The banking business model of the past is clearly not the business model of the future. We are now living in the era of Customer’s choice. Technology has transformed almost all industries such as entertainment, accommodation, music, transportation etc.

In the banking industry, according to Future Branches Consumer Study, when given a choice, 42% of customers prefer digital banking experiences via mobile banking experience over desktop or in-branch experiences.

Furthermore, the disruption caused by the pandemic in 2020 made banking executives realize greater investment and faster transformation is required to stay relevant. According to a study of financial institution by Cornerstone Advisors,  a little more than a quarter of banks will launch their transformation strategy soon . Among credit unions, just 15% will not have launched a digital transformation strategy by this year.

Subsequently, a global study on the future of banking by Economist Intelligence Unit (EIU), indicates that 84% of Business executives from banks believe that Cloud technology will play a transformative role in banking. And 47% of financial service companies considering third party collaboration, wanted to collaborate with a fintech firm, claims a survey by PwC.

Let’s understand why it’s important for banks to realign their operational models.

As competition from eCommerce, FinTech, and Social Media giants rises, customers are gaining trust in non-traditional providers. With high engagement rates from technology companies especially with millennials and the Gen Z, most of the banking customers today prefer digital interactions to branch visits.

Secondly, customers expect hassle-free user experience as they do not want to spend a lot of time banking than they must. Therefore, banks should make it easy, frictionless, and pleasant. The UX should deliver easy, intuitive, and consistent access and usability in everything customers do. The additional time spent by a customer should be utilized in value addition and deepening the relationship.

Data has become a powerhouse for banks. Through intelligent insights, it can help deliver personalized, superior customer experiences and value additions, thereby improving customer journeys. The use of machine learning here can empower banks to discover customer patterns that enable predictions and ideal product offers.

With near-constant access and the expansive reach of digital banking through mobile apps and third-party applications, it makes digital banking ideal for helping customers and influencing their financial decisions. This also allows banks to serve the unbanked and underbanked population easily.

How smaller banking segments can prepare for the future

  1. APIs (Application Programming Interfaces) :- Growth of a bank will rely on its ability to build and participate in digital ecosystems. APIs let bank products communicate with each other or with third party products in real time and in a secure way. For instance, it enables Core banking systems to receive money transfer requests from customer mobile wallets, card systems, 3rd party financial service providers, etc.
  1. Real Time payments :- With the growth of digital transforming people’s expectations on payments, real-time payments technology has driven global consumer demand. Here money is transferred electronically between banks and banking systems and processed within a matter of seconds as opposed to credit or debit cards, digital wallets or P2P apps that can take up to 72 hours to clear and settle. Real-time payments so far have been around domestic retail payments and are expected to evolve into the corporate, B2B segment and cross-border space. Therefore, it requires regulation and a gross settlement process to address the associated risk and 365X24X7 payment processing capabilities.
  1. Cloud Banking :- Some banks are held back by legacy platforms and technology for delivering better experiences to customers. It is important to have the backing of strong cloud banking service providers that can free you from expensive and restrictive legacy systems. With SaaS cloud banking platforms like Temenos Cloud, Mambu or Thought Machine, it enables banks to build and scale innovations quickly.
  1. Advanced Self-service capabilities :- Self-service digital banking solutions provide a low-effort, fast, and pleasant user-experience via the device of their choice. Cutting-edge technologies are used in designing such processes such as Real-time ID verification, Selfie capture and verification, Device verification, Omnichannel capability, eSignatures, Real-time credit bureau checks, etc.
  1. Process Automation and Analytics :- Legacy system modernization and process optimization is an essential part of a bank’s digital transformation. And the inclusion of automation in customer onboarding and KYC, mortgage lending, etc. can help enhance banking experiences through these services. In addition, banks can also leverage data to provide personalized financial services and insights. This can be done by analyzing a range of data sources that include payments transactions, usage of digital banking channels and demographic data.

An Innovative plug and play solution to put you in the forefront

Starting a new digital bank or digitizing bank services is a demanding task.

Bank in a Digital Box (BiDB) solution helps embrace modernization without any disruptions. It helps you build a digital bank or digitalize your services and operations from scratch.

It is a one-stop digital banking solution, which saves you the hassle of having to source multiple vendors for development and integration.

BiDB follows a Minimum Viable Product (MVP) and add-on approach to accelerate business efficiency, meet compliance needs, and acquire new customers. It offers fast configurable ready to deploy solutions at reduced entry/operating costs with the ability to increase operational speed, scalability, and resilience.

It allows smaller banking segments to focus on their vision and strategy and look at digital transformation as an opportunity over being a need. The acceleration into digital transformation will help enhance their services and meet the modern customer’s demands.

Recommended Read: Allow your Customers to Design Their Digital Banking Experiences

To Summarize

It’s now more critical than ever for financial institutions to make a cultural shift from the C-level down.

As new trends emerge every day in the financial services landscape, small banks must look to deliver the best customer experience possible with the power of modern and digital technologies, thereby empowering customers as well as enabling seamless operations. This ultimately helps them remain flexible to change and keep themselves relevant to the pulse of the industry.

With superior customer experience, a vital element for the success of any business is digital transformation. The time is ripe to embark on your Digital journey!