Digital transformation has touched every industry in one way or another, but not all organizations are matching the pace. Four out of five financial institutions acknowledge that digital transformation will reshape the industry’s competitive landscape, according to the Boston Consulting Group, yet 43 percent admit that they do not have a digital strategy in place.
Most bank leaders understand that digital transformation is essential for long term success and sustainability. However, many banks still rely on digital banking solutions that were created using outdated concepts and legacy frameworks. This is one of the main reasons why digitalization attempts often end in failure or significant losses. To keep up with this quickly-evolving digital market, banks must adapt their operating models and place a greater focus on user experience.
Here are some of the top ways that digital transformation will impact the banking industry moving forward:
Traditional Banks Will Need To Move Online
Mobile banking is more popular than ever before, with no sign of slowing down. In fact, nearly one-third of people in the United States use mobile banking more than any other app on their smartphone, according to a Mobile Banking Study published by Citi. The study also found that eight out of ten people now use their smartphone to manage their money on a regular basis.
The digitalization of banking is not a new development, but it is one that many financial institutions have been slow to adopt despite increasing customer preferences to bank online. Customers have high expectations for ease of use and digital access to banking products and services, which means making the move to an online platform.
Bank digitalization can result in a wide range of benefits, such as greater business efficiency, increased accuracy, cost reduction, greater agility and enhanced security. Banks also gain a competitive advantage when they develop a stronger IT architecture.
Mobile Applications Are Essentially Mandatory
The banking industry is becoming more technologically savvy due to the rapid growth of mobile technologies. While some financial institutions have deferred the development of mobile applications, this move has essentially become mandatory in recent years.
The benefits of mobile banking for customers are clear. Access to a mobile app provides security, convenience and ease of access. Mobile banking also presents certain advantages to the banking industry itself, such as lower expenses, greater return on investment, boosts in security and the ability to more easily gather customer analytics.
Mobile applications can help financial institutions retain their existing clients through a variety of features and functionalities, such as push and in-app notifications. These notifications help make consumers aware of discounts and other relevant offers that may be of interest to them. This can provide banks with a major competitive advantage.
New Technologies Must Be Adapted
With digital transformation comes a myriad of new technologies that banks must adapt into their existing infrastructure, such as Artificial Intelligence (AI). AI refers to the intelligent actions of applications or devices without human interference, such as machine analytics, machine learning, algorithms and natural language processing.
Cloud computing will also continue to have a major impact on the banking sector. The cloud has proven to be an optimal solution for improving data capacity and business scalability. Cloud computing also enables banks to achieve significant gains in efficiency and cost reductions.
The banking industry is also starting to see an uptick in the use of blockchain. This record-keeping database is the technology behind the Bitcoin network and has transformed the way that information is stored. Blockchain has many uses in the banking industry, such as faster payments, fundraising and trade finance.
The Internet of Things (IoT) is also important to the world of financial services. IoT refers to a network of devices connected through the web and is used to transmit and obtain data. This technology has many benefits in banking, such as the ability to integrate on-demand services to customers.
Privacy And Security Of Data Are Critical
Privacy and security concerns are always top of mind in the banking industry. Financial institutions are responsible for storing personal customer information and banking details, and without a strong security strategy in place, sensitive information could be lost, stolen or corrupted.
Digital transformation focuses on preventing fraud against clients and minimizing system exposure to cyberattacks. Bank leaders must strategize on ways to prevent attacks, identify threats and mitigate the impact of external interference.
Speak With A Digital Transformation Expert Today
Digital transformation will continue to evolve at a rapid rate, resulting in risks that become more difficult to manage. Effective risk management requires transparency, collaboration and seamless integration. This applies to both traditional banks and web-based financial institutions. To learn more about the ways that digital transformation will impact banking or to speak with an expert, contact Hartman Executive Advisors.