Digital Transformation in Banking – What Is Right for Your Bank?

Digital transformation in banking has been an important trend amidst economic uncertainties induced by the pandemic. Financial companies are dipping their toes in digital waters, eager to modernize their IT structure in 2022. It is no surprise that Gen-Z and millennials want their banks to be technology-driven with competitive digital solutions.

Digital and mobile channels are now critical for customer acquisition and satisfaction. The dependency on e-payments has increased all over the world. The global mobile payment market is expected to surpass US$ 590 Bn by 2032 at a CAGR of 30% for the forecast period 2022-2032. The United States alone expects a market valuation of US$ 42 Bn in 2022, with contactless payments growing by 150% in 2020.

Banks, too, are eager to modernize their IT infrastructure with technologies that would bring about a cultural, organizational, and operational change. They are now looking for improvisation in four distinct areas: process, technology, data, and organizational change. The focus is now on building an ecosystem that facilitates personal, automated, and cohesive customer journeys.

The cornerstones of successful digital transformation in banking

As banks gear up for the ‘next normal’ waiting for the pandemic to recede, they reset their digital agenda on the road to recovery. They are shifting towards digital channels to address scalability and reliability concerns while catering to customers’ growing needs.

Every project for digital transformation in banking, however, should work towards:

  • Engaging clients with tailor-made solutions and experiences
  • Empowering employees with tools and technologies to enable accessible, holistic information
  • Optimizing internal operations with automated, synchronized processes
  • Building a connected ecosystem

Top benefits include:

  • Faster time to market for product and pricing
  • Cost-effective ways to scale
  • Future readiness with agile and remote solutions
  • Digital competitiveness with capabilities like open banking and real-time payments
  • Better services to enhance product innovation and customer satisfaction
  • Lower risks with regulatory compliance and greater security
  • Greater efficiency and productivity
  • More business value with data insights and cognitive automation

Banking infrastructure modernization – Technologies and use cases

Artificial intelligence (AI), machine learning (ML), and Big Data – Financial companies are leveraging these powerful technologies to transform the customer experience with seamless services and safe transactions. They help detect and prevent payment fraud. They offer a 360-degree view of the customer and are believed to reduce delinquency rates by almost 76%.

AI can be applied for multiple banking infrastructure use cases such as risk assessment, fraud detection, asset management, credit intermediation, process automation, client onboarding and KYC (know your customer), and algorithmic trading. Global spending on these technologies is expected to double from $ 50 billion to $110 billion in 4 years from 2020 to 2024.

While AI and ML help increase the efficiency and accuracy of workflows, feeding ML models with big data helps decision-making around portfolio allocation, assessing creditworthiness, and making underwriting decisions. HSBC has been using AI for fraud detection, transaction monitoring, sanctions screening, and identifying insider trading & bribery.

Robotic Process Automation (RPA) – The operating activities in financial companies involve a multitude of standardized processes. RPA ensures optimal data processing and takes care of rule-based and repetitive tasks quickly and efficiently. It reduces human workload, minimizes errors, and enables cost reductions. Digital processing of business transactions also helps in fraud prevention in a big way.

SBI General Insurance has used RPA and AI to build a digital-first business model. It leverages technology to get a 360-degree view of customer activity across touchpoints to understand customer expectations and personalize their offerings. It uses predictive analytics to upscale its cross-sell initiatives and AI to personalize customer journeys. The company relies on RPA to keep track of total premium payments and implement tax liability confirmation.

Blockchain – Blockchain has secured a coveted place in a world of digital currencies like Bitcoin and Ethereum. It allows you to store cryptographic encryption in a block. All blocks have a unique value distributed across the network, and it is impossible to manipulate in any manner. Data integrity thus is an essential aspect of blockchain though it is popular for its speed and transparency.

Blockchain enables transactions almost in real-time and instantly saves changes, facilitating the exchange of massive amounts of data in the shortest time. Transactions are unchangeable, traceable, and protected from money laundering. Smart contracts stored on a blockchain help execute an agreement between participants without the involvement of an intermediary.

