Craig Guillot
Craig Guillot Sep 20, 2019

Beyond gadgets and widgets, an outstanding ‘phygital’ experience

Banks have talked for years about bridging the yawning gap between physical and digital channels—first via multichannel, then omnichannel. The progress, if slow at times, still promised something revolutionary. Something novel. And, for the puckish, something with a funny-but-catchy name.

Welcome to the Age of “Phygital.”

We’d forgive you, gentle reader, if you blinked your eyes because you thought you saw the word “pigtail.” Or thought it was a groaner of a pun based on “fidget.” But once you get used to this puzzling portmanteau of a term, you’ll want to consider all it stands for. For the finest innovators in financial services now covet a phygital world, as it promises a solid bond between branch and online, face to face and interface. 

“We’ve become a real-time world, and people are accustomed to getting what they want now because of digital,” says Ben Hopper, head of strategy, consumer bank at First Horizon National Corp. (You can listen to Hopper discuss the digital-physical mix on the BAI Banking Strategies podcast.)

To be sure, giving customers the same sort of cyber red carpet they get from Amazon remains a non-starter. Then again, The House That Bezos Built isn’t exactly killing it by sending armies of real people out to help customers (except, perhaps, if you count its Whole Foods and Amazon bookstore properties).

So, here’s a quick lesson in Phygital 101: As consumers, “we discover a pain point or need, we want the solution, and expect it to happen almost on demand,” Hopper says. “But that can only go so far. People also want to be face to face with a banker advocate to have conversations to learn, get reassurance, and most of the time get professional advice for solving more complex problems.”

That’s understandable, isn’t it? “Sometimes we just want a banker to help us feel confident about major decisions,” Hopper says. But people also want to do things the digital way, too—and on their own. Call it a financial services version of having that cake and eating it, too.

“It’s that mix, the physical and the digital, that is what we really want,” Hopper says. “We want real-time solutions with a foundation in personal relationships.  That’s the sweet spot where phygital becomes an amazing experience for both the business and consumer.”

Betting on a phygital future

One the one hand, think of phygital as an Omnichannel 2.0—that is, a world where all the kinks of merging channels have been worked out and consumers can effortlessly move from device to teller and back with no latency.

Yet the implications of phygital from a digital transformation point of view should give us all pause, and goosebumps.

Accenture said in a recent report that phygital means digital strength across all channels, in all operations and in all ways a bank does business. That means interacting with customer digitally both in digital channels and in the branch.

“It’s really about how you get everything to work together in a more positive customer experience,” says Paula O’Reilly, Accenture’s managing director of the financial service practice. “It’s system oriented and thinking more about things from a customer perception, customer journey and customer experience.”

Put another way, phygital experience strives to create more “harmony” across channels, O’Reilly says. For instance, a customer could visit a bank, start a loan application and then call up a call center to try to finish it. Or, they could start a loan application online, then walk into any branch to finish the final steps.

That may sound simple. But customers, given the chance to respond, might say that they’ve been simply waiting on this for years—and the question is, for how much longer? Thanks to the likes of Uber, consumers are already elevating their expectations for the seamless experience.

A survey last year by Bank of America found that consumers increasingly blur the lines between digital and physical experience. They use more apps and less cash. More than half say they’re comfortable with biometrics on their phone and using facial recognition (even if criminals are figuring out how to defeat those technologies).

Banks have responded by expanding digital experiences in their branches. At Capital One’s new cafes, including a brand new downtown Chicago location, consumers are encouraged to engage in digital banking in the physical space with Peet’s Coffee within easy reach. In March, HSBC announced a larger nationwide rollout of its Pepper robot to enrich the customer experience. And in June, Chase unveiled its flagship branch on Madison Avenue in New York to integrate the latest digital experiences in the physical space.

“They’re all what we would put in the umbrella of phygital, and it will be interesting to see how these models evolve,” O’Reilly says. “They are all betting this is the way of banking in the future.”

Phygital feeds customer needs

As banks compete through innovation, many seek proactive ways to give consumers the products, services, and experience they want before they ask, says Denis Thomas, director of strategy and innovation in Capital Markets for Capgemini.

Thomas reported on the amalgamation of physical and digital banking services in India in a white paper and said banks will need to adopt a “customer journey mindset,” with end-to-end processes supported by artificial intelligence, robotics, machines and human agents.

In a phygital application, a consumer could conduct a transaction or loan application online or on a mobile device then walk into a branch, scan a QR code and immediately complete the process without friction.

“People already use a combination of digitalization services before they even step into the branch,” Thomas says. Thus phygital “could anticipate what they’re coming in for.”

But the greatest value comes when banks gather and use data from both physical and digital interactions to create “phygital insights,” says Andrzej Szewczyk, vice president and managing director of Efigence, a digital banking company in Poland.

Intelligent platforms and applications can now enable banks to collect and analyze data from the physical world then use it across all channels. “It’s like a ubiquitous meeting of the worlds,” Szewczyk says.

For example, Alior Bank in Poland uses an award-winning AI-enabled virtual agent called Dronn to better enable associates both online and in the physical space. The bank is also testing fingerprint technology and voice and face recognition. Emirates NBD also offers a fitness account that links rewards and interest rates to physical activity. Customers can link their wearable device or fitness app to their account and combine their real-world physical activity with digital banking. Customers who take up to 15,000 daily steps and earn an interest rate of up to 4 percent. (No word on whether couch potatoes are subject to fees.)

While the options are endless, the best phygital experiences benefit both the customers and the banks, Szewczyk says. For instance, analyzing customers’ online accounts for spending habits, potential car interests, and family trends can enable banks to make personalized recommendations online and in person.

“They could offer better products, improve the apps and processes,” Szewczyk says. “It’s tangible for banks, but it results in better services and products so it’s a win-win.”

It’s also a win customers are growing accustomed to celebrating. Amazon has mastered the art of recommendations that use past purchase history and complex algorithms to predict what customers may be interested in. Banks must now learn to do the same and deliver more products and services based on information about their customers.

“Banks needs ways to draw conclusions about customers from very different events they trace in their life, and most of these events are offline,” Szewczyk says.

In other words: Funny and on the money, phygital is the word.

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Craig Guillot is a business writer who specializes in retail and finance. His work has appeared in such publications as the Wall Street Journal, CNBC, Bankrate and Better Investing.

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