“The coronavirus is creating an additional sense of urgency for financial institutions that may have been on the fence about investing in digital mortgage technology before.”
—–Timothy J. Mayopoulos, President & Board Member of Blend
The novel coronavirus is expected to fundamentally change the way customers interact with their banks, retailers and other service providers and fintech businesses, which were built to operate in a fast-moving, digital-first economy, are particularly well-placed to meet their demands through the crisis and beyond. Since the onset of the virus, banks have had to grapple with how to protect their staff and customers from infection, which has meant, to a large degree, facilitating remote working arrangements and digital customer service delivery. At the heart of this fundamental shift, is the need to have robust, resilient and flexible technology infrastructure can support this new way of doing banking.
However, traditional banks that rely on inflexible, monolithic technology infrastructure will be hard-pressed to make the shifts required as quickly and effectively as digital banks, which are in a far better position to function in these challenging conditions because they were built to be responsive, adaptable and scalable. Many traditional banks operate on centralized, unwieldy, legacy technology that cannot be adjusted quickly because changing one part of the system affects the others. A research carried out by Fintech solutions company, Velmie, the global lockdown could be the last nail in the coffin of traditional banks still stuck to legacy forms of delivery. Those banks which:
- Are not remote friendly
- Prefer to rely on in-house development than taking advantage of the benefits of purchasing prebuilt systems and accommodating the flexibility offered by Application Programming Interfaces (APIs).
- Stick to on-premises hosting over cloud-based hosting with no clear rationale and benefits to doing so.
- Rely on their physical presence/branches rather than offering customers digital access.
- Have complex operational environments that are difficult to manage and maintain.
- Do not make use of decentralized software teams that are, or are able to, operate remotely.
Digital transformation is about more than just providing online and mobile functionality. Traditional banking providers need to combine digital speed and convenience with human interactions that are both thoughtful and caring at crucial moments in the customer journey.
- Traditional Banks should realize that Technology is the keystone.
Legacy systems shouldn’t be a hindrance or excuse to stifle innovation. If your delivery via loosely integrated networks is laborious to maintain or upgrade, you can’t be as agile as you need to be. Technology is key to making a digital banking transformation successful.
However, whatever technology you adopt absolutely must be human and personal. The point here is that technology should enable outstanding customer care. Banks are being forced to shift from a product-centric to client-centric point of view. That means adopting “customer-centricity” to satisfy evolving customer needs and expectations and using technology to enable that strategy.
- Be ready to Pivot.
You can’t predict what customers will want in 10 years, so embracing flexibility and the willingness to make changes is critical. That means new financial products need to be brought to market quickly so you can address customers’ current pain points before someone else does. Some banks are partnering with nimble Fintech innovators to get the technology they need to address challenges.
- Strive for faster Innovation.
Successful banks in the digital world need to strive for continuous improvement and renewal. That means getting much faster in the way they learn, act, and react. Few banks are quickly producing game-changing innovations. Most are taking the standard approach they’ve always used which means internal debates, committees, small pilots, more committees, and so on. Little wonder that these banks produce few innovations compared to their more agile peers.
The big digital players test and learn. They’re not afraid of failure. They’re agile and experiment in real-time with their customer base. And they use these iterative processes to understand what works and what doesn’t. The result is they’re bringing products to market quickly, understanding if they satisfy customer needs, and then improving upon them as necessary. It’s fast, a bit risky, and, ultimately, produces a digital banking transformation.
- Change the Culture.
Procedures are inherent at traditional banks and very little gets done without invoking them. But how does innovation successfully live side-by-side with time-worn procedures? Innovation, by definition, means looking for a new way to solve a challenge. Your existing procedures aren’t going to facilitate that. Embracing innovation means changing your culture to solve your customers’ challenges differently. Banks tend to be incredibly resistant to change. You want to be nimble, responsive, and customer-driven. And that means testing, innovating, and partnering with companies that can help get you there quickly.
- Embrace Chaos vs Order.
Entrepreneurs already know this: innovation can’t thrive in a static, orderly environment. The risk that’s needed to drive change means a good deal of chaos needs to flourish, too. This goes hand in hand with changing your culture while promoting innovation and experimentation. Entrepreneurs don’t say “it can’t be done” or “this is impossible.” Banks need to do the same by forbidding managers to repeat these innovation-killing phrases, and instead, reward their employees for taking risks and adopting a disruptive mentality.
Transforming a traditional bank into a truly digital bank is no small task. And many banks will not make the metamorphosis successfully. Which institutions will make the digital banking transformation successfully? It really boils down to those banks that are willing to completely change their operational models. Many banks have been trying to do this for years, but they’re still struggling.
The future will bring a new banking paradigm: a new delivery model where digital teams are integrated with existing personnel, and where some pure digital players may add physical branches to showcase their brands; newly formed IT with an app-focused front end, a central core database connected and hosted in the Cloud, and a back end widely industrialized and outsourced; and a digitized culture, where all employees are “digital certified,” and where time and cost are given to adapting skills and headcount to deal with competitive and margin pressures.
“The next 20 years will see the world go from 20,000 ’analog’ banks to no more than several dozen ‘digital’ institutions.”
………. Francisco González, BBVA Chairman,
About the Writer:
The writer worked in mainstream banking and NBFIs. He is a Google Certified Digital Marketer, an Author and a Chartered member of the CGIA Institute, USA.
www.ebenezerasumang.com /[email protected]/0242339145
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