Consumers’ expectations from banks are changing and the need for seamless and efficient processes is growing. Banking Digital transformation helps banks evolve and stay competitive. Most banks have a huge task ahead of themselves and they need to step up to customer expectations to stay relevant in changing times.
As per data collected through a survey, 14% of the US consumers were looking forward to changing banks, with 43% of customers planning to do so in the next 3 months. To retain customers and gain new ones, banks and financial institutions need to invest in digital and on-demand services. Customers who are on the market looking for a new bank will definitely prefer the ones that offer services beyond their expectations. This can be achieved by digital transformation in the banking industry.
The financial services industry has been under huge turmoil in recent years, as tech companies have made subscription-based and on-demand services a normal habit. This unique environment has also entered the financial services industry. FinTechs have been filling the gaps that traditional banks lack. This newfound preference for FinTechs over banks is challenging for large financial institutions, as they need to innovate. This is why digital transformation in banking and financial services is becoming a necessity.
Most financial institutions have started investing in digital transformation, and a lot of them are still struggling to keep their customers happy. In this article, we’ve mentioned the steps for successful digital transformation that banks can follow.
Digital transformation in the banking industry requires huge changes and a cultural re-vamp. For innovation to be a major part of the industry, it needs to come from the top management to the lower level. To make this happen requires bringing in new leaders who have innovation experience.
To embrace digital transformation in banking and financial services, leaders should be the ones who try to implement innovative solutions the most. The innovative ideas should focus on long-term ROI and should help in building a lasting competitive advantage rather than attempting to avoid the short-term costs of making impactful structural changes.
To make sure the innovative processes are working ideally, there are six areas to focus on:
Software built-in in older times didn’t take data integration in mind. Keeping customers’ financial data in silos that can’t be easily accessed outside the company. This is changing as people want to access their money anytime, anywhere.
With the digital payments apps of today, it’s almost seamless to send and receive to friends and businesses. If a particular bank can’t connect to these third-party payment services, customers will switch to a bank that can.
Financial institutions need to invest to build better online customer experiences, financial institutions should invest in a centralized data-linking system. To get a data linking system, financial institutions can either build one from scratch or choose a third-party vendor that can do the heavy work themselves.
Internal data is valuable, but it doesn’t provide the full picture of your customers’ financial lives. To offer the best products and services, you have to be able to access permissioned data from financial accounts they hold somewhere else. Up until recently, accessing consumer financial data from outside banks was next to impossible. But, in the last ten years, there are several technology companies that allow banks to do that.
For retail baking customers, linking an external account is relatively simple. They select their outside bank and enter the username and password for those accounts.
Data partnerships can paint the complete picture of a customer’s financial life, providing banks with the ability to build solutions that are able to keep up with customer demands. This can help in refinancing their mortgage at a lower rate or offer to target savings tips.
In addition to data partnerships, banks can also consider relying on open banking API infrastructure that makes data sharing seamless. Partners like these can be a good solution for resource-limited banks that want to follow the digital transformation in banking industry.
Technical talent is critical for successful digital transformation in the banking industry. Without proper technical talent, financial institutions can’t build the much-needed solutions.
Recruiting high-performing product managers, designers, and software engineers start with building an innovative environment. Financial institutions aren’t exactly perceived as tech giants, so most technical talents don’t wish to work for financial institutions. According to a report, 50% of financial institutions say that they have challenges in finding IT talent.
Fortunately, the culture is shifting, so banks need to offer enticing incentives for IT professionals. An ideal solution is to offer salaries that are up to par with top IT companies such as Google and Amazon. This may be the only way to recruit several tech workers, and possibly the most effective solution.
Once a bank gathers data and the people they need, it can probably identify the gaps that digital transformation can fill. For example, a bank’s data team may need to find a significant number of customers, the problem they’re facing, and how to fix them.
Addressing issues customers face can involve working with designers and engineers to build innovative solutions that can fix the pain problems. This is one of the biggest benefits of digital transformation in banking, as it focuses on improving customer experience.
Digital transformation in the banking industry isn’t a one-off process, it’s a continuous process. Ahead evolving customer expectations require having a product-focused mindset.
Here are some of the key factors financial institutions need to keep in mind:
Not every financial institution can shell out millions of dollars annually for seamless digital transformation. For most banks, the challenge is how to deploy limited resources in the most impactful way. To make the digital transformation successful, banks and financial institutions need to decide which solutions to build and which technologies to buy.
Let’s say, if an institution has an amazing onboarding flow, they should build upon it and make sure that they boost the process. They can do this by updating their existing technology or getting third-party technologies such as online document verification solutions or other solutions to enhance the process.
Digital Transformation In Banking Can Overcome Consumer Problems
The financial services industry is changing and is soon to be disrupted by external factors such as FinTech and cryptocurrency. Under these circumstances, history has shown that only a couple of players stand tall at the end. Others either go out of business, get acquired, or slowly go toward the decline. The great news is that the standing players come out stronger than ever.