How to Create a Future-Proof Digital Banking

How to Create a Future-Proof Digital Banking Services
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Do you recollect the time you first logged in your mobile banking app, transferred money, or paid a bill online? No more standing in line at brick-and-mortar branches, paper forms, and cash payments. Glorious days, right?

Since then, the digitalization in the banking industry has continued to move into top gear. Banks and other financial service providers are regularly pushing up their IT budgets to stay afloat. Over the coming decade, we expect to observe even more changes and not only due to the technological advance but a combination of factors — economic, socio-demographic, environmental, and regulatory. Needless to say that the coronavirus crisis is one of the latest drivers since it not solely transforms how we interact with our finances but also how we work, socialize, and live in general.

To stay competitive and thrive, banks are encouraged to future-proof themselves by gaining a lasting competitive edge that goes beyond merely embracing the most advanced technologies or business models. The stakes are high, but the really intriguing thing is that nobody provides a strategy or shares insights on how to achieve that. Over the years of working closely with reputed banks and fintech firms and analyzing the industry, we’ve identified certain imperatives that make companies better positioned for the digital future, even under uncertainty. So let’s look under the hood of future banking services and digitalization as such.

How Far We’ve Got in the Digitalization of Banking Services

Individuals prefer to shop online or using mobile devices, make decisions based on app or website design, Google rankings, online customer reviews, ads, and social media recommendations. Consequently, today it’s crucial for businesses to reinvent themselves and adapt like never before. The financial services industry is becoming more elaborate with the rise of platformification and mobile, excessive demand for personalized products, and real-time interactions, along with the introduction of new regulations.

Although there are companies that go beyond mobile online banking and capitalize on the digital revolution in the banking sector, their numbers, in view of the entire industry, are still too small. When it comes to digital transformation maturity:

  • Twelve percent of financial institutions see themselves as ‘leaders’;
  • Thirty-four percent as ‘fast followers’;
  • Thirty percent as ‘mainstream players’;
  • Twenty-five percent as ‘laggards’.

The same research proves that digital banking adoption progress is still slow since less than fifty percent of companies think that they’re ready for customer anticipations, competitive threats, or advancements in technology. The majority of companies haven’t implemented cutting-edge technologies — namely IoT, AI, RPA, or design thinking — into their operations so far. This state of affairs is primarily a result of the restrained budget, IT infrastructure, talent availability, and legacy culture.

So what do these digital banking stats mean? — The digitalization efforts are still in the infancy stage. Most banks revolve around delivery channels and believe that transformation highly weights towards IT function, though this notion is not entirely true. It requires a broad organizational involvement and changes in every component of the corporate structure, including but not limited to sales, marketing, and operations, to make it possible for a bank to compete in the future successfully.

Digital Transformation in Banking: Where Is It All Going?

Despite the aforecited fact that digital transformation is still in its infancy across most organizations, the banking sector is persistently trying to respond to ever-growing customer expectations and hectic business environment. The top three strategic priorities among financial institutions remain unchanged for the last two years, at least, and for 2020, they are: enhance digital customer experiences (84%), improve data analytics possibilities (42%), and cut down operating costs (32%). Thereby, the digital banking market is expected to hit almost $14 billion in five years. Current digital banking trends are projected to cause a general industry shift, so let’s analyze where things are going.

  • Full integration with daily life. Today people get used to mass-personalization, similar to the ones from Spotify or Netflix, and they expect the same level of service from financial institutions. In the coming years, banks can decide how to bill themselves, as they can act as marketplaces and connect customers with the best vendors, or create their own products to address customer-specific needs. Relevance and proactivity may help financial institutions to embed their services into customer life and maximize their value.
  • Intuitive and seamless services. The underlying principle of digital banking is to make a customer’s life as coherent as possible, all while going unnoticed. Remember your shift from paying a taxi driver manually to having Uber do all that for you automatically. Subsequently, the collaboration with retails and initiation of payments post factum is one of the possible scenarios that we may see in the foreseeable future.
  • Context and proactivity. As banks enhance their understanding of the collected data, their capability to adapt and act by that information also grows. The use of artificial intelligence, robotic process automation, blockchain, and the internet of things, along with the Open Banking and PSD2 initiatives, will provide a better insight into buying patterns and so empower banks to offer more relevant services and personalized advice. Though we can already witness some progress in this field, the future technology in the banking industry may also guide individuals helping them to manage their finances more efficiently and wisely.

