Digital disruption has changed the way consumers interact with products and services and has challenged businesses to rethink their model, create new alternatives, and reinvent themselves, including the banking sector. The COVID-19 pandemic also helped accelerate this new movement of consumer behavior, which caused a significant impact on how people live and interact with services today.
A study shows that new behaviors emerged across eight areas of life, including shopping, consumption, communications, and information since the pandemic. The same study points out that behavior changes will reshape consumer decision journeys, so companies need to adapt as fast as possible.
In this new scenario, the main challenge of the traditional banking sector is to be able to compete with the latest neobanks and attract new customers in the rapidly changing environment that requires quick responses. Globally, more than two-thirds of generations Y and Z are using digital channels, including mobile banking applications.
There is a new generation of consumers who changed the dynamics of business for companies. According to a recent study, Gen Z is more pragmatic and realistic than the previous generations. As consumers, they expect to access and evaluate a broader range of information before purchasing something. The study still says that Gen Zers analyze what they buy and the act of consuming.
A report shows that the global neobanking market is expected to reach USD 722.60 billion by 2028. The same report says that the European region dominated the neobanking market last year and accounted for over 30% of the global revenue share.
Technology development helped new financial service providers to pull down barriers to the banking industry and provide services that traditional banking companies were not yet offering. There’s a need in the banking sector to reinvent themselves to reach those new customers and provide their current customers with efficient products and services customized to their needs and focused on the user experience.
How can the traditional banking sector act in the face of the new challenges?
Digitalization, or digital transformation, in the banking industry goes beyond reducing paper usage. It’s about improved customer experience, efficient services, and increased security in the digital environment.
The current leading players succeed in the face of competition because they understand the importance of a solid digital strategy that is constantly updated to deliver the best digital solution. So, how can the banking industry act?
A client-centric approach focuses mainly on the customer experience, one of the most important steps towards an effective digitalization process and reinvention in the banking industry.
What once was done at the branch, with hours spent on conversation, form-signing, and document verification, now can be done at home, through an internet-connected device, within a few minutes. It is a great revolution for banks, but it is not effective with a poor customer experience.
A client-centric approach focused on the user experience prioritizes easy navigation, the customer’s online journey, and integration with multiple channels to replace the operations that were once done at the bank. The easier it is to navigate during the journey and access support channels effectively, the better the customer experience is, which also helps decrease the drop-offs and increase profitability.
However, more than understanding the customers’ current needs and demands to provide a smooth journey and experience through the operations, it is essential to invest in innovation and to have leading-edge technology to face the constant-changing challenges of today’s world.
Effective operational model
As mentioned before, innovative actions and cutting-edge technology are strong allies to ease the customer experience journey and assure an effective operational model, which is crucial for the banking industry.
The digitalization process demands significant changes in the traditional banking systems and how they operate and record information. So, there’s a need to look at the new techniques developed to assist in those processes, such as Artificial Intelligence (AI) and Machine Learning (ML), that can perform ID validation processes remotely, for example, and release the banking staff to more crucial operations.
Moving the banking operational model from a physical place to the digital world is a major task that demands that companies rethink their entire operation to a more optimized process.
The right partners are a great help at this stage to assist banks in making this transition as smooth as possible and to provide them with the most suitable tools to continue their operation with quality and efficiency.
Up to date compliance regulations
As much as technology advances are essential to the digitalization process of the banking industry, so are security standards and certifications that apply to the industry. The world has gone remote, but security is still a significant concern for customers and companies, especially the banking sector. Compliance is part of the banking industry’s core, and it needs to remain as it is.
So, as you move forward on digitalizing banking processes, you don’t leave compliance behind. The right partners, with the know-how of the banking industry, help you ensure your organization has the right tools to fulfill Anti-money Laundering (AML) and Know Your Customers (KYC) requirements while reducing the risk of fraud even in entirely remotely processes with an optimized operation.
There is no news saying the future of the banking industry is digital. It is, in fact, already happening, so the real challenge is to keep up with the market and the fast-paced environment. Around the world, banks are looking for the best way to offer new solutions and improved experiences to their customers and innovative ways to remain leaders.
The key is to find a partner that understands the industry and the needs of the banking sector and the current trends and newest tools to improve the digital banking experience. By taking those steps into a whole reinvention journey, it is confident that banks will achieve a positive evolution.
Miguel Pontes, Head of Business Strategy of LOQR, shares his thoughts about the main steps for the banking industry to reinvent itself in this article published in Portuguese on Dinheiro Vivo.