6 Missing Pieces Of Digital Banking That Could Bring Transformation
Banks and financial institutions were the earliest adopters of technology and banking has undergone massive transformation ever since they opened its doors to technology and digitalisation.
Core banking services, NEFT-RTGS and finally debit cards introduced by banks paved the way for digital transformation. This stupendous effort was propelled by the internet and advanced technologies. Around the turn of the century (the 2000s) most banks and financial institutions in advanced economies offered online banking services to people who don’t have access to the services of a bank or similar financial organization. With better penetration of connected digital devices, faster broadband speeds, banks and financial institutions are now able to offer services to customers which were otherwise not available through a branch of the bank. Today online financial services include a gamut of packaged offerings like savings, investments, insurance, account aggregation, mortgages etc. Though banking has undergone a major transformation from physical branches to IT based touch points, highly specialised human capital & big data, there are some missing puzzles in the digital transformation journey and its application.
Missing pieces of Digital in Banking
Banking is undergoing massive transformation, it has evolved from brick and mortar branches to remote service providers with the help of information technology (IT) and big data, together with highly specialised human capital. Yet, there are certain areas that need to be improved to take banking to the next level.
Though fintech companies and banks compete with each other to offer increasingly well-crafted products and services, sometimes the customer experience fails to reflect individual choices and previous interactions with the bank. Bank and Fintech companies need to come up with more tailor made products, services to interact with customers and cater to user specific needs and preferences.
While manoeuvring the digital divide and bringing transformative changes, banks shouldn’t forget one critical aspect of digital banking service: ‘Genuine personalization.’ The reason is simple. While other businesses, mainly the software industry, treat consumers as individuals, banks tend to treat customers as just account numbers. Today’s customers are accustomed to interacting with a variety of business offerings like fast and reliable online services which incorporate an advanced degree of personalization. From e-commerce retailers to streaming services, personalisation is the key to retain and give better services to customers. Today’s new-gen customers expect their banks to provide personalized and tailored experiences, by using the treasure troves of data that banks already have access to. Amazon and Netflix are some great examples of personalized experiences for their customers.
Digital transformation has helped banks take great leaps in terms of services, but it’s time for banks to take the next step. Fintech companies and especially legacy banks must avoid piecemeal digital transformation initiatives e.g. systems that require customers to enter data multiple times. Today’s smart and savvy customers are demanding and want things to happen quickly. Complex or multiple entry points of data will create customer fatigue in the various digital touchpoints for banks hence a centralised and condensed data input for simple tasks goes a long way in retaining customers and gaining their loyalty.
Lack of data infrastructures
Modern banking players and financial companies have to combat data infrastructure related issues. What banks need now is robust infrastructure with power, speed, scalability and flexibility to extract relevant & useful information out of a great volume of customer data which can be used to provide tailor made services and products. A 2019 KPMG research report with views of 84,000 consumers in 20 countries corroborates that personalisation and brand loyalties are correlated. It is also proven that customers awarded higher ratings to banks with the best personalization capabilities, this is possible with the help and augmentation of great data infrastructure.
Regulation for new age banking
Aided by digitalisation, modern banking practices and fintech’s have grown by leaps and bounds, yet regulations and rules governing these practices are often age old and have hardly evolved. Government and regulatory bodies need to come up with relevant and completely new ways to identify and manage risks and regulate activities undertaken by a broader range of participants. Research by KPMG reveals that by 2030, regulations will move away from a product specific focus to monitoring activities of institutions and focussing more on outcomes. Governments across the world will have to come up with financial regulations built on new structures & catering to modern times. This will help in monitoring the firms and make sure that financial systems are safe and protect consumer interests. It’s commonly observed that banking and payment services become embedded in service or experience. This simply means that a financial institution or a company is operating outside of the regulatory perimeter. This mismatch on emerging technologies and government regulation can create unforeseen risks for customers, as new technologies are not always neutral. ‘Regtech’ rules powered by AI will need better compliance as per geographies to primarily protect customer interest.
Workflow automation in banking
Workflow automation facilitates the replacement of existing paper-based and manual processes with different automation tools. These tools can be integrated with existing business systems and controls. It is defined as the design, creation, deployment, and automation of business processes based upon preset rules. This enables work tasks to be automatically triggered and routed between people, technology and data. By selecting a workflow platform that focuses on ease of use and rapid adoption, processes in digital banking can hit milestones and prove value faster. It can streamline and speed up internal processes by reducing manual entry and request handling, reduce possibilities of errors and re-work, drastically reduce paperwork and associated costs and waste, identify redundancies, increase data security etc.
Workflow automation systems deliver consistently positive experiences for your customers, both external and internal.
A critical part of digital transformation is a smart Vendor management strategy and a check on the budget. Banks must think through the types of vendors they need and the deliverables they have in mind for every kind of situation. In this process, long standing relationships with capable vendors can be quite beneficial. In a digital transformation process, good relationships and open communication with vendors can help in establishing a clear and collaborative process.
In Summary: The way forward
Data safety is the most critical part of the missing puzzle and is the way forward. New age customers are far more aware of the value of personal data and would under no circumstance want it to be compromised by individuals, groups or institutions with vested interests. Keeping data safe and secure is paramount for banks like never before. There is a need to work on an ecosystem that will give customers the confidence and trust that they used to have in banks to safeguard their money and finances. This can only be achieved by banks which vouch to protect the anonymity of their customers. Banks can secure trust by acting as an intermediary in securing products or services on the customers’ behalf without revealing the details and identity of customers. Customers are the ultimate owners of their data. To further the interests of their customers, many banks are coming up with data consent management services and this is a transformative step towards complete data safety.