New Models in Financial Services
Customers continue to demand great value, high-quality experiences, and fast delivery solutions in an increasingly dynamic environment. This poses challenges to incumbents yet creates opportunities for new players within the banking sector. Unsurprisingly, we’ve been witnessing a proliferation of new players offering well-crafted solutions to meet the needs of demanding customers in the financial industry.
Who are these “new players” in the banking sector? Some are start-ups and tech giants, limiting their scope to certain domains of the industry; payments, money transfers and loans. Others are broader in scope and act as banks, under banking licensure. Regardless of scope, the purpose is the same: use technology and innovation to challenge traditional methods. Companies do this successfully via human-centric thinking, rather than product-centric thinking and by a smart leveraging of data. Design, data analytics and agile working capabilities stand out as key components.
Competition within the financial services sector is sure to intensify. New entrants are relatively better at offering solutions that are beautifully designed, simple-to-use, fast and customised. Traditional banks, on the other hand, are equipped with established deposit and lending relationships, robust infrastructure, regulatory know-how and a relatively better reputation for security. All in all, we are experiencing a transformation within the financial sector. Here are our expectations for the next 5 years:
Higher productivity and operational efficiency efforts are pushing banks into investing in process automation and artificial intelligence (AI) initiatives. Banks will aim to eliminate manual errors and reduce costs by automating back-end processes like loan scoring, anti-money-laundering, and regulatory reporting, among others. AI is likely to be widely used in a range of domains like conversational banking, fraud detection, financial advice etc.
Wider Ecosystems and Open Banking
Consumer and market dynamics are driving banks to enhance their capabilities and deliver great experiences. In pursuit of solutions that make customers lives easier, rather than trying to develop every solution by themselves, banks are likely to invest in and cooperate with partners to improve to deliver a range of offerings. The banking ecosystem will expand as the complementary skills of different companies are leveraged with digital. As tech giants like Apple, Google, Amazon or large local players move deeper into the banking domain, the financial sector will be pushed further into augmenting their ecosystem capabilities and emotional appeal.
Reorganising, Re-skilling, and Up-skilling
Human centricity stands out as a key trait among high performing financial institutions. Cultivating a smart, human-centric organisation extends beyond technology. Banks are driven to incorporate new ways of organising and working. To leverage a full-scale human-centric approach, talents with design and data analytic capabilities need to work collaboratively. Moreover, as routine tasks get automated, traditional roles in transaction processes will require fewer people. Frontline staff will need to enhance their cognitive, social and technological skills by learning to interpret dashboards and use software to supplement conversations with customers.
Developments in technology and changes in consumer behaviour are undermining traditional business models in banking. Banking will survive, though; just not in the same old way. As money is there to stay – for daily use, saving, investing or any other transaction- banking will be there, as well. However, it will be more intelligent, much easier, personally relevant and certainly more digital. As Digitopia, we maintain that success in the digital era requires a set of capabilities across 6 dimensions. Our Digital Maturity Index (DMI) takes a holistic approach to assess a company’s digital maturity, identifying strengths and weaknesses, offering a roadmap to digital success. Get in touch with us to ignite your digital journey.