DIGITAL TRANSFORMATION IN BANKING – THE FUTURE OF BANKING
The banking world is seeing a rapid change from traditional brick-and-mortar establishments to digitization of the entire process. Presently the era of digital transformation is upon us, and it is crucial that banks start adopting this new environment.
With the emergence of fintech companies, the banking landscape is becoming highly competitive. So, to stay relevant and meet customer expectations, banks are embracing digital transformation.
According to a recent study by Alkami, mid-sized banks that underwent a digital transformation in 2022 saw a significant increase in their investments. The amount nearly doubled, ranging from $425,000 to $1 billion in assets, compared to only $200,000 per $1 billion in 2021. This trend is expected to continue its upward trajectory in 2023.
As customers’ behaviour shifts to personalization, the requirement for cybersecurity, fraud detection, and risk management is becoming a highly crucial component of banking services. By embracing digital transformation, banks can better address these challenges and secure their customers’ financial well-being.
Thus, to thrive in this era of digitization, banks are now proactively transforming their operations to ensure the safety and value of their customers.
Why are banking systems implementing digitization today?
Digital transformation is essential in the banking industry for multiple reasons. They are:
1. Meet Customer Expectations:
Customers have become highly tech-savvy and want their banking system to offer the same seamless experience. Options such as online and mobile banking, easy transactions, and quick access to details are pushing banks to digitize their systems as soon as possible.
2. Competing in a Digital Age:
Banks need to remain relevant, especially in today’s market, which is why most are embracing digital technologies to showcase innovative products and services to their customers. Digitization of the entire process allows banks to adapt to the new digital market and leave their competitors behind.
3. Cost Efficiency:
One of the biggest reasons why banks are using digital channels is a reduction in operational costs. When the process is automated and streamlined, banks can start using their resources efficiently and hyper-focus their energies on the delivery of services.
4. Data Insights:
The digitization of banking systems helps banks to collect, sort and analyze vast amounts of data. With the valuable insights they offer, banks can gain insights into their customer’s preferences and behaviour and provide them with personalized options.
5. Regulatory Compliance:
Banks can use digitization to improve their overall risk management and compliance maintenance, especially against cyber fraud (like Danske Bank’s success story). The automated report and monitor system help ensure that all legal regulations are followed and customers’ data is protected.
How are banks implementing digital transformations?
For the implementation of digital transformations in banks, the industry is using the following steps:
1. Digital Strategy:
Developing and implementing a clear digital strategy that aligns with the overall business goals of the bank. They are also identifying areas that require transformations and defining objectives and KPIs.
2. Leadership Commitment:
Gaining commitments from top brass to ensure the active support of the digital India initiative, especially in the banking industry.
3. Technology Infrastructure:
To support the digitization of banks, they need to invest in the right technological infrastructure. This includes sections such as secured IT systems, data storage, cybersecurity options and cloud computation (According to a survey, more than 83% of financial institutions are deploying cloud computing.).
4. Customer-Centric Approach:
As a bank, if you want to understand your customer’s preferences and requirements, then design digital services as per their requirements. Banks can create long-lasting connections with their audiences by providing user-friendly interfaces across digital touchpoints.
5. Employee Training:
By providing comprehensive training to staff, banks can ensure that they have a hands-on deck, especially regarding the implementation and utilization of digital systems.
6. Collaboration and Partnerships:
Banks collaborating with fintech partners leverage their expertise to accelerate their overall digital initiative.
7. Mobile Banking:
When banks use robust mobile banking options, customers can perform transactions and access their information on the go. This helps make the overall process smoother while keeping the customer happy.
8. Data Analytics:
With digitization, banks now have access to customer insights like behavioural patterns and tastes. This can help them personalize the entire banking process for every customer they serve.
Current Trends in Digital Banking
With the present change in the market, digital banking is slowly evolving. These trends are transforming customers, banks, and businesses from mobile strategies to the use of AI. So, let’s explore some key trends that are helping shape the sector:
1. The Payment Revolution
The era of traditional cash and card payments is gradually fading, making way for the rise of online payment options. According to a study, in 2020, the Far East and Asia accounted for 805 million online banking users. This figure will reach $1 billion by 2024. As banks, embracing this shift can empower your institution must stay ahead of the curve and cater to the preferences of modern, tech-savvy customers.
2. Pioneering Marketing Channels
Marketing holds immense significance in the banking sector, and new opportunities are emerging to captivate your customer base. Explore innovative marketing channels that unlock more profound insights into your clientele, allowing you to tailor services and offerings to meet their evolving needs.
According to a joint study by the National Business Research Institute and Narrative Science in 2020, 32% of banks utilise AI technologies, such as predictive analytics and speech recognition, to get a competitive edge in the market. Seize these opportunities to streamline the path from advertising to remarkable business success.
3. Empowering Data Utility
Embrace the full potential of the digital age as it opens multiple avenues to gather and analyze data. This newfound data-driven power empowers banks to glean intricate customer details, ranging from lifestyle choices and psychographic profiles to buying behaviour.
According to a study by Genpact, most senior executives believed that customers would prefer to be served by bots by 2021. And chatbots have become a go-to for any banking problems. By harnessing this wealth of information, you can precisely target potential customers, ensuring your institution remains at the forefront of personalized banking experiences.
Conclusion
The financial industry is now under pressure to first provide its customers with a seamless and protected digital experience. So, embracing the new-age ideology of digitalization is a crucial aspect that executives in banking systems should concentrate on. Otherwise, you may lose out on potential customers and your present ones.
We, Arrk, work towards transforming traditional banking institutions into tech-driven futuristic ones. Companies need to upgrade themselves with the latest changes in the market, and the banking industry is the same.
So, if you want a streamlined, innovative and frictionless movement from the traditional banking system to a modern one, connect with us today!
