Hi friends. This is our first storyline and it begins with traditional ranges of bangs between the period of 1950 to 1980. And then we shall move to an era of year 2000 when it was necessary for traditional banks to move to digital channels. And within the segment, we shall cover key drivers of moving to digital channels. We shall also cover the threats of FinTech companies. And then we shall talk on the needs of new Jains y, z and z plus.
However, let's first begin our story as early as 1950 was second World War period. So our story begins from 1950. How we'll look at your screen, this was a big IBM machine in 1950. Must be for banks who are trying to become digital In those times, machines were as big as one big room. And can you imagine how much data those machines could store? Absolutely no comparison of the current period.
However, it's no good to compare. And those times were different when the whole world do not have more than say, 25 computers. But that was the time when world was moving from analog to digital. Before we moved to introspect digital banking, let's see the progress of banks post 1950. This was an era between say 1950 to 1980. When banks were trying to cope up with a huge customer base, high business volume, etc, etc.
And focus on this banks was merely automation of all the activities of a bank, both at front end as well as the Back in. However, branches were still struggling with long queues, mismatch file balance on a daily basis. So let's visualize this period inside a branch of 1980. This was a period between 1980 to 2000 when personal relationship with bank staff was very obvious in conducting banking transactions and not so much of digital customer profiling of the current rate, and bank staff could recognize the customer with their family background and past interactions very easily. However, was that sufficient in the New Age era? Or did change your current period of time?
Why do banks failed or need to gradually transition to a digital era? Why generation is changing requirements from previous generation are being replaced with needs a new generation requirement of baby boomers and Gen X. And who's Gen X? Someone who was born till 1965 or 70 is radically changing with Gen Y Gen Z and Gen Z plus plus, by the way, who's Gen Z and Gen Z plus plus Gen Z is someone who was born till say 2000 and Gen Z plus plus could be somebody who's born thereafter, till say 2005. So, banks are moving from branch upgrade to internet and mobile banking to a banking apps to social media, and then to innovations such as artificial intelligence and robotics, etc, etc. However, what are the key drivers of change in ranking?
Let us look at those parameters of change. So friends, let's die whatever subject to a global arena. population of this planet in the year 2000 was 6.1 billion And that grew up to 7.6 billion by the year 2018 with a fertility rate of more than 2% per annum, assuming at least 50% of people having their own bank account, number of transactions grew multifold however, the cost of transactions in the physical mode was also increasing. So, there was a need to reduce the cost, for example, in the year 2000. As for research done by Booz Allen and Hamilton, cost of conducting one transaction in a branch was as high as 1.08 US dollars, whereas, it was reduced to 54 cents if telephone banking was used. And it became a fraction of cost a banks were using internet and that cost was as low as as just 13 cents.
Just compare that to the cost of contract Conducting a transaction in a brand for 1.08 US dollars. In addition to this problem, why banks were forced to reduce the cost competition and started hitting their big banks. So, with the arrival of new FinTech companies and telecom companies taking over the traditional banking customer, few other things also became very important parameters. For example, growth of business, customer centricity, employing brand image very important elements for moving to digital space from a physical infrastructure. Banks are facing a battle not only from competition within the own banking space, but also facing competition from non banks, who are either operating as a bank or trying to become a full service bank. Starbucks has 13.3 million customer with my Starbucks loyalty program.
And that program has offered 13 million smart cards to its customer. So how much time it takes for Starbucks to convert a 30 million coffee customer to a banking customer. By the way, they have a huge customer data with them. And they're utilizing this data digitally. Let's take some more examples of smaller FinTech companies, for example, lending FinTech companies such as Zopa, Lending Club or prosper, they can quickly offer loan in no time to its customer. And thus due to its network of lenders who are people at large like you and me.
Can banks truly compete with them? Amazon has plans to create 70 million banking customer in next five years. How difficult is it for Amazon or Facebook or Google to create a new banking organization? So it's a huge wake up call for traditional banks. The only way they can survive is to automate and digitize operations. And that will reduce its cost, bring customer Connect, improved services, etc, etc.
Let us now begin looking at what exactly these banks are doing in digital era.