Banks can halve per transaction costs by going digital: Assocham-PwC

Indian banks can reduce per-transaction costs by up to 50 percent in the next few years by going digital, an Assocham-PwC study said on Friday.

"Banks will have to make the operating model agile so as to easily adapt to changing business dynamics, as the people driving technological innovations at banks have grown up on technology that is different from what is prevalent in today's times," the study said.

Titled 'Logging into digital banking: Creating access, transforming lives,' the study conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and PwC said banks need to structurally change their cost base and institute more aggressive cost management processes.

Branch banking needs to undergo significant transformation, with the branch size and costs being reduced by introduction of new models and migrating transactions to low-touch digital channels, it said.

"Branches may need to take many forms, from flagship information, advisory and engagement hubs (offering education, financial advice, full service capabilities and community offerings) to smart kiosks," it added.

Competitive reach of banks will no longer be determined by branch networks, rather by technology and advertising budgets, the ASSOCHAM-PwC study noted.

New digital entrants will able to offer similar high-value services, unencumbered by the massive legacy cost bases of traditional banks. "Existing banks will need to restructure their cost base, while at the same time investing in innovation around areas such as analytics and delivery," it said.

The study said that going ahead, smart devices will grow in importance and take its place alongside cards as primary medium for consumer payment which will continue to remain popular as they are quick and effective.

Besides, industry utilities like customer authentication, fraud checking, payments' processing and KYC processing, will arise as cost pressures and technological advances will force banks to focus on customer service and risk management, it added.