Of course, there are more scenarios of the impact of digitalization on the banking sector since banks will need to focus on policies and procedures to ensure fraud prevention, risk mitigation, protection against data breaches, and process automation to eliminate human error. All these processes are at the top of mind, as privacy and security of customers’ data is something that individuals expect by default.

Users of Future Digital Banking Services: What Are Their Expectations?

Needless to say that individuals will still need to effect payments, save, invest, and borrow in the future. However, financial literacy, technological advancements, and customers’ savviness will fuel intense fighting between challengers and incumbents craving to become their agents of choice. Customers wish for better awareness and control, so financial institutions will need to adapt.

Let’s stick to the subject. How do people see the future banking technology? — The actual breakdown is as follows:

  • Eighteen percent predict that the future rests on online-only banks;
  • Forty-nine percent expect to see far fewer branches;
  • Twenty-four percent believe that there will be slightly fewer branches;
  • Nine percent vote for banks with more branches and FDIC-insured tech firms.

Meanwhile, when it comes to concrete services and digital banking solutions that might be offered by banks in the future, people would be interested in:

  • More intelligent identity and credit protection — 74 percent;
  • Data security for digital assets — 59 percent;
  • Automated financial guidance — 47 percent.

Given that over sixty percent of individuals globally believe that the fraud volume increased in 2019, and more than fifty percent have noticed a rise in fraud value, we may conclude that financial institutions should introduce additional security measures and data protection services to promote customer trust and so expand their market share.

In general, customer needs regarding the digitalization in the banking sector can be encapsulated into three core elements:

  • Secure: protect my identity, information, and funds;
  • Smart: utilize all the collected data to know me better and so help me meet targets and master my finances;
  • Simple: help me clear up the confusion and streamline my financial life.

These are the three sustained demands of today that will continue in the foreseeable future. At the same time, for banks, the ability to adapt will serve as a foundation for constant innovation and the future-proof bank. Our experience shows that the required agility should come from within, and consequently, financial institutions should start implementing their digital banking strategy with future-proofing the workforce.

Forward-Thinking Workforce as the Leverage of the Digital Banking

It’s no surprise that fostering a more future-ready and flexible workforce is one of the most urgent issues for banks and other financial organizations. So far, many people are afraid of technological advancements as they believe that the latter will replace humans and take up workplaces. On the other hand, optimistic observers state that innovations will free humans from routine, unleash new opportunities, and generate employment.

At Dashdevs, we not only assist with financial software development or provide fintech consulting services but also take on the integration of recent advancements into the business; hence we can assess the situation first-hand. Though anyone can hardly be assured of where we’ll end up, we tend to stand up for the optimists. And here’s why:

  • Banking is a service-based business, and in this case, these are the employees who drive the real value. When they are trained and with the right set of skills, they tell the difference between pacesetters and laggards. Augmenting them with emerging technologies and tools may turn into an enduring competitive edge;
  • Automation is mostly associated with cost reduction, but it’s not the case where it can produce the best value. Forward-thinking firms embrace RPA, AI, chatbots, ML, and other technologies to automate particular duties and thus shape new opportunities. The main goal is to free up funds and invest them in employees’ re-skilling to let them contribute to more mission-critical tasks, better understand consumers, and improve the quality of service.

So, how can business owners prepare employees for the digital banking future trends? How will banking look like in the future? Let us share three ways of how management and HR teams can help workers qualify for the coming changes.

#1 Promote skills mapping

Being realistic about the company’s potential and predicting future needs regarding new skills is critical. Management teams should be able to detect the gaps and hire or re-skill talent promptly to satisfy business demand. Competency or skills mapping is a useful approach for workforce skill management as it allows companies to keep up with the quick technological evolution and so continue to be relevant.

It’s a common practice for managers to assess workers’ current competencies, look for new roles, and discover what training needed to help them advance. Moreover, managers may analyze the market and identify developing skill sets that will be popular soon and suggest courses to grow proficiency.

