The Digital Economy and Banking
Online retailers, communities, marketplaces, and platforms have access to large customer and supplier networks. Financial services are offered by non-banks as an integral part of their product offering. Financial technology providers, also known as fintechs, are fueling rapid innovation. Retail banks acknowledge the need to address the challenge that traditional value chains are being disrupted by new entrants.
The always-connected, digitally savvy customer is turning to alternative banking providers. Meanwhile, the role of banks as trusted intermediaries is diminishing.
We are witnessing an unmatched era of digitally driven innovation. Breakthrough technologies have matured and achieved scale together. This will change how banks provide financial services. Technologies such as in-memory computing and cloud have already made an impact in banks.
Others such as:
Artificial intelligence and machine learning
API management, open banking, and banking as a platform
provide new and exciting opportunities. But at the same time they open the playing field for companies who are not traditional banks, yet have expertise in these technologies from other industries.
Banks are collaborating with fintechs and tech providers at a more rapid pace than in the past to take advantage of the technology they have available to serve customer’s tech savvy demands. Having an open and agile platform will enable faster implementation for new products and better customer experience.
Through an open banking business model, banks will reduce costs, grow, and provide a better customer experience by securely and rapidly enhancing their digital offerings using an ecosystem of third-party applications and services. Here are the top priorities driving the shift to open banking:
1. Improve the customer experience: Engage customers with a real-time, multichannel digital experience. Banks need to leverage technology that drives a customer-centric business model for sales, marketing, and service with real-time execution capabilities. Delivering a seamless, consistent, channel-optimized, and customer-centric experience drives customer satisfaction and loyalty.
2. Predict customer needs: Big Data and sophisticated predictive analytics of structured and unstructured data provide 360-degree customer insight, enabling banks to anticipate the behavior of their customers; respond to their needs; predict the next, best step or product offer; and rapidly engage them in real time. The digital economy is highly personalized and offers better convenience, choice, and value to the customer.
3. Reduce operating costs: Decreasing costs to combat reduced margins and increased competition requires banks to simplify and automate their processes. Machine learning can automate knowledge work. Cloud solutions are adopted to standardize processes. Employee self-service can be made less costly with the help of chatbots and conversational apps.
4. Meet regulatory and compliance standards: Meet regulatory and compliance requirements with a platformdriven architecture. The unprecedented volume of global regulation is placing considerable demand on banks from a compliance bandwidth perspective. The best defense against relentless change is a holistic and open system architecture that supports an integrated approach to finance, risk, and compliance that enables new business processes and unanticipated future regulatory demands.
5. Enable open banking and platform-based business models: Banks are driving innovation in the areas of digital customer engagement, machine learning, and blockchain. Investments in open and agile software platforms and APIs enable banks to respond to competitive challenges created by reforms like open banking and PSD2. Banks need to be able to collaborate with OEMs and financial technology providers to develop new business models and product innovations.
Successfully embracing the opportunities from new technologies and consequently addressing these five strategic priorities will be the foundation for successful digitalization and staying ahead of the innovation curve. Contact us to learn how we can guide you into the digital era.