Digital trends that financial services need to catch up post Covid-19
The current state of digital banking transformation is slow because of the ongoing fight against the COVID-19 situation. But the future of banking is never going to be the same again. Being ‘Digital’ is no more an option.
It is evident that pandemic has changed the lives of all and the way we approach the business services. People have accustomed to the new normal.
Banks & Credit Unions are forced to accelerate their digital banking engagement with their customer more like the way the tech giants approach – Amazon, Netflix & Zoom.
Moreover, some big tech giants like Apple, Facebook, Amazon & Google have already shown interest in entering the financial services space. Though there is a slight uncertainty of tech giants entering this space due to the bill proposed – “Keep Big Tech Out of Finance Act.”
That being said, it could still change any moment considering the current situation and the need to be digital-savvy.
Let’s look at the 5 digital banking transformation trends for the new normal & post COVID-19 era.
1. Data – The foundation for the future of banking
The Covid-19 situation has helped the banking industry to understand the importance of data in providing the right services and products tailored to their customer needs.
For instance, this lockdown, helped people find comfort in Amazon for buying products, receive groceries from Instacart, or ordering food from Grubhub. Customers feel more comfortable sharing their data to save time & energy.
Financial institutions have abundant data on customer attributes. And, today, apart from the traditional data, banks & credit unions can leverage external third-party data like – lifestyle & psychographic data, social media data, brand loyalties, geo-locations, and more.
When these data are powered with advanced analytics, it can help provide customers with banking propensity patterns and seasonality attributes, which in turn helps the bottom line of banks and credit unions.
2. Adoption of next-generation technologies
Many fintech players are entering the market for today’s tech-savvy customers and have challenged the status quo of banks & credit unions.
Banks & credit unions are forced to catch-up with the new-gen fintech companies in delivering banking services and products. Post the Covid-19 pandemic, the competition to be a fully digital bank will be the top priority for all financial institutions.
The legacy technology infrastructure will be replaced with next-generation technologies in delivering agile & scalable solutions. For instance, technologies like AI or Machine learning, cloud platforms, Internet of Things (IoT), Open-banking platform with API, and more.
This is just a tip of the iceberg, and it would further need banks and credit unions to deliver new features in an agile way continuously.
3. Embrace Platform Model
The platform model is a plug and play functionality that is already a full spread success in many industries. A platform model creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers.
Platform business model helps in creating large, scalable networks of users and resources that can be accessed on-demand.
Some of the big giants who embraced platform models include Amazon, Airbnb, Microsoft, Apple, and others.
Few benefits of a platform model are
- Agility & Scalability
- Self-service model with a low operating cost
- Reduced capital expenditure
- Low skill requirements
- Secure ecosystem with interdependent players
Though it does have obstacles in finding the right platform which adapts to the security concerns & legacy systems, the benefits of platform models are significant for the banking and financial services industry.
4. Prioritization of digital customer experience
The lockdown has impacted the way we define customer experience. There is a massive transformational shift from physical servicing to digital servicing and the mode of customer engagement.
Customers spend more time online now than the traditional branches for their daily needs. Banks and credit unions are forced to sell online.
With that being said, banks and credit unions are required to deliver frictionless customer experience. The UI should deliver easy, intuitive, and consistent access and usability in everything customers do.
Touching base on the aforementioned ‘data’, it is crucial to understand how customer data can help improve the customer experience. For example,
- Customer data can help deliver the personalization needed for superior customer experience and value.
- Technology, like machine learning, can help discover patterns that enable future predictions and ideal product offers.
5. Partnering with the right Fintechs
With ‘Digital’ being no more an option, banks and credit unions have started looking out for potential strategic partners for offering their products on the cloud and keeping customers in business.
Recently, HSBC, along with the fintech firm Amount, launched a digital lending platform to expand its lending portfolio.
Marcos Meneguzzi, head of cards and unsecured lending for retail banking and wealth management at HSBC USA, said, “Fintechs were quicker to recognize the consumer lending niche and improve the customer experience with pre-approvals and quicker funding of the loans.”
Having passed two quarters in 2020, it is evident that there is a shift in the industry, customer behavior, and regulations. The most significant shift is the customer expectations from the banking providers, and that demands scaling of digital and fintech partnerships.