Digital Banking and transformation has been talked about in lengths over the past few years. However due to different socio-economic issues, digital transformation has been kept at bay in a few countries. However there has been a rise in developing countries across the world in terms of improving digital banking while banks in developed countries are trying to recreate user engaging experiences by modernizing their legacy architectures. Listen on as our host Ashish Cherian discusses on digital banking goals for 2019 and beyond with Alex Jimenez, a top influencer in the banking space and Vice President at Zions Bancorporation.
Ashish Cherian: Digital Banking, in most banks has been in full flow, with banks trying to invigorate new innovations and schemes to dominate the banking spectrum. However there are certain aspects of digital banking which banks struggle from. There are several reasons for this – It could be due to the rise in online fraud that sows scepticism in the minds of bankers. Also there are the banks that built their legacy systems, years ago and aren’t sure about how to go about legacy modernization of their digital banking structure, or find it too costly. They don’t know on how to stack current technology on top of their legacy build and software. Either way, these are major challenges that need to be addressed, else the gap between banks across regions will keep widening. According to different analysis and stats recorded by experts, certain countries in Latin America are behind others in the digital banking ranking. For example, there are some countries where there are 50 million internet users and over a 100 million mobile phone users. However, only 11.5 million of the internet users have a bank account. Similarly there are countries which have just started their digital banking journey in the 2000s after its fight against war and socio-economic transformations. While they have made massive changes and improvements, there still appears to be a couple of pieces which are missing from the puzzle. There are also advanced countries which started their digital banking transformation years ago, however struggle with adopting the new age trends and technology stacks and building a customer base with extreme personalization that the customer desires. Customer demands are growing rapidly and it is extremely important that banks understand the customer behaviour and implement and use technology with a customer first approach. What do you think could be some of the innovations and transformations that these countries and several others should start bringing about to improve the digital banking ranking in their country? What do you are some attributes that should be prioritized over other innovations?
Alex Jimenez: Not having an infrastructure like how you see in Europe or in the US is not a hindrance. Take the example of Kenya and specifically in PESA who started digital transformation 10 years ago and who leapfrogged over how we see adoption of mobile payments in the West. Here in the US, there are struggles on how one can make real time payments when many parts of the world have already done that. It requires a focus in the industry and the government has to help out organisations. The government of Mexico has tried to bring in more innovation into the banking system and they have also tried bringing start-ups up and running. They have also made regulatory changes which help a new company to test out a new functionality. The fintech laws that Mexico passed last year are some examples of governments trying to help to change the banking environment. Another example is that of Columbia, where they are the 3rd largest fintech market. The reason for that is that the major banks in the country have built a market where there is more adoption. Bank of Columbia has played a major role by bringing in hackathons and accelerators and they have partnered with fintechs to move quicker in the market. You also see companies coming from the US and Europe who are starting to invest in the Latin American market, such that there is a competition among the Latin American countries. You seem similar instances in Africa and Asia. The future of banking and inclusion in financial services in the developing world is wide open and in some cases, it will pass what we are seeing in US and Europe.
Ashish Cherian: When you consider the payments sector of banks. Digital Banking has made payments and transactions much easier and that has been the case for quite some time now. However in the recent times, there has been a strong non-financial payment base growing, which is quite popular. Major Corporations like Facebook, Google, Amazon and many more are venturing into the payments industry. Banks have a big reason to worry. This is because these non-financial institutions spent the past few years growing their customer base with their traditional, main operative services. However with Google Pay, Amazon Pay and Facebook planning to introduce digital currencies, bankers have a lot to worry about. Their customer base is slowly eroding away and this is a major cause of concern. Alex, what do you think banks can do to counter this challenge and what do you think banks should focus on to retain their customer base?
Alex Jimenez: Banks have been a bit awful in providing digital services and hence they have fallen a bit in the domain. In the US, banks rely on vendors who focus on tech size and not customer experience. Banks need to take ownership in the customer experience. It is easier for Tier-1 banks to focus on customer experience when compared to small mid-size banks. Even if it’s a community bank, however it is important to look at the customer experience and pushing the vendors to provide top services. The saving grace for banks is that there are a lot of fintech companies and start-ups who are looking to partner with banks. If you look 10 years back, fintechs were looking at taking the business from business. However in the US and Europe, it didn’t pan out as expected. Banks need to start focussing on the customer experience, more than what they did in the past. If you take Venmo as an example, in reality, it is not a revolutionary process, but they made their user experience so easy, and better than their parent company PayPal, and hence have taken a large part of transactions from banks. When banks finally decided to do something, it took them a couple of years to respond. Banks cannot continue thinking that they can all be fast followers. It is no longer an environment where you can be a fast follower. You can either be a leader or a follower. One of the interesting things when looking back at the successes that we have had, is how we have approached the innovations that we brought. Having a group of smart people to come up with the innovation was really people. We worked with our compliance and audit people to make the bank take the appropriate risk.
Ashish Cherian: Customers are not looking at real time scenarios. They are looking at futuristic problems. Banks need to put the customer at the centre and move their operations according to the customer and for that they need to be data enabled and they need to understand the customer behaviour much better. What do you think banks should focus on in 2019, with the emergence of fintech companies as well as non-financial entities in the financial market? What do you think is the priority for banks?
Alex Jimenez: Banks need to focus on the technical mess within the organisation. We have banks in the US that have core systems that are 30 years old and difficult to update, ones which have several integration issues. This year will be about that. One specific issue is cyber security. Security should always be of the highest priority even ahead of customer experience.
Ashish Cherian: In continuation with the first topic that we spoke about, what would be your advice for banks to focus on in delivering seamless processes? Also what do you think is something that customers could look forward to from banks in the next one or two years?
Alex Jimenez: It depends. If it plays out as expected, there will more choice for customers to do different kinds of business with banks. Each customer will define their own experience and need through the concept of open banking. This is case of what could happen, but it can’t be said with complete assurance.
It will be very exciting to see where the global bank heads into 2019 and beyond. There is immense scope for banks to improve and provide digital services in the form of better security, easier and better usability, in-tune and speedy experiences and data enabled-customer intelligence program to provide customer services based on customer behaviour. As Alex said, customer experiences are only going to get better and the already competitive banking space is only going to become more challenging for the different banks and financial entities.
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