According to the IT research and advisory firm Gartner, 80 percent of traditional financial services firms will cease to exist or become irrelevant by 2030. With the rise of fintech companies and digital platforms, Gartner predicts that these legacy players will either close their doors, become commoditized, or struggle to compete in an evolving market.
Digital technologies profoundly affect how enterprises in the financial sector are doing business, especially how they attract, retain, and interact with their customers. Financial services companies need to leverage new technologies to avoid their organization falling into obscurity, digitally transforming their business to improve efficiency, productivity, and customer satisfaction while cutting costs.
But what new advances and developments should financial technology innovators be aware of? This article will explore three of the biggest trends for digital transformation (DX) in finance: engagement banking, platform banking, and technology banking.
Engagement banking is a paradigm in which banks tightly integrate themselves into the lives of their customers, making it easier for users to access products and services whenever and wherever they need them. As the name suggests, engagement banking is focused on engaging bank customers, meeting them wherever they’re at, to boost the longevity of the relationship.
The philosophy behind engagement banking is a user-centric one. From a bank’s first touchpoint with a potential customer, the business must take charge of the relationship, nurturing it at regular intervals in order to boost conversion and retention rates. Successfully implementing engagement banking will require many institutions to rethink their operating models and technology architectures to make customer convenience a paramount concern.
For example, many banks struggle with long wait times and manual workflows for personal and business loans, which can easily take a few weeks to a few months to be approved. By implementing automation within their business, financial services firms can dramatically shorten the approval process, ensuring that customers don’t look elsewhere when seeking to borrow money.
Platform banking is a technology-enabled concept that provides users with a single platform from which they can access a wide variety of products and services. This notion has been particularly embraced by fintech companies, leveraging third-party integrations and APIs (application programming interfaces) in order to rapidly integrate new features and capabilities.
One of the most significant advantages of platform banking is its scalability and flexibility. When demand for new functionality arises, institutions can quickly tack on support for this functionality by integrating their platform with third parties that already provide it. Platform banking can also pull from datasets (either internal or external) and mine them for valuable insights that help financial services firms better understand their customers and anticipate their needs.
Like engagement banking, platform banking espouses a customer-first philosophy. Banks are able to offer a range of products, benefits, and experiences within a single ecosystem. For example, customers who receive a mortgage may also be looking to purchase homeowner’s insurance or obtain a loan for interior design and furnishings. Platform banking provides a one-stop shop where users can have all of their needs met under one roof, reducing the likelihood of customer attrition.
Technology banking leverages cutting-edge digital innovations such as artificial intelligence, machine learning, and robotic process automation (RPA) to make banks more efficient and productive.
For example, by automating many tedious, error-prone, and time-intensive tasks, financial institutions free up their employees to focus on higher-level, revenue-generating activities. These new technologies also enable banks to improve accuracy rates and complete processes more quickly, resulting in a better experience for the end-user.
Adopting AI and machine learning technologies during digital transformation can also significantly impact financial institutions. Just a few potential use cases of AI and machine learning in finance include:
- Chatbots that can handle many simple customer queries and issues without the need to speak to a human agent.
- Automatic fraud detection and alerts for suspicious credit card transactions.
- “Robo-advisors” that analyze customers’ investment portfolios and make suggestions based on their tolerance for risk.
- Analyzing customer behavior to identify users who are likely to look elsewhere for financial solutions and taking action to bring them back.
Engagement banking, platform banking, and technology banking are three of the biggest DX trends to watch in finance. Are you looking for more tips and guidance on digital transformation in the financial sector? That’s precisely why DigXchange was founded.
DigXchange is a forum for business and technology leaders to share advice and best practices for digital transformation. We host an ongoing series of webinars, conferences, workshops, and other events where you can learn from and network with your peers in the field of digital transformation.
Want to receive announcements and updates on our next digital transformation event? Sign up for the DigXchange newsletter today. You can also follow us on Facebook, LinkedIn, and Twitter. Keep an eye out for the next article in this series, which will discuss the impact of these three trends on the future of the financial industry in greater depth.