Such is the power of blockchain technology that China is kicking off an intensive blockchain trial involving 164 entities despite its checkered history with digital currencies. President Xi Jinping describes blockchain technology as “an important breakthrough for independent innovation of core technologies.”

Cloud computing – Financial companies now rely on external data centers to manage their workloads. Cloud computing technology has become an essential aspect of mobile banking and payment services. It also plays a crucial role in trading, evaluation processes, and customer relationship management.

As per a survey, 40% of banks have already deployed cloud computing, while 30% have deployed application programming interfaces (APIs). Cloud computing enables speed to market with new capabilities.

Singapore’s Asia Digital Bank Corporation (ADBC) has collaborated with Tencent to develop cloud-based banking technology to offer personalized experiences to customers. It also aims to provide small and medium-sized enterprises with digital banking services to ensure end-to-end, frictionless, and seamless processes.

First steps to creating sustainable outcomes

It is easy to navigate through the chaos despite economic uncertainties by building on core strengths and tweaking existing business models. Here’s what you can do.

Grow an ecosystem

Banks have long relied on the tried and tested method of ensuring growth. They have been introducing new and relevant products to existing customers. But those like Ideabank and ING have gone beyond their traditional core to strengthen customer engagement with a 360-view of customer data.

They now provide other services like accounts-receivable management and cash flow analysis to small and medium enterprise (SME) customers. Post Bank has gone a step further to capture a market share in nonbanking domains. It is now the largest provider of mobile phone services in Italy, using its already strong franchises to offer new services to existing customers.

Address multiple needs of customers with a financial supermarket

A mix of third-party offerings can help customers manage their financial needs via a single integrated channel.

That’s how aggregators sell 60% of the auto insurance policies in the United Kingdom. Bank Bazar in India caters to more than 23 million customers without having proprietary offerings.

Offer value throughout the customer journey

Banks and financial companies can grow if they decide to extend the scope of their services to add more importance at different stages of the customer journey.

Commonwealth Bank in Australia (CBA) created an augmented reality app to help customers use their phone’s camera to see the price and sales history of the properties they were interested in. The app with financial tools such as a mortgage calculator allowed the bank to extend its role in the home buyer’s journey.

Monetize the data with analytics

You can use customer data (location, lifestyle preferences, age, gender, etc.) to get insights and anticipate customer needs. Some of the biggest banks in Canada have collaborated with Toronto-based SecureKey to help customers access online services offered by the federal government using bank credentials. Banks rely on the data they have to verify identities before allowing access.

Credit card companies have access to the data of customers and merchants. This data helps them foster new partnerships and gain access to new potential customers.

Develop a product portfolio

Financial companies should also consider leveraging back-end assets to create value for smaller businesses. These businesses usually lack the reach or resources for core banking products and services. This makes an opportunity sweet spot for financial companies to develop and sell products through third parties.

ING has collaborated with Kabbage, a US-based startup, to provide value-added services in Europe. ING brought to the table its reservoir of capital and relationships with SMEs. At the same time, Kabbage leveraged its easy-to-use interface and risk-management algorithms to offer quick decisions on loan applications.

Modernize your banking infrastructure with Trigent

Regardless of the technologies you choose or the digital routes you wish to pursue, a good view of your capabilities is critical to ensure infrastructure modernization. We have extensive experience in helping financial companies achieve digital transformation goals. Our services and solutions are designed to help them at different junctures in their digital journeys to boost their digital capabilities.

We drive IT modernization projects for the BFSI sector to make it agile while taking care of the complex regulatory and compliance requirements.

We can partner with you to simplify and standardize your IT infrastructure. Call us today for a business consultation.

5 Key Points Any Fintech Solutions Provider Must Keep in Mind to Succeed

Digitalization and COVID-19 have altered the financial landscape significantly making fintech solutions an absolute must for financial services. Fintech was initially considered as the technology that was applied to the back-end systems of financial institutions.

Fast forward to 2022, it lets you manage everything on your smartphone from helping you pay for your food to managing insurance and trade stocks. It allows you to lead your financial lives successfully without feeling the need to visit brick-and-mortar establishments.

