The rise of fintech companies and other nontraditional players has shaken up the financial services landscape. In order to stay relevant in an increasingly crowded market, companies need to adopt initiatives for digital transformation in finance that help them attract, retain, and delight their customers.
In a previous article, we introduced three digital transformation “megatrends” in the banking industry that can help dramatically improve efficiency, productivity, and customer satisfaction. These trends are:
- Engagement banking: A paradigm in which banks are more closely integrated and engaged with their customers, making it easier for them to use products and services in the manner of their choosing.
- Platform banking: The use of a single platform that provides access to a wide range of products and services, leveraging third-party integrations and APIs (application programming interfaces).
- Technology banking: Cutting-edge innovations such as artificial intelligence, machine learning, and robotic process automation (RPA) that help banks save time and effort and focus on higher-level, revenue-generating activities.
So what impact are these three possibilities having on the world of banking and financial services? Below, we’ll discuss four significant effects of engagement banking, platform banking, and technology banking on the financial industry.
Greater customer empowerment
Engagement banking strongly prioritizes the customer experience, which means that bank clients have more power in their hands than ever before. With plenty of options at their fingertips, many customers are willing to jump ship to a competitor.
According to research by the Motley Fool, for example, 48 percent of consumers said they would be “somewhat likely” or “very likely” to switch to another bank that better fit their needs. This tendency is particularly strong among younger customers. In another survey by the consultancy firm Mobiquity, 46 percent of users below 55 years old said they might switch banks for better digital features, while just 27 percent of users over 55 agreed.
Innovations such as artificial intelligence, machine learning, and robotic process automation (RPA) are a core element of technology banking. One of the greatest benefits of these technologies is that they can liberate human employees from performing many tedious, repetitive, low-level tasks.
In banking, for example, RPA agents can handle everything from generating reports (such as monthly close and reconciliation documents) to managing accounts payable, fraud detection, and more. By implementing RPA, AI, and other automation technologies, banks can free up untold hours of work for their employees, enabling them to concentrate on higher-level, revenue-generating activities instead.
Lesser burden of regulations
The banking industry is one of the most highly regulated in the entire economy — and for good reason. Banking regulations such as Sarbanes-Oxley (SOX), Dodd-Frank, and more ensure that unscrupulous firms don’t exploit customers, mislead investors, or assume an irresponsible risk. However, even reputable firms often chafe against the constraints and requirements of banking regulations.
The good news is that the adoption of technology banking can help automate a great deal of finance companies’ workflows for compliance, governance, and risk management. For example, know your customer (KYC) laws require banks to verify the identity and risk of each new client, which can take hundreds of a single employee’s full-time hours on an annual basis. By strategically deploying RPA agents, banks can drastically shrink the amount of human effort they need to spend on this verification, boosting their efficiency and productivity.
Greater flexibility and problem-solving
The growing adoption of platform banking will make financial institutions more flexible, adaptable, and agile in response to changing customer demands. By swapping out products and services in a “mix and match” manner, banks will find it easier to tweak their existing offerings and release new ones promptly, capturing the interest of consumers.
In particular, personalized services are in high demand as companies respond to users’ requests for a custom-built, individual banking experience. To provide this personalization, banks will need a way to crunch massive amounts of data, segment their audience, and uncover hidden trends and insights that help them maximize their customer satisfaction rates.
This article has explored how engagement banking, platform banking, and technology banking are poised to massively disrupt the financial services industry. In the foreseeable future, we expect the most successful financial institutions will be the ones who thoroughly embrace these changes, embarking on digital transformation projects to remain competitive in the rapidly shifting financial services landscape.
Companies undergoing digital transformation need to remain informed about these three trends (and more) in order to stay on top of the latest technologies and possibilities. Are you a business or tech leader who wants to learn from and network with your peers in the field of digital transformation? That’s exactly why the DigXchange forum was founded. We host an ongoing series of webinars, conferences, workshops, and other events where you can share advice and best practices for your own digital transformation initiatives.
To receive updates on our next digital transformation event, sign up for the DigXchange newsletter today. You can also follow us on Facebook, LinkedIn, and Twitter for all the latest news and announcements.