There was a time when traditional financial institutions were skeptical of financial technology, partly due to the industry’s disruptive nature and competitive position in terms of conventional finance. Today, as the world is still dealing with the consequences of the COVID-19 pandemic, FinTech has become a cornerstone of the ‘new normal’, and banking customers are finding it increasingly appealing on a global level. This radical change in how we manage our finances has convinced traditional FIs over time that the future lies in digital, and that this inevitable change is better accommodated by their infrastructure sooner than later, if they wish to stay afloat in this raging sea of economic uncertainty.
FinTech companies and neobanks have seized the opportunity to fill in the gaps left behind by traditional finance; gaps that only widened with the onset of Coronavirus, but were ultimately filled by the almost-exponential adoption of FinTech around the world due to its convenient offering: no physical contact, instant financial access, remote account management, and much more.
As more FinTech companies and neobanks managed to cater to the needs of a post-pandemic world, their popularity rose and they became major contenders for the modern banking customer. With significant cuts to physical cost, these new players injected their capital in new emerging technologies that helped position them as disruptors of the digital era, delivering customer-centric, tailor-made experiences that delighted consumers and basically eliminated the risks associated with branch visits, saving a lot of time and effort in the process.
This consumer-first approach has resulted in a banking population that expects everything to be available ‘right now’, with rising expectations of ease, speed and convenience from their banks. While all this was happening, traditional financial institutions were relatively late to acknowledge FinTech’s potential for satisfying the modern customer, and even today as they adapt to the situation, they are still encumbered by their legacy processes and infrastructure. However, banks today have also prioritized their digital processes and are swiftly jumping on the speeding train that is FinTech. They are actively trying to guide customers away from slow, traditional processes through launching mobile banking wallets and apps, and perhaps more importantly, banks are actually partnering up with various innovative FinTech companies and startups that smoothly complement their offering, whether in the backend of frontend. They are trying hard to streamline the customer journey, using digital ID verification solutions and similar technologies that are big on speed, reliability, security, and ease of use.
Although FIs were aware of the need to digitize their approach even before COVID-19, the pandemic has really accelerated this need as physical branches were unable to open for the better part of a whole year, resulting in an unprecedented need to finalize their digital offering. This swift change sparked the digital journey for many traditional FIs, and they realized that they were already poised to make an impact in that area due to several existing factors:
Banks have the financial capabilities to digitize their strategies and offerings and practically eliminate physical processes. They also have an extensive knowledge database filled with customer profiles and demographics, and this rich history can be leveraged to reach the digital customer and maintain a healthy relationship with them. Finally, banks have their brands solidified in their customers’ mind which offers a great competitive advantage over emerging FinTech companies that are still making themselves known. These existing advantages can be exploited by banks to quickly gain ground in the digital finance ecosystem.
These capabilities are a great starting point for banks to go digital, but there are many more questions that need to be answered, if they are to catch up and compete with trendy FinTech organizations. Here are some critical questions that leading traditional FIs need to contemplate before making their digital transformation:
- Are all digital processes seamless and without interruption for customers? In other words, every single digital service needs to be easy, intuitive and without hiccups in order for customers to get (and stay) on board.
- Are all the bank’s digital channels aligned with physical processes and ready to accommodate the dynamic needs of modern customers? Websites, mobile apps, branches, customer service departments and any other relevant entities need to communicate and execute seamlessly between each other, so in turn the customer experience becomes flawless.
These are important questions to ponder, but the process of digital transformation is nowhere near as simple for traditional banks and FIs; this is why the time is now to invest in digital technologies and optimize digital channels to reflect all physical processes as much as possible, which allows for banks to perform their core offering in the background while maintaining their modernity and relevance with the digital crowd to keep the modern customer and acquire new ones along the way. The road is long but traditional FIs are greatly positioned to catch up with established FinTech companies if they adapt their strategy to the digital age.
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