Accelerating Digital Transformation in Banking: The Virtual-First Banks

The novel 2020 pandemic takes every sphere of human activity into the next level. Financial institutions are forced to move quickly to protect their employees, transform their operations, and serve customers in new, improved ways.

In brief:

  1. The software revolution — which has already disrupted many industries and has made some industries essentially obsolete — is still rapidly transforming the financial services industry.
  2. Digital transformation banking strategy should include relevant technologies that can bring the most value for both the bank and its customers.
  3. The future of digital banking transformation is impressive, and it is predicted to entirely change the image of traditional banks, as well as bring more services to the customers.

The Future Of Digital Transformation in Banking

As the coronavirus continues to spread around the world, more and more organizations will miss their financial targets because of strategic and operational disruptions and dampened customer demand. It’s also unclear how long COVID-19 will last. But one sure thing is here — this will not be a short-term event with fewer consequences. Industries, such as banking, should prepare for the long haul.

However, the software revolution — which has already disrupted many industries and has made some industries essentially obsolete — is still rapidly transforming the financial services industry. Digital transformation in banking has already started, and now we can see some changes like 24/7 online banking and instant transactions.

Still, the process in this sphere is quite slow. To begin a journey to digital transformation, institutions have to develop a detailed strategy to change their distribution model, revise and enhance value offers, as well as develop end-to-end customer-centered processes that can result in growth and customer satisfaction.

There are a number of technologies available nowadays that can help in the process of the digital transformation of the banking field. Good digital transformation banking strategy should include relevant technologies that can bring the most value for both the bank and its customers. Among the trending technology solutions, we can distinguish:

Artificial Intelligence

AI in banking is represented by chatbots or online assistants that help customers with their issues by providing necessary information or executing different transactions. Apart from this, AI can be used for the purpose of data analysis and security. For instance, identify money laundering by analyzing customer data within several seconds.

Blockchain

The implementation of blockchain in banking can result in a better interface, more accuracy, and secured data and transactions. In addition, blockchain solutions will make transactions and different operations transparent, facilitating collaboration. There will be no need for the intermediation of the third parties, thus bringing up the level of trust from the customers. It can also influence cloud technologies and move to decentralized ones, which will result in higher protection of the data and funds.

Internet Of Things

IoT is helpful with real-time data analysis, thus makes the customer experience more personal, and banks are able to provide individually-tailored offers. What is more, thanks to wearables, customers can easily and seamlessly make contactless payments. Apart from this, IoT is helpful with risk management and access to platforms; the authentication process can be supported by biometric sensors that make access more secure and protected.

Cloud Computing

Cloud computing is another technology that can help banks become more efficient and gives them a chance to provide more innovations, as well as have better productivity, improve operations, and instantaneously deliver products and services. Cloud computing, as well as IoT, can help with risk management and create a secure environment for the customers and internal bank systems.

All in all, the digital transformation of the banking field will bring great innovations that will change the image of banks we know nowadays. Technologies bring numerous opportunities both for banks and their customers by securing personal data, increasing transparency, and giving a chance to manage funds anytime and anywhere.

Digital Transformation In Investment Banking

Digital Transformation in Investment Banking

Despite all the benefits brought by digital transformation in banking, investment banking is going to face some challenges in the current environment. Investment banking doesn’t take deposits and functions as a facilitator between buyers and sellers and keeps data protected.

As we have already discussed, the rise of digital solutions in banking can result in increased data transparency, elimination of intermediates in the process, and alternative methods to access financial and intellectual data. All this can result in lower pricing on the operations and make transactions easier and faster. Investment banks can be replaced by a group of small investors brought together at one digital platform. The occurrence of new players in the niche (for instance, fintech companies), eliminating entry barriers, and disintermediation can put investment banks in dire straits.

Still, it’s not all doomed, as there always will be a need for professional advice on complex operations and big deals. In order to survive in this competing world, the investment banks should think of the ways to use available data and skills in the digitalized world.

Digital Transformation In Retail Banking

Retail banks have more opportunities in comparison with investment banks, but still, the journey to digital transformation is rather long and requires a lot of resources. First of all, in order to succeed, their strategy should be customer-centered. Banks possess a lot of important data that can be used as a background for new innovative solutions and services that can satisfy customers to the full.

