The Future of Banking is Phygital!

What is Phygital Banking?

The term ‘phygital’ is derived from the combination of physical and digital.

Today, digitization curates much of our banking experience in the form of interactive bank websites, net banking, online customer service, and mobile banking apps. Not only have they relieved us from time-consuming and confusing logistics that entail physical banking, but sometimes, we can also open bank accounts and maintain long-lasting relationships with banks without having to visit a physical branch.

Today, many institutions offering banking as a service (BaaS) have begun crafting their digital presence with sophisticated technology, so much so that they can be claimed to provide ‘phygital banking.’ In a similar strain, Prime Minister Narendra Modi, in March of this year, announced that 75 digital banks will be established in otherwise underbanked and underserved areas. Inspired by the vision of Digital India, the hope is to increase the digital branches of banks who’ve ventured into the phygital space include SBI as SBI Online, PNB and PNB One, to name a few. Such an uptake of digital banking has ushered in an exciting time for the payment sector.

The merchant is now able to take advantage of the collaborative offerings between banks and brands and incentivize the customer to spend but spend well. Perhaps the single most versatile tool to make this possible is Innoviti’s genie, a collaborative commercial platform that brings several stakeholders together ripe for the customer’s choosing.

The Need For Phygital Banking:

Online banking services gained a refreshing pace during the covid pandemic, and this trend is shaping the banking sector as we speak. Now that customers have experienced the ease that comes with digitized banking, traditional banks are compelled to ride the digital wave. In fact, the rapid growth of the fintech space can largely be owed to the legacy methods that caused banks to largely stagnate as the world advanced.

Digitization, however, is a resource and capital-intensive process that demands collaboration. On one hand, banks are in dire need of a digital revamp, while on the other hand they needn’t always have the means to efficiently design and integrate sophisticated digital infrastructure with their processes. This quandary warrants collaboration between fintech stakeholders and incumbent banks. Such a partnership is today shaping the payments ecosystem.

Today’s customer is looking for more than simple transactions. India’s fast uptake of digital payments has more to do with the payment experience rather than the payment itself. The preferential shift from cash to cashless payments, presently standing at 41%, gestures to the changing expectations and needs of the population.

Accompanied with the government’s push to increase financial inclusion, banks are now expected to fast go phygital. Since its launch, the Pradhan Mantri Jan Dhan Yojana has witnessed the opening of over 430 million new accounts, especially by persons who’ve either been unbanked or underserved.

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 meets the customer expectation of all types of customers.
  • Phygital Banking makes banking services cost-effective.
  • Phygital Banking helps in enhancing the bank and customer relationship.
  • Phygital Banking helps banks enhance their customer base.


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. Here are some of the advantages of Physical Banking:

  • Physical banking helps in enhancing the trust and confidence of the customers.
  • Physical banking helps those who are not confident in using online portals and those who are not confident in electronic transactions.
  • Physical banking provides more personalized solutions to specific problems.
  • Physical banking ensures that the customers are associated with the bank seriously.
  • Physical banking transactions are considered to be safer (more in case of higher amounts) given the risk of online frauds and security alerts.

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.


Ans. Neo Bank is a digital bank that provides all the facilities and services of any bank. The distinctive difference between a neo bank and a traditional bank is that a neo bank has a single branch that purely functions online. While a traditional can function phygitally, the neo bank cleverly cuts costs by eliminating the need for a physical presence and creating scope to scale their user experience and quality of services. The Neo Banks are digital-only banks that are challenging how conventional banking services are offered..

Ans. Digital transformation of banks is absolutely mandatory in order to maintain pace with the global economy and move forward with rapid digitization. Digital transformation is needed to provide the convenience of doing business to customers and to cope with ever-changing and unpredictable future events.