Digital Banking Transformation – Future Path of Banking

Ashish M. Shaji

08 Aug, 2020

Digital technologies have taken over our daily lives and have changed the way we live, interact, and bank. With the outbreak of Covid-19, more emphasis has been given to digital banking transformation, and various financial institutions have also realized its importance.  

Reinventing Digital Transformation

The digital leadership race has been propelled by stable economic fundamentals, a pleasant regulatory climate, and easily accessible technologies. Many banks have realized the importance of digital banks going forward, considering the outbreak of the pandemic that has caused people to be away from physical branches.

Many global banks have already implemented a digital transformation program. It tells you that such a transformation is no more an option but a necessity.

To reinvent digital banks, digital banking transformation is required, not with disconnected digital technologies. To transform your digital bank, all its processes, functions, and interactions must be transformed while providing excellent customer experience and distinguished engagement.

What is the need for digital banking transformation?

The banking sector is evolving and changing, like never before. Technology has been the driver of this change. It has helped in serving the needs of customers with excellent user experience. However, banking customers’ expectations have gone through a sea of change as their experience with other aspects of technology has shown them new ways of interacting with the world.

These expectations have now caused them to desire the same experience with banking. They now expect the pace of change in the banking industry to accelerate, which provides them real-time delivery and process up-gradation at speed and scale.

Another critical factor that raises the stand for digital banking transformation is the fact that more and more people have now shifted to digital banking, especially after the outbreak of the pandemic in March. Therefore to satisfy the growing number of customers and to engage more of them, transformation in digital banking should be envisaged.

Challenges to Digital Banking Transformation

Transformation in digital banking is not free of challenges. It faces numerous challenges that are mentioned below:

• Competition

Digital transformation has become more complex with players in the big tech platform. Banks face high competition as they are competing against other banks as well as fintech. Those that survive the competitive market are the ones to have a successful digital bank transformation journey.

• High rates of investment

Constant innovation in digital banking requires high investment, and transformation without innovation is not possible. Therefore many banks choose to remain where they are because of high investment related to new technologies.

• Ever-changing customer expectations

This is one of the biggest challenges facing the transformation of digital banking. Customers are expecting more and more from banks in terms of delivery and service. This poses a challenge to banks as they require meeting the changing demands of customers.

• New Regulations

Most of the time, digital banks refuse to transform due to the complexity of new or amended regulations. We find that new regulations are notified every other day, which makes it challenging for banks to conform to it while transforming.

• Security Concerns

The security of the IT infrastructure and the data it contains is a challenge to digital transformation faced by the banks undergoing or contemplating transformation.

What are the fundamentals of digital banking development?

 Digital banking is a set of activities that lasts for years. Bank’s top managers must be aware of the investments required for digital banking development. In this segment, we will look at the fundamentals of digital banking development.

• Speed

The time to market is decreased in times, and as the financial service market is dynamic and rapid, the speed of delivery must be rapid.

• Flexibility

The objectives and priorities should follow market tendencies. Being flexible doesn’t mean taking spontaneous decisions. If there is a need for change in priorities in accordance with the market, then the priorities can shift.

• Consistency

Digital banking requires continuous integration or continuous delivery practices and paralleling.

• Customization

Customization involves integration, UI/UX, business processes. Banks hire agencies to build UI, UX design considering the fact that customization of digital financial products is a necessity in the fiercely competitive market.

• Research and Development

Digital banking requires a combination of several aspects, and the effectiveness of all those must be considered. Research and development prepare you to make risky decisions.

What are the methods of driving digital banking transformation?

The following methods can help in driving digital banking transformation:

• End to End digitalized operations

It is one of the key foundations for a successful digital journey. Financial institutions must connect the mixture of legacy systems, thereby ensuring easy system replaceability and integration into an end to end platform. Once optimized and connected, a business can embrace future proof of digital banking capabilities.

• Omnichannel customer experience

The financial service providers must shift from bank centered mindset to customer-centered mindset. The present customer lifestyle is a mixture of physical and digital worlds. Banks need to come up with compelling digital products and services omnichannel to meet the expectations of modern customers. Customers experiencing great user experience can expand the customer base of the bank.

• Constant pursuit of digital innovation

In order for your bank to be cut above others, you must be front runners in innovation. Rapid innovation is possible with flexible, modular, and reusable digital banking capabilities. Financial institutions must be quick to build and launch new financial custom digital services.

• Adoption of new technologies to engage customers and boost operations

With the evolving digital expectations of customers, competitors are claiming wallet share. In order to compete, banks are required to adopt digital transformation approach of embracing technologies that engage customers and also improves operations.

• Rapid Informed decisions

Banks and credit unions should take rapid, informed decisions to realize ongoing success. They must have insight into business and to do it with confidence. The basic need for this requires strong connections in the business. The persons involved in the informed decision making should have all the necessary information to understand those decisions.

What are the benefits of Digital Banking Transformation?

Digital banking and its transformative trends can be beneficial to your business in a number of ways:

• Higher client retention

Transformation in digital banking causes improved customer experience and encourages your existing clients to stay with you. In short, it leads to higher client retention. It can also cause the addition of more customers due to positive word of mouth by existing clients.

• Streamlined operational and decision-making process

With digital banking, most of the work is done without human interventions; therefore, it leads to a simplified operational and decision-making process. With the use of advanced technologies, the bank operations are streamlined and are completed in a matter of less time.

• Fewer chances of error and cybersecurity risks

Transformation of digital banking will also lead to up-gradation of existing technology, thereby decreasing the chances of error, and with AI and blockchain, the cybersecurity-related threat is also reduced, thus giving peace of mind to customers.

• Strong brand loyalty

The Digital transformation will lead to better customer service and will bring about strong brand loyalty.

A look at Digital Banking Transformation trends 2020

• Mobile-only banking

You will see many people opting for mobile-only banking, considering convenience and accessibility. It will cause more and fintech businesses to create their own mobile banking platforms.

• Blockchain Data Management

The use of blockchain in data tracking and information management could be the trend going forward as it is viable for increased safety of digital banking clients.

• AI security

The security risk with digital banking is high due to the versatile nature of it; therefore, the implementation of AI security will enable users and banks to detect any unauthorized access attempts.

• Bio-metric identification

With a view to reduce illegal banking access and enhance security, biometric identification could make its mark in the fintech industry. Biometrics could replace passwords, making it a perfect option for digital banking.

Conclusion

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