The banking industry is changing swiftly due to the growing penetration of new digital technologies, rapidly changing and rising consumer expectations, and fierce market competition. This is a crucial time for financial institutions, and they must take proper action to ensure their long-term survival.
Though banks have been driving profitability to varying degrees through cost-cutting and by taking proper efficiency measures, future growth demands much more. The banking industry players need to better understand the transformative forces that are impacting the growth of the industry. Banks must take risks, respond to changes proactively, and disrupt the status quo. They can only excel and move ahead of their competitors by staying abreast of the rapidly shifting digital transformation trends in the banking sector.
Here are the top 5 digital transformation trends that every bank must know:
- Big Tech, Main Threat– The growing willingness of customers to buy financial products from big techs is likely to emerge as a big threat to the growth of the existing and traditional banks. The established levels of trust in traditional banks have been the main advantage to these banking firms, however, with digitization consumers are increasingly getting comfortable with big tech players. Leading tech firms are posing a growing disintermediation threat to existing banks.
- Open Banking- A Mine of Opportunities– Open banking is enabling banks to expand beyond conventional financial services and cater to the unbanked seamlessly. As per a recent research done by McKinsey, 44% of US bank executives expect non-financial products to represent 10% or more of organizational profits. To attract the growing pool of younger customers, several leading banks are stepping into additional ecosystems, by leveraging platforms-as-a-service.
- Digital Banking Taking Centre Stage- Digital banking has become the most preferred engagement channel for virtually every consumer segment. Consumers of all age groups are seeking seamless ways to make a bank transaction easily, check their financial balance, and get real-time recommendations. Digital experiences promise multichannel engagement and are increasingly challenging banks to provide smooth end-to-end digital capabilities. Customers are no longer interested in visiting a bank branch for digital account opening or filing a loan application. In such a scenario, banks must gear up to deliver a differentiated customer experience.
- Yesterday’s Banking Systems Can Paralyze Tomorrow’s Banks– New and advanced back-office platforms can help banks in saving a spot for them in the fiercely competitive marketplace. Banking platforms such as a digital banking platform, digital wallets or core banking platform can help banks cut costs and enhance customer experiences exponentially. As per McKinsey’s research, banks leveraging leading-edge technologies stand to make significant potential gains.
- Improved Cyber-security- A Key Prerequisite– To stay ahead of the competition in the banking landscape, banks must align their internal and external risk mitigation with the realities of the marketplace. Banks can augment their demand by acting now and preparing well for the digital and technological realities of cyber-security. As customer expectations continue to grow from their bank and financial institution that it will maintain their privacy and protect funds on their behalf, this is a golden time for banks wanting to outshine.
Banks of all sizes must recognize and act on the various digital transformation trends mentioned above to stay relevant in the highly competitive banking landscape. Banks that are keen to leverage advanced platforms like digital banking platforms, digital wallet or core banking platforms can explore opportunities with Unified Fintech Platform Arttha.