Digitization is here. It is changing today’s business landscape so rapidly and so radically that enterprises are being forced to completely transform their business models to meet the new demands of customers and address new operating realities and growth opportunities. Among those struggling the most with the digital revolution are banks and financial services firms, which are under intense pressure to adopt strategies completely unlike those they have used in the past. And, all the while, they must comply with increasingly strict compliance and security regulations.
Some well-established companies that have not responded to market changes quickly enough have lost market share. Those that aren’t changing at all are on the road to extinction as newer, disruptive upstarts create alternatives. As is often the case in business, what presents itself as a problem can be made into an opportunity. Firms that have embraced the need for change are finding ways to leverage digitization to extend their reach, acquire clients and increase customer loyalty.
Here are the Top 5 trends that show how successful banks and financial services firms are redefining themselves.
1. Swallowing the whole digital pill. Consumers increasingly use mobile touchpoints for online purchases and transactions, and they expect to interact the same way with their banking institutions. To retain and attract customers, many banks are beginning to move beyond their remote banking apps and more widely adopt digitization via e-forms and workflow systems, which they can rapidly implement without deep integration into complex legacy architectures. Other organizations, like Spanish bank BBVA, are gaining digital capabilities by acquiring startups that already provide digital banking solutions. This push for broader digitization requires service provider and software firms to prepare for increased demand for mobility testing services, quality analysis and mobile data management.
2. Capitalizing on the “zero-friction” model. More and more banks are embracing a client service model that requires minimal contact with their customers. A couple of years ago, early remote check deposit technology began to change the way people conducted their personal finances. Now, as banks increasingly engage technology providers and make significant investments in near field communication (NFC), mobile payments at the point of sale are becoming more widely available. The release of Apple Pay’s mobile payments service for iPhones and the introduction of Host Card Emulation (HCE) for Androids have made a lot of slow-moving banks act quickly.
3. Drilling into data for deeper insight. Like other consumer-facing enterprises, banks need specific and current information about customer behavior and preferences. To enhance customer loyalty and lifetime value, banks and financial services firms are seeking niche service providers that can offer customer analytics solutions that collect, store and interpret both their structured and unstructured data.
4. Integrating and recycling services to create a leaner, more productive outcome. Mergers are common in the BFSI sector, but current digital disruption in the industry means that banks must place special emphasis on delivery models that ensure seamless integration and interoperability. For example, a newly merged entity that is suffering from many duplicative processes, differing standards and multiple, redundant process management tools needs a service provider that has both expertise in BFSI operations and strong business process management and post-merger integration capabilities.
5. Leveraging cross-industry experiences, economics and engineering. Different industries have traditionally used different ways of acquiring and retaining customers. Digitization is creating best practices in process, technology, tools and platforms that can be shared across industries. For example, the BFSI sector can glean insights from data in the life sciences, healthcare and retail industries to increase adoption velocity, reduce engineering time and improve financial accounting.
Digitization is now. Its impact is multi-dimensional and permanent. Enterprises must act quickly to create a digital strategy to fundamentally redefine how they do business.
ISG helps enterprises no matter where they are along the digital transformation journey. Contact us to discuss further.