The appetite for Fintech apps has grown to such an extent that they are now an integral aspect of financial management. User experience has been a key factor driving this growth. The use of online and mobile banking has increased worldwide with Asia leading the way.

Thai e-wallet TrueMoney grew tremendously during the pandemic and has been one of the most downloaded free Android apps in the country. Along with Japan’s LINE Pay, it is predicted to grow by over 200 percent between 2020 and 2025.

On the other hand, India is outpacing the world with digital payments rising from $61bn in FY16 to their current value of $300 bn. The Unified Payments Interface (UPI) has witnessed a surge of 103 percent in transaction values in 2021 as compared to the previous year.

While those like Paytm expand the scope of their offerings with prepaid mobile recharge services, gold trading, and bill payments, the battle for market share continues to get fiercer with contenders like Google Pay, PhonePe, and WhatsApp.

Mobile apps are now the preferred touchpoint

Fintech mobile apps are seeing an increase in installations, session times, and retention rates with the rise in innovation and offerings. Some of the top fintech apps to consider include MoneyLion, Robinhood, Chime, Nubank, Mint, Revoult, Coinbase, N26, Finch, and Tellus.

Modern apps are now facilitating diverse functions and use cases such as lending, blockchain/crypto, insurance, regtech, payments, investments, trading, money transfer, wealth management, and mortgage. Fintech apps can benefit your business in a big way.

Some of the top benefits include:

  • Greater reach – You can reach a wider audience and keep them updated with the latest information.
  • Improved functionality – You can add features to improve your business and empower customers.
  • Unparalleled convenience – Customers can use apps on the go and are more likely to explore new services.
  • Enhanced operational efficiency – You can streamline operations by integrating software to offer lower prices and greater value to customers. This can make your business more efficient and increase revenue along the way.

Korea’s super app Kakao has given its users a robust mobile-only bank platform combining marketplaces and banking functionality. In just 24 hours of opening, it had managed to garner 300,000 subscribers thanks to its user-friendly and effective marketing strategies.

Key things to remember to turn your app endeavor into a success story

While building the perfect FinTech app, it is important to remember a few things that would ultimately determine the success of your app.

  1. Security is paramount

While every financial transaction is based on trust and reliability, the app is expected to be secure at all times. It needs to adhere to legal regulations and compliance practices. Consumer data needs to be protected and customers should be offered complete peace of mind.

Fintech is vulnerable to cyberattacks since it involves sensitive financial data. It is, therefore, crucial to add the required security layers and test the app thoroughly to ensure that the coding is foolproof.

Precisely why PayTouch leverages biometrics as a security measure allowing payments with fingerprint detection. Customers do not require cards or PINs, and can easily track all their transactions online.

Blockchain-based systems are now becoming popular due to their ability to deter attacks and make apps unbreachable. According to a PwC report, more than 50% of technology leaders believe artificial intelligence will drive change while 40% of organizations are looking up to blockchain to transform the way financial services are delivered. We believe both these technologies play a crucial role in keeping threats at bay.

  1. Everybody wants a Super App

Every consumer expects ‘One app to do it all’. One app, one sign-in are fast becoming the norm. Modern users want to do multiple things including buying gold, booking tickets, and managing investments. Precisely why Bank of America is all set to launch an all-in-one app to attract new customers, bolster its digital ecosystem, and improve customer service.

Considering that 1 in 5 adults in the United States invested in stocks or mutual funds between October and December 2021, the easy-to-use app is expected to reduce the pain points for customers ensuring a seamless digital experience.

An all-in-one experience can undoubtedly be enticing but super apps have thrived only in a few markets. A super app is touted as the Holy Grail of the digital economy, and those like PayTM and Flipkart are making a beeline to claim a bigger market share with a diversified portfolio. And yet they lack the dazzle to impress consumers.

Consumers prefer choice over brand loyalty and are willing to explore and compare before buying anything. Besides, companies are trying to build use cases beyond their primary domain of expertise instead of collaborating with others. Precisely why PayTM couldn’t carve its niche in eCommerce and Ola Cabs ended up dropping Foodpanda soon after acquiring it.

Not to forget UberEats which burned a whopping $3 billion only to give away its food delivery business to Zomato later. Rather than capitalizing on individual strengths, these companies are fragmenting the market.

