Let’s admit it - banking, as a process, is changing and with that - all the legacy software in use must change or adapt to the new realities.
In a series of articles, we will take a closer look at the changes, shaping the face of the banking industry - one of the key areas the Nemesis platform is implemented in.
The game has changed
Tediously queuing in the bank. Impatiently waiting for the consecutive transaction to be done for you. Carefully managing your time to fix the working hours of The Financial Institution. Forget about that. The game has changed. Want your bank to stay in? Build your strategy correctly!
The existence of legacy institutions is put at stake. Challenges come from outside - by the emerging service providers - and from inside - by the bank’s adaptivity to changes. The strategy a bank enhances defines whether it will fit the newly-shaped marketplace or will drop out.
While many of the technologies in fintech focus on making previously tedious tasks simple for customers, it is the trends behind the scenes that drive the transformation. These trends will have the greatest impact on shaping the future of the banking sector.
The article looks at a selection of emerging trends, outlined in the KPMG’s 12-page white paper, and the role they will play in solving problems for the banks of tomorrow.
7 Factors that shape your strategy for creating a digitally-enabled bank
1. The Generation Change
We are living in times of Millennials. Still. Think about the outburst of technology, of digitization, of omnichannel expectations, the need of speed. In one research project after another, Millennials have consistently demonstrated dramatically different buying patterns in comparison to previous generations. Millennials set the standards in digital channels, with their preferences largely adopted by everyone else. To get along with these standards, banks need to provide omnichannel experience, to perform customer outreach efforts, to conduct focus group sessions, and to assess experiences through customer journey maps. Put it short - your customers’ expectations shape the future of your business. Either meet them, or create them by being a leader in your industry or get out of the game.
2.The Competitors change
Expectations and requirements from the end user, result in higher competition and newly introduced models for customer interaction. It is not the amount, but the type of new competitors that threaten the industry’s established players. Just consider the non-traditional banking rivals, such as PayPal, or Amazon, or Walmart, or Venmo, or Alibaba. Zoom it out to include in the game the hundreds of other lesser-known companies out there, offering expanded connectivity and customer insights through new technologies, data and advanced analytics.
Once introduced to such vast possibilities, consumers raise their expectations towards banks’ services. Here comes the task - how to turn your legacy software into fast-adaptable, omnichannel, cloud-native solution?
3. Data Collection
Get to know your customer if you want to be able to direct their behavior. The key to understanding a buyer’s intentions is the correct interpretation of the data collected. Data, on the other hand, does not always come structured and organized. Unstructured data refers to information that either does not have a pre-defined data model or is not organized in a pre-defined manner. Unstructured information is typically text-heavy, often containing a mix of dates, numbers and facts. It is the way the bank institution handles unstructured data that may result in its competitive advantage. Some ways collected unstructured data may be used:
- For defining customers’ credit scores – for example - more accurate credit scoring, improvement of reserve and loss forecast accuracy, prediction and proactive management of credit events.
- For improved customers’ segmentation - a bank may accurately predict customer behavior and their buying patterns.
- For lead generation - your institution may predict and offer products consistent with your customers’ life events (e.g. birthday, anniversary), asset ownership, and other buying behaviors.
4. Artificial intelligence
If you may automate a process, just do it! Second - if something is automatically done, why do you need people for the execution? Why not just go for bots? Another factor that shapes the success of a bank institution is the minimization of costs where possible (for employee compensations, for example). Once money saved, it can be invested in the latest technologies’ acquirement. That is why the entire industry is looking at automated algorithms, artificial intelligence and robotics. According to KPMG, using bots to automate processes can eliminate three to five full-time equivalent employees.
5. Digitally provided faster payments
Mobile wallets and P2P payments are already the norm. Once everything is on mouse-click distance, it is speed only that matters. To have a chance in the digital competition, where momentary payments are guaranteed, a bank needs to start speeding up the services provided.
6. The must of security
Consider the whole picture - your lifetime savings, your future intentions, you momentary decisions - everything depends on the level of security, provided by the vendor of your choice. That is why, in the digital are, cyber security is not a matter of discussion. And has never been. Cyber security is table stakes. Financial institutions that design their digital strategy with an emphasis on security on mind will not only be safer. They will also be better equipped to handle innovative technologies to meet business objectives.
7. The speed of changes
According to the latest researches the KPMG paper is based on, it will take consumers 7 to 10 years to fully adopt digital banking. The problem is: we are already four years into that adoption cycle, leaving financial institutions as few as 3 to 6 years to prepare. Keep in mind it is not an overnight alteration we are talking about here. It is a process, where your current legacy software needs to adapt to the changes in the market. A long-term investment that is worth it - the price: your current and future customers are at stake.
Where is your bank in the process of digital banking adoption? Where would you want it to be tomorrow? Let the Nemesis platform empower your employees with real-time information and insights so you get to know your customers better and deliver unique customer experience.