BANKING
How Banks Are Digitally Transforming To Compete Against An Army Of Fintechs
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Farida Gibbs, CEO of technology consultancy Gibbs Hybrid, explores how banks are cashing in on the digital revolution
The growth of the Fintech industry has been fuelled by an increasing amount of investment. The UK Fintech industry is on track to generate a record amount of investment in 2017 of over£759 million.[1]The lines are increasingly being blurred between the competition banks are facing from companies such as Transfer Wise and Atom Bank alongside technology giants such as Google, Apple and Amazon who are entering the fast-moving payments sector.
This week,UK banks are kicking off their third quarter earnings, against a backdrop of an increasingly volatile and competitive landscape being disrupted by regulatory changes and heightened customer expectations.
The banking industry is being digitally disrupted at every level, from front-end services such as payments to broader transformation in systems enabled by digital technologies such as big data, automation, and the cloud. This shift is changing the banking model as we once knew it.
Pressure from regulators, competitors and customers are all pushing banks to digitise their processes and service offerings from all sides. Banks are having to keep pace with consumers who demand access to real-time, mobile-driven technology to manage their finances.
The stakes will be raised with the open banking initiative that comes into play in 2018, stipulating that banks won’t have the right to deny third parties access to data, when requested to share it by the customer. Their established base will be further threatened by fintech innovators, who can leverage customer data to deliver tailored solutions.
The battle for the customer is on – they value speed, convenience and access. Innovative solutions offered by digitally savvy competitors give them the ability to offer lower prices whilst also delivering intuitive and compelling customer experiences.
With more channels at their disposal to manage their finance and payments,customers will flock to the service which is faster and easier to access. Banks are provided with the opportunity to capitalize on their established customer base by optimising the experiences they offer customers.
The speed of innovation is rapid and banks cannot afford to waste time, money or resources. Unlike new entrants, the task of harnessing the power of digital for banks must start with back-office processes and systems.
Banks’ IT infrastructures are often decades old, hindering their ability to quickly adopt new consumer-facing technologies. Outdated systems lead to inefficient operations and leave banks trailing behind their technology savvy competition.
For example, with the proliferation of smart phone and tablet usage, customers increasingly expect real time updates about their finances, anytime and anywhere. Updating a bank’s IT ecosystem will lay the framework to create more digitally innovative front end products such as app services, chatbots and virtual assistants to engage with customers.
Banks are measuring up against their digital competitors by adopting lean business process models to modernise their existing IT infrastructure. These offer a more cost-effective solution which revamps their existing IT architecture, without halting operations to install entirely new processes.
In order to remain competitive, multinational institutions are raising their game by looking to partner with specialists who can help them embrace digital.According to Technavio’s market research, the global outsourcing market in the BFSI sector will grow at a CAGR of more than 6% between 2016-2020.[2]Investment has been driven by incumbent banks’desire to capitalise on new technologies such as automation, cloud and data analytics.
Effective strategies are being implemented by banks with the support of digital specialiststo reduce operating costs, increase operational efficiency, and mitigate risk. In an attempt to grapple with the challenges and opportunities of the digital age, these external partners allow banks to capitalise on their core strengths whilst simultaneously adapting to changing market pressures.
[1]http://www.cityam.com/274142/uk-fintech-startups-track-record-breaking-year-investment
[2]https://www.technavio.com/report/global-ito-and-bpo-outsourcing-bfsi-sector-market
Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.
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