#2 Advocate continuous learning

Too often, on-the-job training is only included in the employee onboarding program. Although considering the pace of future trends of mobile banking, ongoing corporate training is needed to help workers keep up with technological progress and bolster business initiatives. Consequently, knowledge sharing should be brought to the core of talent management. Workshops, webinars, meetups, and panel discussions are just a few methods to introduce lifelong learning to your teams.

#3 Stay agile and open-minded

Users’ expectations for learning experiences are rather high. Learning and development (L&D) teams should stay open for new options and methods when it comes to formats, skill sets, and technologies. Though L&D facilitators remain the key stakeholders, you can engage content curators, data analysts, or learning experience designers. The integration of modern technologies, like robotics and AI, can help with personalization and so make learning paths more efficient and captivating.

Four Tactics to Future-Proof Your Digital Banking and Prepare for the Global Development in Banking Technology

As we can see, choosing digital banking applications now, people don’t compare various banks anymore, they draw a parallel between experiences. Check a balance, update an account, make a payment, or pay bills — all these and other functions are available on their smartphone. They are quick, easy, and seamless.

To survive the competition and stay relevant, financial institutions should have a valid strategy in place. Based on our experience in mobile banking development, business stakeholders should implement the following tactics:

#1 Omnichannel experience

In most cases, financial organizations want to have it all and immediately. The typical strategy with detached channels — like brick-and-mortar branches, web, and online — is neither effective nor employee- and customer-friendly. Each particular line requires its own set of workflows, designs, content elements, and other supporting means, all while presupposing that the same functionality is developed again and again. Engineering teams redo the job a good many times; meanwhile, the final result is allocated to multiple channels that aren’t interconnected with each other.

Rather than investing in digital features for every business line separately, it makes sense to create all the elements once and distribute them through a centralized hub. What’s required is a digital banking platform to manage customer interactions across all touchpoints and thus ensure consistent and high-quality service.

#2 Modular digital banking architecture

The Amazons, Facebooks, and Ubers of this world release smart new features regularly and with a minimum expenditure of time and money. Despite being large, they remain flexible enough to not only meet but also surpass customer expectations with no significant implementations, tremendous changes, or heavy expenses. They deliver new products and scale them up and down as necessary.

With microservices, financial organizations can innovate in a similar manner — quickly and seamlessly. Such an approach to digital banking development allows firms to not only live up to customer expectations but also to anticipate and create them together with the user.

#3 Leverage Open Banking

Once the PSD2 and Open Banking initiatives have heaved in sight, banks faced the risk of being disintermediated. Open APIs provide other parties, including market disruptors and (in)direct competitors, with access to banks’ large data volumes. But we shouldn’t forget that customer expectations have also changed, and those institutions that fail to capitalize on new initiatives will end up disintermediated anyway.

Current regulations require banks to make their APIs available to other companies, but banks, in return, may also take advantage of the situation. Turning into API users, financial institutions can leverage third-party capabilities, expand and improve their offerings, and thus create additional value for their end-users. Being directly involved in the future of Open Banking, financial leaders may gain the advantages that, in result, will outweigh the risks.

#4 Go the extra mile for personalization

Continuous data harvesting from multiple sources and further analysis to obtain actionable insights — this strategy is already used by pacesetters in e-commerce and entertainment industries. Big Data is the core that powers all personalization efforts, and banks should be well-versed in reading not only their own data but that of other companies.

The evolution of personalization promotes the need for new competencies to collect and structurize massive amounts of data and translate them into meaningful insights. Effective customer tracking, segmentation, and targeting will be a must, so financial organizations should invest heavily in data scientists and smart technologies to turn figures into business and client value.

Conclusion

Future-proof banking is not about banking as we know it, but it’s about helping individuals satisfy their demands and desires — safely, seamlessly, and quickly. The future of information technology in the banking sector steadily goes beyond ‘projects’ to company-wide initiatives and involves culture, product development models, and business practices.

For banks, it’s of vital importance to be digital not only in channels but at the very core. Modular architecture, a good understanding of data, full cooperation in the ecosystem, and agile techniques — all these components will help financial firms to innovate faster, deliver more quality products, make end-users happier, and so confidently morph into ‘banks of tomorrow’. Start your transformation today as any delay may result in being compelled to act later but at more risks and higher costs.

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