The banking industry is being transformed by technology. Similarly to retailing, banking is getting more customer-centric and shifting towards digital transformation that allows for a better customer experience. To date, online banking is already dominating the Asia-Pacific region and steadily catching up in Europe. Internet banking is way more flexible and beneficial. It gives access to a wide range of banking services anytime and saves customers from the trouble of having to show up in a bank each time they make a transaction or take out a loan.
The largest banks in the world, like JPMorgan Chase and Citigroup, have adopted the latest international banking technologies, but plenty of smaller financial institutions are lagging behind. This slowness may cost them millions of dollars because the majority of bank customers expect to manage their finances from mobile phones.
Forbes reiterates that a digital banking strategy is essential for banks to stay competitive and meet the evolving needs of customers in today’s digital age. According to a report by McKinsey, banks that embrace digital transformation can expect a 20-30% increase in revenues and a 20-40% reduction in costs.
Below are presented 9 most effective ways of overcoming challenges faced by investment banks with the brick-and-mortar mindset.
1. Artificial Intelligence
It is the number-one technology that substitutes the regular middle man for a smart bot that guides a customer on how to perform basic banking correctly and safely. AI bots are excellent at analyzing investments and financial assistance. They greatly simplify decision-making by providing accurate and faultless prospects based on which you can assess your financial position and opportunities.
The use of AI software seems advantageous in terms of security as well. It relies on complex algorithms that provide an increased level of protection and minimize the risk of fraud or hacking into accounts. The adoption of AI tools brings dual benefits to banks as it also permits to reduce spending on personnel.
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2. Mobile banking app
One of the top online banking trends is the increasing popularity of mobile banking apps, with more and more customers preferring to manage their finances on the go. Whether nationwide or international, any banking institution needs an easy-to-navigate mobile app that helps customers stay in touch with their financial space around the clock. The banking app lets users feel in control over their finances and solve part of their problems without consulting with bank officers.
Digital banking technologies have revolutionized the banking industry, allowing customers to access their accounts and perform transactions on-the-go via their smartphones and other mobile devices. At times, a banking app can provide full access to a large pool of services on condition that the bank itself is a financial supermarket that is capable of meeting every consumer’s demand.
However, the app integration with the banking system requires the engagement of a third-party provider. This collaboration can be long-term and quite resource-intensive, but in the long run, a banking mobile app creates a solid ground on which financial organizations can further build strategies to promote their services and expand their client base.
Another significant advantage of having a mobile app is the opportunity to implement mobile payments. Cashless payment methods are becoming increasingly mainstream because people value their time and strive to spend less time paying their daily bills. This trend towards fast and cashless servicing is prevalent in other industries as well. For example, Honda established in-vehicle payments that allow a driver to pay on the go. It is comfortable, quick, and safe.
3. Data monetization
Data monetization is another effective online banking strategy that banks can use to gain a competitive advantage. Bank data is commonly followed by detailed analytics reports that give a good understanding of consumer behavior. This information can be of great value to banks themselves that are involved with promoting personalized communication and customer satisfaction. Similarly, a bank can use it to guide companies that operate in other industries and need third-party insights to deliver their services on a high level or develop brand loyalty.
4. Blockchain technology
Though many people link blockchain technology with cryptocurrency, it is also a digital banking strategy used largely to ensure secure financial operations and safe data storage. In particular, more and more financial companies adopt it to automate verification processes and speed up digital transactions. Blockchain eliminates the need for intermediaries and makes the banking finance system invulnerable and glitch-free.
5. Extended ecosystem
Today, banking activities are not limited to investments, payments, financing, and cash management. It is vital to go multichannel to be able to offer value to any client logging in their account. This is why financial institutions should extend the core business of their ecosystems by overlapping with adjacent activities, such as cash-flow analysis, accounting, or tax management, that are important for small and medium businesses.
Going beyond banking-related activities can be a good decision for large-scale banks that have enough resources to embark on providing non-banking services, for example, health services, mobility services, or ITO. Therefore, giant banks involved with increasing their market share should transform their ecosystem structure to engage more customers.
6. Advanced marketing
The multi-level structure of the banking ecosystem creates an ideal climate for providing flawless customer journeys. Since a customer usually has multifaceted goals, financial institutions need to organize multichannel campaigns encouraging their visitors to fulfill all their needs in one place, namely using one app.
Multichannel campaigns are aimed at ensuring a customer will be notified of banking assistance on most of their devices and thereby get motivated to learn more about a specific service being part of their needs. Such campaigns also require measuring optimal ROI, defining the best cadence, as well as investigating the target audience. Based on these metrics, banking analysts can build a perfect digital marketing strategy.
7. Smart management
At last, any digital transformation strategy should be coupled with smart management that cultivates a growth mindset and assists in the smooth implementation of strategies. Managers are also responsible for keeping the spark in employees to compete and outdo their rivals. Likewise, they should instill the idea that customer satisfaction is the main value of banking. If a customer fails to get their best banking deal, their loyalty falls sharply, and no digital tool can fix it. By contrast, a couple of digital strategies backed by sound management can drive amazing transformations and promote a bank to the international market.
Therefore, all the digital strategies offer efficient and reasonable solutions to traditional banks that are threatened by online banking services developing rapidly but still need a good management approach to pull it off.
Since the success of a bank heavily relies on its digital banking strategy, banks must prioritize building trust with their customers. In order to remain competitive in the current banking landscape, modern financial institutions should cultivate trust and promote transparency, which is the second most important factor for financial product selection, according to Raconteur’s research. This has led to the emergence of the concept of radical transparency, where businesses strive to create an environment of openness and honesty by communicating the truth and admitting mistakes to meet customer expectations.
As per current trends, traditional banking practices are being replaced by a more transparent approach. By prioritizing transparency, new financial institutions are rapidly gaining market share, even in the face of centuries-old established practices.
9. Cloud computing
Cloud computing has emerged as one of the most popular digital banking trends, with a significant surge in its usage. Essentially, it refers to the availability of computing services like finance software development, data storage, and networking tools.
Cloud computing is expected to see a major surge in adoption within the banking sector in 2023 due to the numerous benefits it offers, including global scalability, enhanced productivity, faster processing speed, and added convenience.
In addition, Cloud computing allows financial institutions to mitigate the risk of data loss in case of physical disasters while also enabling the elimination of massive data stores and minimizing the need for physical servers and personnel to manage them.
How to stay relevant to customers?
Technology evolves faster than any financial company can embrace it. To stay afloat, a physical bank should be poised to implement several of the strategies above and collaborate with third-party providers that assist in integrating technology quickly.
Though it might seem that right now it is not such a need, online banking in Europe is on the same level with regular banking and expected to surpass it within a few years. So it is all about online banking or nothing at all.
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