Technology plays a critical role in the financial ecosystem as it continues to revitalize customer journey through novel offerings. Race for innovation and rising customer expectations are driving demands for more convenience and personalization. Technology companies (FinTech) are jumping into the financial domain with full vigour and at the same time, financial companies are striving to adapt to the technology wave.
Banking institutions have scale, stronger brand recognition and established trust. They also have adequate capital, knowledge of regulatory compliance and an established distribution network but legacy systems are holding them back. Although FinTech firms have been continuously exploring new possibilities of financial transactions, leveraging customer data to drive personalized payment offerings, providing fast and convenient payment experience, but they have struggled to scale on their own.
The Future of Banking
Largely scaled financial institutions and innovative FinTech firms need to synergise and gain from symbiotic collaborations.
Innovations in this space
We are seeing organizations innovate in targeting, expanding services, re-configuring delivery channels, delivering proactive advice, integrating payments and applying blockchain technology. Globally, financial and tech giants are revolutionizing the financial services arena. Banks are already experimenting with new mobile applications and voice-enabled gadgets to enhance both delivery and contextual personalization. As technologies continue to evolve, the banking sector will continue to accelerate its investments in innovation and digital enhancements. These days, banks have adopted targeted customer policy based on lifestyles, values, aspirations, mind sets and underserved needs. As per recent reports, financial institutions will go beyond personalization by segment, to develop individualized communication and experiences for the segment of one. Data availability, openness and advanced analytics are key enablers of digital innovations in banking.
Secondly, open banking APIs are accelerating innovation and collaboration leading to expanded banking ecosystems that could include more than just financial services to make a consumer’s lifestyle better. The interesting story about open banking is that, making consumer consent a central part of open banking strategy places an increased emphasis on consumer value propositions. If improved value isn’t part of the open banking consumer proposition, the customer will not allow sharing of their data. FinTechs are really emphasizing on providing best consumer value proposition.
Chatbots to connect customers, seamless transaction to kiosks and express branches, distributed ledger technology for digital currency, RPA-robotic process automation to provide automated and digital workforce to manage complex and repeated tasks, continue to disrupt financial services.
Digitization of Finance
Digital disruptions have heavily impacted a variety of habits and behaviors in the professional world. Technology combined with smartphones/ mobile devices and the internet provides numerous benefits to the customers as well as to financial establishments. With tighter regulations and changing customer demands, the financial applications and systems have become nimbler and progressive.
In the financial Sector, high standardization, highly
automated & insight driven functions, improved customer experience and
better service delivery are the key components of digital transformation of Finance.
- High Standardization: Finance functions integrated with technology systems with standardized processes and data lead to a high standardization.
- Highly Automated functions: Adoption of new technology tools lead to higher process automation for services such as money remittance, KYC verification, etc.
- Insight-driven functions: Digitalization has modified financial models in such a way that the resources concentrate more on deriving insights rather than focusing only on transactions.
- Improved customer experience: availability of data, strong analytics and lightweight payment interfaces improve customer experience.
- Better Service Delivery: The legacy systems integrated with new technologies have changed the financial operating model. The structured processes have improved service delivery.
Scalability and Velocity of Payments
The ability to handle oncoming work that grows and develops, make platforms more scalable. Similar to flexibility, scalability allows users from either end of the platform to transform and change their businesses with the knowledge that the platform will react accordingly, adjusting quickly to manoeuvre new challenges. A platform that is not scalable, on the other hand, will suffer. Static platforms fizzle and die, unable to keep up with the growing trends and industry challenges.
Integration of payment applications with centralized identity database for biometric authentication, easily accessible locations for transaction authorization, and unified payment platforms are really making a difference. Velocity in digital payment transaction has significantly improved. Content/ context driven analytics are expediting the transaction processing with security and safety. Payments enabled with near field communication (NFC-Pay wave), voice enabled payments and many more experimentations will continue to make payments frictionless and handier.
New Competitive landscape
With the best collaboration, the ability for legacy financial institutions to compete in the future banking ecosystem will be challenged by the TechFin powerhouses. Built on digital platforms, these huge technology organizations are efficient and have already found ways to reduce operational costs and monetize their business models. In India, with the emergence of UPI, large non-financial organizations like Amazon (Amazon pay), WhatsApp (WhatsApp Pay), Google pay, are disrupting the payment space by seamless payment offerings. At the same time, traditional financial institutions are adopting many FinTech customer service enhancements, while retaining strengths including risk management, infrastructure, regulatory expertise, customer trust, access to capital, and more.
Regardless of existing challenges, collaboration between traditional banks, FinTech and TechFins need to stand to gain from collaborative relationship.