Digital has become intrinsic to consumers’ lifestyles and is impacting all stakeholders across the banking value chain. To be successful over the next decade, financial institutions must embrace emerging technologies (AI, Blockchain, Cloud, and Machine Learning) and digital transformation.
In a recent panel discussion, experts from Oracle, Citi, Barclays, RIA Advisory, and Deloitte shared some key insights into how digital is reshaping financial services and how banks can leverage emerging technologies across the value chain to realize long-term business outcomes.
Here are the key takeaways from the session
Why Digital?
- Digital is the way of living now.
- It’s interwoven into everything we do. Today’s consumers are dependent on digital technologies for all aspects of their lives – right from networking, shopping, entertainment, communication, to work.
- Digital interactions have completely changed consumer expectations. Consumers expect their digital experiences to be highly personalized, instant, and highly contextual.
- Thanks to these changing habits and expectations, there is an increased interest in the financial services industry to overhaul digital infrastructure. Digital has now become an imperative and pervasive reality, fueled by emerging technologies, regulations, and market headwinds. Banks that are more digitally present attract new business.
- According to AppsFlyer, Digital banking apps in the US increased revenues by 17 percent in March.
- 38% of Western Europe and 58% of Central Europe banks expect to acquire more than 20% of new customers through digital channels.
7 Key Takeaways for Banks
- Today’s banks are extremely serious about digitization. There is increased adoption of the latest technologies such as Blockchain, Big Data analytics, Robotics, Tokenisation, VR/AR, Cloud to address the needs of modern digital consumers.
- Technology innovation is high on the agenda for the banks to remove the manual processes and fix transparency issues. However, they face challenges with respect to scalability, stability, performance, and roll out of platforms at a large scale. The experts on the panel suggested that banks should pick the most pressing items and find a solution to those. It is a good idea to introduce small but tangible and measurable changes before investing in large-scale projects. With tight R & D budgets, the focus should always be on delivering value.
- Revenues are dwindling from traditional sources. Banks are looking for innovative ways to increase their top line. Data could become oil from a banking perspective provided banks take care of governance, controls, regulations like GDPR. That apart, banks need to have the right infrastructure to analyze and create meaningful content. Open Banking presents as an alternative and viable revenue source (especially in Europe and the UK)
- API economy is here. Many banks are considering packaging their products and services with external parties.
- Banks are exploring innovative pricing models using the latest technologies, such as AI/ML. While the applications of these technologies are still at a nascent stage, there is certainly a lot of interest around adoption of AI/ML for price setting.
- There is a greater demand for knowing the price before it is executed – across all levels within the organization as well as customer portals as customers are requesting the price to be shown upfront. SWIFT has also announced its plans to implement changes such that all banks are required to provide pricing before payment is executed. Legacy technologies at banks could pose a massive barrier to adapt to these changes because, with legacy technologies, pricing is often agreed for volume.
- Banks realize the importance of customer stickiness and generating longer-term value from existing relationships. While proposing a pricing model to a customer, the focus is still on discounts rather than value. The reasons could be that discounts are easy to establish, easy to execute, and are tangible. By providing the right tools and right information to the relationship managers at the right time, banks can make life easier for them by enabling segment-based pricing, streamlined process flow, and automated implementation.
Banks are becoming more like software companies with an increased focus on new technology – they are driven by customer demands and faster go to market. Microservices and event-driven architecture are becoming the norm.
With digital being at the heart of several business operations – especially after COVID – banks are adopting the latest technologies to be innovative and nimble in their services to their customers.