Companies will have to work towards fostering partnerships and ecosystems. They will have to invest time in opportunity mapping and conduct an exhaustive study of the competitive landscape. The focus should be on developing the customer value proposition to ensure high user stickiness. A robust data analytics engine can help provide the necessary insights to get started.

  1. A frictionless customer experience should be the ultimate goal

A simple and easily navigable UX (user experience) / UI (user interface) is what is needed to ensure convenience and a frictionless customer experience. Intuitive, UX-driven payments are the need of the hour and streamlined navigation is the hook on which they rest.

Thailand’s Piggipo allows users to have their own financial advisor to help with budgeting and handling myriad other things. It allows subscribers to manage multiple cards via a single interface, track their spending, and schedule payments. It also allows them to set spending limits and check their credit card statement in real-time.

System performance is critical to delivering the perfect customer experience. Time is of the essence when it comes to use cases like payments processing. App developers must optimize system performance keeping the end-to-end impact in mind. They need to adopt agile methodologies like Scrum and Kanban to ensure rapid iterations, minimize risks, and enhance business value.

  1. Everything has to be customer-centric

Gojek understands this well and offers more than 20 services in diverse areas including transport, food delivery, and logistics., on the other hand, offers a fintech service, mobile phone cellular services, and an online payment system along with a cashback for top-ups, savings, transfers, purchases, and bill payments.

Data analytics makes it easier to understand your consumers. Data insights can improve operational processes and transactional data can be used to offer better customer experiences.

For instance, you can use the data to risk-assess loan applications and offer them loans just when they need them. While traditional banks are still struggling to make sense of siloed data and get a good view of their customers, you can step up and serve your consumers with meaningful solutions.

Although every endeavor should keep the ‘customer’ at its core, other factors like time-to-market, scalability, and maintenance should not be overlooked.

  1. You must provide a solution to a market problem

According to the State of Finance App Marketing report, Asia & Pacific region has over 1230 fintech apps. In 2020, marketers had spent US$ 244 million to get new users taking the number of paid installations to 600 million. It’s easy to get lost in the crowd unless you pick a specific problem and address it effectively. Only then would you be able to have a competitive advantage and a greater market share.

That’s exactly what Square Inc. did. McKelvey (one of the founders of Square Inc.) was unable to process a sales transaction worth $2000 in 2009 since he didn’t accept credit card payments. The transaction costs made credit card processing extremely expensive for small businesses back then.

He teamed up with Jack Dorsey to create a hardware prototype that would solve this problem for smaller retailers and individuals. It was a square card reader that was sent to users for free to connect through the audio jack of mobile devices and facilitate payments. Square charged a nominal fee of 2.6% along with an additional transaction fee of 10 cents and the company was soon making humongous profits.

Interestingly, Square Inc. became a fintech success story even before fintech was born. The company attributes its success to the low transaction fees and the $0 fixed cost for card purchase. But none of this would have happened had the founders failed to see the advantage and the opportunity in payment processing.

The right technology partner could be your first step to fintech app success

It takes an experienced partner to understand the intricacies of fintech. The best-laid plans and the biggest ventures can fail too if they lack proper research and strategy.

A classic case in point is the fall of N26 that had announced its US operations amidst great fanfare in 2019.

With America’s oldest and most celebrated bank Axos as its banking partner, the Berlin-based fintech promised an unparalleled digital banking experience to its customers. Yet, it recently announced its decision to close its US operations.

So, what went wrong?

Despite claiming to be for everyone, it was for no one since it lacked a definite market niche. There was no feature differentiation and challenger banks were already offering what they could. In a strong regulatory environment, it is important to define your customer and differentiate the customer experience.

In contrast, Chime and Varo were very clear about who they were catering to – low to middle-income consumers – irrespective of whether they spent their whole time on their smartphones or not.

Build your fintech solutions with Trigent

Emerging tech holds the key to fintech app success. At Trigent, we make organizations digitally ready with next-gen technologies like AI, IoT, and blockchain.

We can help you navigate through the many challenges of fintech app building. Call us today for a business consultation.

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