The proliferation of digital and physical channels has never had more of an impact on our lives than today. This is especially apparent within the financial services industry, where digital transformation is more important and relevant than ever before.
While digital technology has continued to develop and grow in complexity over the last few years, it has also served as a catalyst for digital banking, benefitting not only consumers but banks themselves. This can be seen through the “anytime, anywhere” concept, which promises customers service whenever and wherever they need it. What was considered new ways of working have now become conventional such as the use of contactless and mobile payments which use advanced digital technologies to complete transactions. The proliferation of self-service, reduces the need for extensive branch networks, freeing up staff to work on other important tasks such as improving customer engagement.
Driving the progress are four key enablers; cloud computing, mobile internet, social media and big data integration. All being achieved in a climate where there are growing requirements and changing expectations from customers that banks must comply with to remain competitive. A scenario compelled by reduced costs, faster time to market, greater transparency and control and improved customer loyalty. This must all be done within a more exacting and demanding regulatory framework.. However, the big transformation brings great challenges.
Challenges in the Internet era
There are two key challenges facing financial services organisations today. Firstly, customer expectations which continue to grow as technology becomes more innovative and accessible. Consumers want seamless, secure, efficient, easy to use services that are available on demand and many will not remain with a bank or financial service if it doesn’t provide this. Customers want to feel connected with their financial institutions and because of this, customer loyalty can be hard to maintain.
Secondly, new entrants into an established industry are disrupting traditional banking and have a big impact on assets, liabilities and also business. Various digital financial service providers have lowered the entrance of mass-market wealth management, and have overshadowed the attractiveness of banking deposit products. Moreover, third party platforms such as Apple Pay are also gradually replacing the banks’ role as a payment channel. Financial regulators intend to make it even more competitive in the world of payments by simplifying the payments landscape to reduce the cost of entry. This will allow FinTech businesses to increase competition and marginalise transitional banking billing and settlement services unless they adapt.
In the face of these challenges, banks and other financial services need to have a holistic digitisation strategy to address different channels and products, and to position themselves as both relevant and necessary to the consumer.
Digitising to support the banking revolution
To compete and thrive in the digital era, banks and other financial institutions need to respond to increasing customer demand for mobile banking and interaction through digital channels. There are three key areas financial institutions should look to improve.
Speed at the lowest cost: Firstly by using high-performance open platforms, cloud computing and distributed architectures, banks and financial services can develop flexible platforms that will support smart platforms. The OpenStack financial cloud will also ensure that services perform at their best to provide the customer with the ultimate customer experience.
Improve customer and business insight: Secondly, by adopting big data platforms, banks and financial services can use innovative technologies, such as artificial intelligence and machine learning, to understand customer behaviour and implement precision marketing based on data analysis and insights. This allows businesses to provide personalised services to customers whilst also providing employees with refined decision-making.
Front to back omni channel/unified communication: Finally, financial services organisations can reshape their services by integrating cutting-edge mobile and video communications technologies with financial channel services. Once implemented, these digital services will allow consumers to access financial services anytime and anywhere, significantly improving the customer experience in real-time.
Today’s era of banking transformation
In today’s digital era, banks are facing a new reality with customers moving toward and demanding more from mobile and digital channels as well as new entrants disrupting the market. Upgrading and managing business technologies will mean more than rejuvenating legacy ICT systems. Financial institutions can improve the flexibility, reliability, availability and scalability of their services, and make a step forward towards the next generation of banking. It is not the legacy environment that is limiting banks transformation journey but more legacy thinking.
Amin Lalani, CIO Executive, Financial Services, Huawei Western Europe