Banks must compete on customer experience to stay relevant: EY report

It also found that AI-driven personalisation is gaining traction, and despite the relatively strong mobile adoption, chatbots remain underutilised and less trusted.EY India, National Financial Services Leader, Pratik Shah said banks that excel in CX, can unlock opportunities for cross-selling and upselling, while differentiating themselves in a highly competitive market.Banks must balance automation with human touch to maintain empathy, overcome legacy system constraints, scale personalisation, and uphold stringent data privacy standards.

Banks will have to compete on the quality of the customer experience to remain relevant and physical branches will continue to play a strategic role, evolving into phygital advisory hubs that blend digital tools with human reassurance, EY India said in a report.

The EY report 'Customer Experience Reimagined: The New Frontier for Indian Banking in 2026' also said that banks are no longer judged only on how seamlessly customers can transact, but on how intelligently and intuitively they anticipate needs, simplify decisions and deliver support at the exact moment it matters.

''This future will be shaped by a partnership between people, AI agents and phygital touchpoints, all working together to create experiences that feel relevant, secure and human,'' the report said.

The report said that customer experience (CX) in Indian banking is entering a defining inflexion point where technology, human behaviour, and contextual intelligence converge.

As AI takes over transactional workflows, human advisors can focus on high-value guidance-long-term planning, life-event support and trust-building conversations, it added.

In its survey of 2,030 banking customers across diverse demographics, the report found that 70 per cent of Indian customers feel financially understood by their banks, yet gaps in service speed and clarity persist. It also found that AI-driven personalisation is gaining traction, and despite the relatively strong mobile adoption, chatbots remain underutilised and less trusted.

EY India, National Financial Services Leader, Pratik Shah said banks that excel in CX, can unlock opportunities for cross-selling and upselling, while differentiating themselves in a highly competitive market.

''Banks must balance automation with human touch to maintain empathy, overcome legacy system constraints, scale personalisation, and uphold stringent data privacy standards. The Reserve Bank of India's recent emphasis on re-KYC completion reflects the sector's increasing focus on seamless and efficient customer engagement,'' Shah said.