Introduction
In a world where everything is moving towards digital, phygital banking blends the best of both worlds, offering the convenience of managing your finances online, along with the human touch of a physical branch when you need it. It’s like having the flexibility to bank at your own pace, whether that’s with a tap on your phone or a visit to the local branch—perfect for today’s fast-paced lifestyle.
What is Phygital Banking?
The word ‘phygital’ comes from mixing two words: “physical” and “digital.”
Phygital banking means using both the real world (like going to a bank branch) and the online world (like using a bank app or website) to do banking.
Today, most of our banking is done through digital tools like mobile apps, online banking, and websites. These tools make banking easier because we don’t have to spend time traveling to a bank or wait in long lines. With digital banking, we can do many things like checking our balance, transferring money, or even opening a bank account without going to the bank in person.
So, phygital banking is a mix of the convenience of using digital tools and the trust of having a real-world bank.
Today, many banks are offering something called banking-as-a-service (BaaS), which means they are using advanced technology to offer banking services online. With this technology, they’re able to mix physical banking and digital banking together—this is what we call phygital banking.
In March of this year, Prime Minister Narendra Modi announced plans to set up 75 digital banks in areas where people don’t have easy access to traditional banks. This is part of his vision for Digital India, which aims to make banking easier for everyone.
Big banks like SBI (State Bank of India) with SBI Online and PNB (Punjab National Bank) with PNB One are also moving into the phygital space. This means they are offering banking services that can be done both online and in person, making banking more accessible. All these changes are making the world of digital banking even more exciting, especially for the payment sector, as it opens up new ways to send and receive money.
Now, merchants can benefit from the partnerships between banks and brands, which allow them to offer special deals that encourage customers to spend in a smart way. One of the most powerful tools to make this happen is Innoviti’s Genie. Genie is a collaborative commercial platform that connects different businesses, banks, and brands, bringing them together in one place. This gives customers the ability to choose from a variety of offers and deals that best suit their needs. In simple terms, Genie helps merchants give customers better ways to spend wisely while also benefiting from the collaboration between different brands and financial institutions.
Need For Phygital Banking
Online banking services really took off during the COVID-19 pandemic, and this shift is continuing to change how banks operate today. With more people getting used to the convenience of digital banking, traditional banks have had to catch up and offer more online services. The fintech industry (which includes tech-based financial services) grew quickly because it filled the gap left by traditional banks, which were slow to adapt to new technology. While old banking methods kept banks from moving forward, fintech companies embraced new ways to make banking faster and more accessible, leading to their rapid growth.
Digitization is a costly and resource-heavy process that requires a lot of teamwork. While banks need to update their systems to stay competitive, they often lack the resources to build and integrate advanced digital infrastructure on their own. This is where collaboration between fintech companies and traditional banks comes in. By partnering up, they can combine their strengths—banks bring their experience, and fintech companies bring their innovative technology. This collaboration is helping to shape the modern payments ecosystem, making banking and payments faster, easier, and more efficient for everyone.
Today’s customers want a better payment experience, not just simple transactions. In India, the shift from cash to cashless payments has reached 41%, showing how people’s needs are changing. They prefer fast, easy, and safe ways to pay, and digital payments are meeting those expectations.
With the government’s push for financial inclusion, banks are now expected to quickly go phygital—offering both physical and digital banking services. A key example of this is the Pradhan Mantri Jan Dhan Yojana, which has led to the opening of over 430 million new bank accounts. Many of these accounts were opened by people who were either unbanked or underserved before, showing the government’s commitment to bringing more people into the banking system.
Finally, phygital banking has reduced the use of resources considerably. In order to answer ‘why Phygital Banking is required?’ We need to understand some of the advantages of Phygital banking. Some of the advantages of Phygital are:
- Phygital Banking helps in enhancing customer satisfaction levels.
- Phygital Banking helps in meeting the customer expectation.
- Phygital Banking makes banking services cost-effective.
- Phygital Banking helps in enhancing the bank and customer relationship.
- Phygital Banking helps Banks reach more customers.
Advantages of Physical Banking in times of Phygital Banking Yet, the grass is not always greener on the other side.
Though Phygital Banking has taken over the banking domain, physical branches of the banks will not disappear, at least in the near future. Even with the rise of phygital banking, physical branches still have important benefits:
- Builds Trust: In-person service helps strengthen customer trust and confidence.
- Assists the Less Tech-Savvy: Helps those who are uncomfortable with online portals or electronic transactions.
- Personalized Service: Provides tailored solutions for specific customer needs.
- Stronger Customer Relationship: Ensures customers feel more connected to the bank.
- Safer Transactions: In-person banking is considered safer for larger amounts due to the lower risk of online fraud.
To conclude, as bank customers, we can be sure to expect greater digital penetration of banking services. As more and more banks go phygital, we can only expect more exciting developments coming to our screens in the near future.
FAQs
Ans. A Neo Bank is a digital-only bank that offers all the services and facilities of a traditional bank but operates entirely online. Unlike traditional banks, which have physical branches, neo banks don’t have any physical locations. They function purely online, which helps them cut costs by avoiding the need for physical space and staff. This allows them to focus on improving the user experience and the quality of their digital services. Neo banks are changing how banking is done by challenging the traditional ways that banks operate.
Ans. Banks need to go digital to keep up with the fast-changing world and the rise of technology. By going digital, banks can make it easier for customers to do their banking anytime and from anywhere, without needing to visit a branch. It also helps banks stay flexible and quickly adjust to unexpected changes, like economic shifts or new trends. If banks don’t move to digital, they could fall behind as more and more services go online and customers expect quick, easy solutions. Going digital is essential for banks to stay relevant and meet today’s needs.