Banks can improve profitability and customer service with phygital

The first blog in this series explains why consumers love phygital payments – the blend of physical and digital payments that delivers superior convenience, flexibility and security.

Banks can improve with phygital

Now global security technology group and paytech leader Giesecke + Devrient consider the steps banks must take to be phygital-ready.

In their new white paper, Giesecke + Devrient outline the challenges retail banks face in adapting to the digital environment.

Over the last ten years, retail banking profitability has more than halved, according to KPMG[1] – while McKinsey tell us[2] the number of bank branches declined by 9% in 2022 alone.

However, if this looks like physical decline and a switch to digital, things aren’t that simple.

McKinsey also note that foot traffic in remaining retail bank locations rose 20% last year, while consumer appetite for services that blend the physical and digital – phygital payments – has never been stronger.

Take payment cards: this year’s edition of the Digital and Payment Card Yearbooks from PCM records[3] that card use rose 20% above the long-term trend last year, while expenditure on cards across Europe was almost double its long-term trend – and card payments continue to match digital wallets for online shopping.

The new G + D white paper Phygital payments are here. Are you ready? considers those use cases in which consumers are already going phygital and explains steps banks must take to deliver the phygital services consumers expect.

Examples of these services include upgraded mobile and internet banking portals that enable consumers to alter credit limits on payment cards online for spending in the real world; biometric cards with online enrolment, and the hyper-personalisation of payments and banking services, from consumers inventing the look and feel of their payment cards through to controlling how much data they share with third parties through their banking app.

In the white paper, G + D note that upgrading systems and products for a phygital future will reduce bank operating costs by making them less reliant on legacy systems that absorb up to three-quarters of their IT budgets[4], while also making transactions more secure through a combination of physical and digital security measures.

Most importantly of all, being ready for phygital means delivering the convenience, speed, security and range of services customers expect – from variable recurring payments for utilities and bills, through to tap-on-phone payments at retailers that cut queuing times and further reduce consumers’ reliance on cash.

For more on what banks should do to be phygital ready, download the new white paper from Giesecke + Devrient now

[1] KPMG Europe, July 2021: “European Bank Profitability: Plus Ca Change?”

[2] McKinsey and Company, 13 July 2022: “Best of both worlds: Balancing digital and physical channels in retail banking”

[3] See “European Overview” in The Digital and Card Payment Yearbooks 2022-2023

[4] PwC Europe, 2 May 2022: “What are the Hidden Costs of Legacy Systems?”

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