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How Digital Innovation can Transform the Future of Banks

13 January 2020

(FinTech Egypt – FinTechMagazine.com)

As we enter the second decade of the millennium, digital innovation has never been more revolutionizing or relevant to financial services and the banking sector. Financial institutions are continuously developing digital strategies and incorporating them into traditional processes, but the challenge here is to keep the pace and catch up with rapidly developing consumer expectations.

Consumers today are flooded with innovative solutions from FinTech startups and tech-centric companies, with each product or service providing intuitive and easy-to-use interfaces while granting better security. It’s a highly competitive medium that banks need to tackle with an innovative approach, if they are to stay relevant and make a solid impact.

Emerging technologies are increasingly finding their way into complex financial structures to provide a myriad of endless possibilities in their application. The rapid development and adoption rates of trendy tech like social media, cloud, big data and analytics, machine learning (ML) and artificial intelligence (AI) are quickly enhancing processes and customer experiences by delivering innovative methods of dealing with money. Banks need to get on board and integrate these technologies into their strategy to meet their short and long-term objectives.

With FinTech companies already gaining new ground in regards to acquiring new customers and attracting bank-loyal ones, it’s now or never for banks that are still resistant to explore the digital spectrum. The world of digital finance is witnessing unique partnerships, mergers and acquisitions between traditional banks and FinTech entities, where they establish mutually beneficial relationships that allow FinTechs to get access to a wide database of customers in addition to having a huge backbone represented by these FIs, while FIs benefit from the innovative reach and creative practices that FinTech companies can provide. These partnerships are actually more beneficial to banks and similar institutions as they give them an instant boost into the digital world with minimal efforts. They focus on their core capabilities while not having to worry about the needs of the digital customer. For example, the tech companies have innovation labs that focus on developing tailored solutions through randomized controlled trials (RCTs), resulting in adding value and increasing efficiency towards attaining their goals.

FinTech companies can also contribute to keeping banks aware of tech-related regulatory and risk-oriented needs, with RegTech companies popping up to serve this exact purpose. InsurTech agencies are also growing to cater to insurance needs and concerns in the digital world. Big data is also an area where tech firms can greatly support banks and FIs, resulting in a critical aspect of personalization and an overall better quality of customer experiences.

Ernst & Young released a survey that reported that 93% of banks consider improving data quality as their biggest risk management priority for the next three years.

There isn’t just a need for banks to evolve into the digitization age, but there are clear benefits to that notion. FIs can safely assume that their growth will be sustainable with the introduction of digital services into their core offering, and by transforming their organizational culture into a future-oriented one for the coming years. Leaders of the finance industry need to reimagine their business models and adapt to a rapidly changing ecosystem that is propelled into the future on the back of digital entities.

Tags

Ernst & Young, InsurTech, RegTech, digital banks, financial institutions, artificial intelligence, AI, machine learning, ML, social media, big data