mobile device through an automated, digital onboarding experience. Once the process is successfully completed and the application is approved, the customer can personalize the card’s artwork. They can even get a unique non-fungible token (NFT) image for a fully personalized payment card in keeping with their own self-image.

The customer receives a virtual version of their physical card in the mobile app, along with a digital welcome kit, while they wait for the physical card to be issued and the package to be delivered. Their card credentials are securely provided to the digital wallet on the customer’s mobile phone or an online merchant’s wallet, enabling the customer to start using the payment card both online and in-store, immediately! All this happens while the physical card is still on its way to them.

Subsequently, they can set limits on their spending and enable notifications, and can choose to be informed at every stage in the process of where the physical card is before it actually reaches them.

Woman paying via her mobile phone

Be more efficient

Being Digital First changes the dynamic around physical customer touchpoints. It doesn’t eliminate them, as customers still value payment experiences that involve human contact. Indeed, as the service being sought becomes more complex – investment advice, for example, or a mortgage – the demand for an in-person meeting goes up.1 In terms of our discussion here, a bad digital or online experience can drive consumers to seek out a staffed hotline, or physical branches and the human contact that such branches offer.2 But going Digital First does free up people to be deployed to where service intervention is actually required.

Digital products have the added benefit of being always available, leading to more usage. Banks and other financial institutions can also push for cross-product utilization across their platforms. This leads to a better, more satisfying customer journey in banking. Customers don’t just have to be acquired; they must be retained. Being aware of their needs and being flexible enough to accommodate them is part of a phygital strategy that begins from a Digital First standpoint.

Manage legacy systems

The agility of neobanks and other digitally native outfits owes much to their relative lack of a physical infrastructure. They’ve set the bar high across the banking ecosystem with their innovative, disruptive offerings. Traditional banks have their own relevant, distinct strengths, like the comfort of secure, established processes and their legacy of customer service. However, they have a bit of catching up to do with neobanks and other fintechs that are born in the digital age, in terms of adopting a Digital First mindset.

Most retail banks have established IT departments, and a physical presence with branches and people that must be kept in mind when outlining strategy. In this scenario, time-to-market for a digital payment solution can approach a year, or even longer. It is vitally important for these banks to not lose time and valuable customers while they wait for a fully digital solution to be ready. One option for a smooth transition is to supply card credentials via a secured digital channel and APIs in the first instance. Once the support IT environment is in place, fully tokenized digital cards can follow.

Ongoing maintenance of the systems that underpin digital offerings is another area where a bank may find it challenging to find an in-house solution. It makes sense in this context to identify the right partner, one who can both provide a solution and maintain it over time, including organizing relevant certifications.

Learning to be as flexible and disruptive as a digitally native fintech can be challenging. But market realities call for fast, secure, convenient customer journeys that consumers can also connect with on a personal level.

Woman digitalizing information

Speed leads the digital transformation

With the right partner, time-to-market can be significantly reduced. The rollout can be integrated with existing legacy systems in traditional banks as well. In this situation, an entity with a broad background across payment card issuance could be invaluable, especially if they have experience with creating and rolling out digital and physical assets for traditional banks as well as tech-led neobanks.

The market has already been exposed to secure, quick customer journeys that are “personal experiences,” just as much as commercial ones. Implementing Digital First as the entry into a successful strategy is the need of the hour.

Key takeaways

  1. There is no way around Digital First when it comes to thinking about customer journeys.
  2. Banks need to position themselves well, physically and digitally, to be accessible to customers.
  3. There must be harmony between the digital and physical parts of the journey.
  1. Building on the digital banking momentum, Deloitte, Sept 2021

  2. The human + digital challenge in banking: Consumers want both, Ron Shevlin for Backbase/Cornerstone Advisors, 2021

Published: 25/05/2023

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