How the Banking Industry Can Avoid Being Disrupted in 2020
In financial services, digital disruptors are coming, impacting traditional banks and credit unions as well as consumers. With the promise of personalized solutions and improved experiences delivered on digital channels, the potential for major changes to the banking ecosystem appears imminent. Despite this, few organizations are prepared for these changes based on research done this year by the Digital Banking Report.
Not only are banking organizations faced with legacy bank office technology, but they are also impacted by outdated regulations, disparate data sources, internal silos, increasing external cyberthreats and a culture that has not changed in decades. To embrace the digital transformation necessary for the future, organizations must rethink how they use technology, people and processes to dramatically change business models and innovate for the future. This transformation must be led by the top of the organization, leveraging cross-departmental collaboration.
Done well, this transformation will have the opportunity to increase revenues and decrease costs, positively impacting the customer experience and providing differentiation in the marketplace. Delaying this transformation will result in an organization that falls further behind what consumers expect, increasing the cost of playing catch up.
Digital banking transformation can be viewed from many perspectives. This can include changes in competition, the pace of innovation, the deployment of technology, new ways of distribution and the introduction of new services. All of these changes have been driven by the consumer, who uses their digital engagement in other industries as the barometer to determine if their bank or credit union is making their daily life easier.
Payments in banking have been completely disrupted by a wide variety of fintech and big tech organizations that found an opportunity to make P2P payments more seamless through digital technology and innovative design. The same is beginning to occur in lending and other areas of banking that had been the foundation for the banking industry since the beginning. In response, many financial institutions, fearful of being rendered irrelevant by more tech-savvy fintech and big tech brands, are experimenting with new digital options.
Traditional financial institutions are also working on delivering more personalized solutions through the use of data and advanced analytics. Previously only used in the determination of risk, artificial intelligence (AI) is now increasingly being used to provide improved advice and recommendations based on transaction and behavioral data.
The fintech firms that were once considered as threats are now also being viewed as potential collaboration partners for financial institutions’ transformation strategies. As opposed to believing all innovation must be built internally, many financial organizations are finding solutions that have been built on the outside that can be used to enhance a current solution or represent a brand new solution as part of an open banking platform.
With so much going on – so fast – how can a traditional bank or credit union keep pace with the technology, innovation, channel shift, regulations and opportunities presented by digital transformation? And where should organizations start to ensure they don’t fall further behind the very agile competition? It is more than just writing a check for new technology or financing an innovation lab.
