How Can Banks Remain Competitive in the ‘Digital Age’?
The digital world and need for connectivity show no signs of slowing down, forcing banks and financial institutions to take a more proactive approach to stay relevant and meet consumer demand. As the industry continues to shift to digital, banks that adapt and integrate new technologies will gain a competitive edge and customer loyalty.
Industry thought leaders, along with SAP’s Global Director of Omnichannel Banking Solutions, Davor Ebling, recently discussed how digital technology is revolutionizing the banking industry and driving customer demands in a recent SAP Radio broadcast, “Digital Banking Comes of Age.”
The Need to Be Digital
The great American historian Daniel J Boorstin once said, “The greatest enemy of knowledge is not ignorance, it’s the illusion of knowledge.”
Reinforcing this point, Likhit Wagle, Partner and Global Leader for Banking and Financial Markets for IBM’s Global Business Services explained that until recently the industry has been in denial that digital is changing the face of banking. “Banking is becoming more about something you do and less about somewhere you go,” noted Wagle.
Facing competition from companies like Alibaba and financial startups, traditional banks are feeling the pressure to become more digital in how they function and engage with customers.
As a result, banks are trying to make their services available to the many people in remote locations who may not have easy access to a local branch. For example, McKinsey & Company finds the number of potential digital banking consumers in remote parts of Asia could rise to 1.7B by 2020.
“Smartphones are the easiest way to reach the unbanked. Personalization is becoming a huge theme,” said Penny Crosman, Editor in Chief at Bank Technology News and Technology Editor at American Banker. “There’s also a need for outreach and communication; smartphones can help with that.”
As Crosman noted a higher purpose for banks, Ebling agreed that’s also the purpose for financial inclusion, especially for doing good and creating economic opportunity.
“In terms of mobile money, the focus is usually person to person transfers, international remittances and merchant payments,” he said. “But now, you can also go beyond that and facilitate humanitarian payments such as micro lending.”
These solutions work on any type of mobile device, which is crucial for underdeveloped areas.”
How to be Different
“In the digital banking space, comparing yourself with others is not the best way to bring about innovation,” said Crosman. “It is when you strive for much higher ideals that brings out something that is good.”
Banks are facing increasing competition from a wide range of companies, and as a result they must striving for ways to be more innovative.
For example, USAA has catered its banking experience to soldiers and families of servicemen who are known for doing things quickly and efficiently. Specifically, when these customers are transferred to a customer service representative, USAA has already supplied the representative with ID information is to eliminate that repetitive step and serve these customers more quickly.
With banking resources readily available at your fingertip, customers today have a lot of options. “Customers demand that they be provided with a consistent, channel-optimized customer experience with exceptional customer service and product portfolios,” said Ebling. In fact, one in six customers would change banks if they didn’t provide them with a powerful mobile experience, he added.
In terms of demand, Wagle sees there being a de-merger between the distribution side from the manufacturing side of the banking system.
“When it comes to the distribution side, in the digital age, customers are looking for familiar experiences and instant gratification. On the customer experience side, there will be a focus on providing a high-quality experience no matter what channel you use. On the manufacturing business, the banking industry needs to operate like low-cost manufacturers where it will be necessary to use the economies of scale. This will have serious implications for traditional banks.”
Mobile technology will continue to be a key area of focus for the future, and banks must continue to integrate this technology in a meaningful way in order to stay relevant.
Well-integrated omnichannel solutions can help minimize fraud through mobile capabilities, added Ebling, whether by pre-staging certain transactions, sending alerts or generating multi-factor authentication. Biometrics and wearable devices will also play a key role in securing banking interactions in the future.
“Wearables will be a thing. It won’t just be banks providing these services. It will be telco and tech companies too. It may end up becoming a brand competition,” said Crosman. “We will be banking from our cars and watches.”