Traditional banks have faced significant challenges in the last few years, and banking industry experts assert that these difficulties will only grow with time. In earlier times, banks have historically relied on their long histories and well-established reputations to retain customers. But, now we are witnessing a digital transformation in banking. Small, mid or large banks – this revolution has covered them all.
Recent trends show that today’s banking clients are more willing to switch banks if they find services that are more aligned with their needs elsewhere. Because of this, traditional banks around the world have begun losing valuable clients to newer competitors such as fintechs, online banks, and other up-and-coming financial institutions. Nonbank financial companies (NBFCs) are slowly becoming more and more popular among the people who has low CIBIL score but want to borrow cash.
For many banks, the problem comes down to technology. Banking customers today live in a highly digital, interconnected world in which many services are available on demand and readily accessible from computers or mobile devices. And while they expect the same speed, efficiency, and convenience from their banks, traditional banks frequently don’t have the technological infrastructure to meet these demands. Many continue to run on antiquated legacy systems that are years or even decades old.
Digital banking transformation is the way forward for banks that wish to adapt to the demands of the new age and retain their competitive edge. Here are four best practices your bank can adopt to expedite its transformation journey. Learn why digitalization is important in banking sector.
1. Work toward a culture of innovation
Digital transformation is not simply a single event. Instead, banks must learn to think of innovation as a continuous process that enables them to evolve with changing markets and business environments. It’s high time for traditional banks to discard their historically risk-averse approach to change and embrace short-term challenges in the name of long-term success.
Such a radical culture shift is only possible with innovation-focused leaders who are willing to implement major structural changes. Hiring top-tier technical talent is also a must for banks to develop and maintain this culture of innovation. Highly qualified project managers, software engineers, designers, and other IT professionals are capable of not only working with contemporary digital solutions, but also maximizing their capabilities.
A more progressive and tech-savvy workforce is well-equipped to thrive in a digital-first business environment and carry bank operations forward into the future. Such personnel will help all the existing customers and strive their best to retain old.
2. Audit incumbent systems
Outdated processes and technology frequently contain efficiency gaps, redundancies, and other weak spots that can cost banks valuable time and resources. These inefficiencies also inevitably compromise the customer experience and may motivate bank clients to seek better service from competing institutions. Hence, the first step toward a successful digital transformation involves understanding what needs to change about a bank’s current system, why such changes are necessary, and what solutions can help.
Banks must first reevaluate their current operating model and business processes, as well as review any changes to government and regulatory guidelines. These audits will allow them valuable insight into current market practices and trends that can guide their transformation. From there, it will help to think about adopting a new core banking system and identifying what capabilities would be most beneficial.
Common goals for a digital transformation initiative include reducing operational costs, accelerating product development and rollout, and improving the customer experience, to name a few. Automation in various verticals is also a key to improve performance and efficiency.
3. Modernize the back office
Becoming more agile and achieving greater operational efficiency are among the foremost goals of most banks digital transformation efforts, and it’s not hard to see why. Banks need to be operating at the top of their game to provide modern customers with the fast, frictionless, and perennially accessible digital services they demand. Using digital solutions to simplify, standardize, and automate basic business processes is one major way to get there.
By cutting out paper-based procedures and minimizing manual labor, banks speed up operations and also reduce the risk of potentially costly errors. They are also adapting new age technologies including cloud based services for faster transfer of documents. Chatbots are also useful for accomplishing mundane tasks like generating financial year statements, giving breakdown of services, consolidated reports etc.
Prioritizing cloud-based solutions is also key to boosting speed and accessibility while keeping risk to a minimum. Moving the bulk of their data and business processes to the cloud lets bank staff work from a wider range of devices and physical locations, enabling greater overall productivity. Implementing cloud-based software also gives banks timely access to updated functionalities and upgrades from providers.
4. Embed intelligent technology into new systems
Data is a company’s most precious resource in today’s world. Banks need immediate access to complete and accurate consumer and market data in order to make strategic business decisions and develop competitive products and services. Leveraging intelligent technologies such as AI (Artificial Intelligence) and MI (Machine Learning) is one failsafe way for banks to optimize their data investment.
These tools are capable of connecting key information across the entire bank and generating detailed business insights, which banks can then use to enhance the customer experience. Such digital transformation in banking have made financial life simpler. Customers are also happy with such fast and efficient services. These new trends in digital banking are revolutionizing the entire sector.
AI technologies, in particular, can provide invaluable support to employees across every department. Depending on their needs, banks can invest in AI solutions to help with customer service, risk assessment, human resources management, and even cybersecurity. Machine learning (ML), meanwhile, makes it possible for certain bank systems to operate autonomously without human intervention. These technologies working in tandem not only enhance banks’ operational efficiency, but also provide them with the critical intelligence they need in real time.
Though digital transformation is a daunting prospect for many traditional banks, today’s rapidly evolving banking industry makes it clear that financial institutions must adapt or face obsolescence. Banks must embrace and overcome the challenges of innovation if they are to remain competitive and relevant to their customer base for years to come.