Technologies like blockchain and AI (Artificial Intelligence) can be of great advantage if the bank wants to survive competition with fintech companies, online banks, and non-financial platforms that provide exact services to their customers and have more advantages over traditional banks. These tools can automate numerous manual operations, thus enhance customer satisfaction. Also, AI and IoT can be used together to collect and analyze personal data of the customers for the banks to create more personalized offers.

Digital Transformation in Retail Banking

One of the biggest challenges for retail banks in this situation can be to find a professional team or create an inner IT department. But thanks to the available platforms and outsource companies, this issue can be easily overcome.

Advantages And Disadvantages Of Digital Transformation In Banking

Digital transformation of the banking institutions brings a lot of new opportunities for the customers, individual ones, small companies, and huge corporations, as well as banks themselves. Clever strategy and constant improvements can result in a number of advantages:

  • Convenience
    Personal and company bank accounts are available at any device, the only things you need are an Internet connection and a few taps on the screen. This brings more customer satisfaction as they are able to constantly keep on track of their account balance and manage the information on their personal profile (add new mailing address, e-mails, telephone numbers, etc.). In addition to this, there is no need to go to the bank to get checks as they can be instantly sent to your email address.
  • 24/7 Service
    Online banking services are available 24/7 all year round, even at the weekends. There is no need to stay in lines and wait for the bank to open in order to conduct certain operations. It’s a huge advantage that comes with digital solutions.
  • Time-Saving
    Another advantage, you save a lot of time as you have access to the account from home. It is extremely convenient as previously you could waste an hour or two at the bank to make simple operations, and now it is done seamlessly from home or any other place where there is an Internet connection.
  • Automated Transfers
    Direct banks can provide unlimited automated transfers (accept payroll deposits or provide automatic bill payment) with no additional fees for the services even to outside financial institutions.
  • Easier Management
    Online accounts can be easily managed, although they require more information than traditional banks. Customers can add information themselves or directly contact online assistants to provide support on the current issue. What is more, payee information is retained within the system, there is no need to re-enter data for the following payments, etc.

Advantages and Disadvantages of Digital Transformation in Banking

Although the advantages are impressive, and they facilitate the work to a great extent, there are still some disadvantages that follow the process. Here are the main ones:

  • Security Issues
    Cybersecurity is one of the most important issues that companies and institutions are struggling to overcome. Even sophisticated software that protects tentative data cannot completely protect accounts from scammers, phishing, hacker attacks, etc.
  • Services
    Nowadays, not all banks can offer a wide range of online services. Still, there are some that require your presence at the traditional banks.
  • Transactions
    Complex transactions may also require the presence at the bank office. Also, international transactions are not possible with all digital banks.

The number of disadvantages is rather low, and it’s only a matter of time for them to disappear. Advantages take over disadvantages and make daily operations much easier, reduce costs, save customer’s time, and manage to provide services efficiently.

Challenges Of Digital Transformation In Banking

The future of digital banking transformation is impressive, and it is predicted to entirely change the image of traditional banks, as well as bring more services to the customers. But today banks face certain challenges that are difficult to overcome:

Competition With Non-Financial Institutions

Amazon is trying to provide banking opportunities to its customers. Facebook allows users to make transfers directly to other people’s bank accounts, thus leaving banks out of the process. But banks are more regulated institutions, thus more secure. It is important for them to go digital quicker.

Online Payments

Not every bank can support online/mobile or contactless payments. The reason for this is that a bank cannot provide another option but physical payment as it doesn’t have a secure online platform, resources, and skilled team to make it possible. It gets even harder to compete with available online services like ApplePay and PayPal.

Technologies

The system that provides online banking services should be constantly updated and have an efficient security level. Cybersecurity is one of the most important issues nowadays that banks should take into consideration first of all. Again, in order to overcome this challenge, the bank has to set up a detailed strategy, choose appropriate technologies and find a professional team that can easily turn ideas into reality with the latest software and available tools.

The process of digital transformation is rather endless as technologies enhance, the systems should be constantly updated. New technologies will give a chance for new services to appear that again will require constant upgrade and support.

Digital transformation in banking is going to speed up in the upcoming years. Financial institutions should take into account the current state of affairs, work out a profound strategy, and use the right tools in order to succeed in the future.

The transformation journey is not an easy thing and involves a lot of resources, but as a result, the services could be more secured and delivered quicker, and most of all, enhance the level of customer satisfaction. As technologies develop and enhance, the banking industry will also get better and better year by year.

Talk to our experts and find out more about the topic and how your business can start benefiting from it today!

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