The financial services industry has entered 2018 with a focus on digitising services to better meet customers’ needs. Leading banks understand that previously inefficient, paper-based processes and clunky user interfaces are no longer going to be good enough in today’s technologically advanced environment; banks must digitally connect to succeed.
However, with 2018 also comes the implementation of PSD2, making an advanced digital connection with customers even more important. Banks will no longer have sole control over their customers’ data, a critical component of their competitive advantages. As tech giants like Apple and Google gain access to customers’ information, banks will be challenged to make the banking experience more intuitive, seamless and digitally engaging than ever before. Banks are truly no longer competing with other banks, but instead, with companies that have unlimited technology influence and budgets.
But, banks also have something these technology companies don’t have – the decades, sometimes centuries of experience in the financial services landscape. Financial institutions have navigated regulation, advised and counselled customers and have safeguarded and managed funds for countless years. They have the trust and relationships that are needed to have such a critical role in consumers’ lives; but, they must adapt.
The emphasis on digitisation and modernisation will likely prove to be too large of an undertaking for banks to embrace alone, especially with the onset of PSD2. There often simply isn’t enough time or resources available for banks to design, build and maintain their own digital channels that can compete. To combat the influx of new competition and stay relevant, more banks will partner with nimble fintech companies to deliver an enhanced user experience in 2018. When banks can find a solution provider that complements their goals and objectives, these collaborations have proven to be wildly successful.
Many fintech companies have the agile architecture necessary for banks to keep up with the evolving regulatory, business and technology needs of today’s landscape. The use of automation relieves bankers from spreadsheet-based procedures and incorporates speed and accountability into new areas of the institution, such as SME lending or deposit account opening. Streamlining processes like these, that were previously manual and cumbersome, can boost overall efficiency for an institution.
When considering fintech providers, savvy banks are paying special attention to those that leverage the cloud. Investments in cloud technology can provide digital automation throughout the entire institution while creating an infrastructure that is agile, transparent and secure. The cloud’s benefits are not dependent on a bank’s size and scope – it levels the playing field for institutions of all sizes.
While some still question the security of the cloud, these hesitations are often due to misinformation rather than actual vulnerabilities. In fact, leading cloud providers, such as Salesforce, provide risk management and security capabilities that far surpass what can be accomplished with in-house applications. These providers encrypt data, monitor system activity in real time, employ a host of software and hardware tools to defend their networks and back up user data.
Banks should keep in mind that not all fintech partners are created equal. Instead of finding a technology provider that wants to replace major components of a bank’s operations and culture, institutions should instead consider fintechs that want to help banks transform processes from within. Fintech partners should be exactly that – a partner invested in and dedicated to helping a bank succeed. Simply ‘setting and forgetting’ new technology may be adequate for the first year or so, but banks will come to find that this strategy comes up short in the long haul, as channels quickly age without consistent attention. Successful banks are investing in comprehensive digital strategies that are continuously updated and innovated, and that also allow them to flexibly evolve as business needs and customer preferences change.
The boost in efficiency and productivity that bank-fintech partnerships can provide will be especially beneficial this year, as the UK will be paying more attention to productivity across all sectors. The Autumn 2017 Budget, released just a few months ago, highlighted the recent decrease in productivity from 2 percent to 1.5 percent across the region. The automation and digitisation that many fintechs bring to their bank partners will greatly contribute to increasing institutions’ overall productivity levels.
While 2018 will present some challenges, like the change in data sharing with PSD2, banks are well equipped to compete against alternative lenders and succeed. However, to do so will almost certainly require an investment in technology. By embracing the right fintech partner, banks can revamp processes within, increasing efficiency and digital engagement to remain relevant and succeed.
Author: Pullen Daniel | Managing Director – Europe | nCino
Prepared and edited by @EdinaZejnilovic, Journalism Student at DCU.