Blending the boundaries: Embracing the phygital shift in the FSI industry

Image source: Adobe Stock: AndSus.

"Phygital" blends physical and digital elements of customer experience. As businesses navigate the hybrid future, this article tries to explore the realities, possibilities and challenges of the convergence of physical and digital realms, focusing on the financial sector.

The pandemic acted as a catalyst for rapid digital transformation across industries including retail, entertainment, education, and banking as businesses adapted and sought ways to serve their customers more effectively. Digital became paramount, and while digital offers immense advantages, the combination of physical with digital provides an even deeper connection to the customer.

The term "phygital" was coined a decade ago by the ad agency "BETC Digital" in France, and offers companies and customers alike many key benefits:

• Human Connection: Face-to-face interactions enable non-verbal cues, emotions, and personal touches that contribute to building relationships, trust, and empathy

• Trust and Credibility: In-person meetings and physical presence instil more trust and credibility than digital interactions, enhancing confidence in the authenticity and reliability of the interaction

• Sensitive Discussions: Some transactions involve complex or sensitive information that may be better addressed in person

• Personalized Services: Physical interactions provide an opportunity for personalized services and tailored experiences. In-person meetings with experts or professionals can lead to more personalized advice and recommendations based on individual needs and preferences

'Phygital' in the FSI industry

While embracing digital is imperative, we are now witnessing the emergence of "Phygital" experiences in the post-pandemic era. Businesses are discovering the fine balance and immense potential of Phygital.

In 2021, McKinsey highlighted the post-pandemic service stickiness across industries, with e-grocery continuing to thrive or has possibly even experienced growth, e-learning appears to have faced some hurdles. We also see a notable rebound in the leisure travel and hospitality sectors.

Amidst uncertainties, "Phygital" stands out as a significant trend. It allows businesses to leverage the strengths of both physical and digital channels.

• While physical elements provide human interaction and a tangible experience, digital elements offer convenience, data-driven insights, and personalization at scale
• Phygital experiences aim to provide a seamless and immersive customer journey, enhancing engagement and satisfaction.
• Businesses are adopting omnichannel strategies to provide consistent experiences across various touchpoints.

In the banking sector, Phygital leverages technologies such as artificial intelligence, biometric authentication, augmented reality, on-site virtual kiosks activated by QR codes, fusion of digital and human support during online account opening, geolocation-triggered push messages, virtual queue lines with QR and SMS notifications and many more innovations.

In India, phygital adoption is accelerating across industries, led by banking, retail and consumer goods sectors. While challenges like infrastructure remain in rural areas, phygital model is crucial for financial inclusion and will drive the next phase of growth in digital commerce. India is also emerging as a global digital innovation hub across sectors due to rapid technology adoption.

Global insights: Key learnings from leading banks worldwide

HDFC Bank

From 6,000+ branches across India, the bank plans to double the network in the next 3-5 years. The branch will be digital from a customer on-boarding and servicing perspective and will provide the emotional connect and relationship management necessary for offering financial solutions to its customers. These branches will be small in size and will be phygital relationship centres.

Branch banking is the key enabler for retail deposits, retail trade and forex business, unsecured and secured asset business and third-party distribution business. They will continue to embed and enhance customer digital journeys, be it sales, services or operations. The key is — enhancing phygital through digital delivery in physical branches.

-Source: HDFC Bank Limited Integrated Annual Report 2022-23

JP Morgan Chase

JPMorgan Chase implemented virtual kiosks in branches, resulting in a 50 percent reduction in customer wait time (Forrester).

CITIBANK

Another case study from Citibank demonstrates how the integration of digital technologies and physical branches led to a 40 percent increase in customer satisfaction and a 30 percent growth in new accounts (McKinsey).

According to a recent survey conducted by Forrester among banking customers in Singapore, 55 percent of respondents stated that they would not consider banking with a provider that has no physical branches. Additionally, 64 percent agreed that access to human customer service is of significant importance to them.

Potential challenges of moving from digital to phygital:

• Balancing Channels: While the shift to digital channels accelerates, banks must strike a balance between digital and physical channels, optimizing distribution strategies with the support of data, analytics, and technology.

• Plotting Next Moves: Financial institutions must address crucial questions, including whether digital channels can replace branches as the dominant sales channel and how customer behavior might evolve in the future.

• Phygital Communications: Community financial institutions (CFIs) must adopt a phygital communications strategy to meet evolving customer demands for digital exchanges. However, challenges may arise, such as employee and customer resistance, data privacy and security concerns, and the need for technology and infrastructure investment.

Harnessing Adobe solutions for seamless online-to-offline integration

• Interactive In-Branch Experiences: Our banking customer are integrating Adobe Sign and Adobe Acrobat into in-branch operations, facilitating the transition from paperwork-intensive processes to digital interactions. Customers visiting a physical branch can complete necessary forms and agreements on a tablet or kiosk. The seamless transition from online pre-interactions to in-branch services enhances convenience and reduces paperwork.

• Data-Driven Personalization: Adobe Target and Adobe Analytics provide insights into customer preferences and behaviours, which is then applied to offline interactions. Financial advisors access these dashboards/reports during in-person meetings to tailor their recommendations effectively, making their customer feel valued and understood.

• Mobile Apps for the Field Force: With AEM Mobile apps driven by Adobe RTCDP data, it has enabled seamless sharing of real-time data relevant to client’s account information, transaction histories, investment portfolios, or insurance policies instantly. Field agents, brokers, or advisors have the most up-to-date information at their fingertips during face-to-face meetings.

"Phygital" presents an exciting opportunity for the FS industry to revolutionize customer experiences and drive operational efficiency. Strategic adoption of omnichannel approaches, cloud computing, advanced analytics, and data-driven enablers will pave the way for seamless customer journeys.

Balancing digital and physical channels, staying agile, and embracing new technologies will ensure competitiveness and customer satisfaction. The future of FSI lies in enhancing the Phygital experience through digital delivery in physical branches. As the industry navigates this transformative shift, the jury is still out, but the potential for progress is undeniable.