The consumer banking sector is growing rapidly, while traditional banking services and products will no longer be sufficient to retain and develop customers while continuing to generate profits. Setting up accessible financial products where the customer needs them opens up a world of possibilities for both brands and banks.
To meet the growing demand for integrated financing, financial institutions are increasingly offering banking as a service (BaaS) offers that non-banks can use to better serve their customers. BaaS enables financial institutions to implement various online banking technology solutions from trusted service providers and fintechs through APIs that can be used to quickly launch new products.
Banking-as-a-Service is about breaking business process silos and exposing them to end customers, and enabling access through their APIs to facilitate specific banking functions (loans, cards, deposits, insurance, payments, etc. .) in a market model. In some geographies, regulations have encouraged this for better access to information and data to bring value to end consumers. Fintechs have also benefited from this regulation. Overall, this is a winning proposition for the end consumer. Data is becoming a key asset that banks have been collecting for many years, but have not leveraged for the benefit of the customer or their internal operating environment.
FinTech startups have received immense attention from investors around the world. Lately, India has become one of the fastest growing FinTech hubs. According to a MEDICI Global Inc. report, “Total financing in the FinTech sector in India reached $ 5.4 billion in the past 18 months (January 2019 to June 2020), with digital lending startups leading the race in terms of number of ‘financing agreements’.
FinTechs have sprung up around the world to help fill in the gaps and deliver a better end-user experience using data to improve CX. The disruption caused by fintechs has been a wake-up call for traditional conservative global banks. FinTechs are everywhere, and they’re not just limited to a specific region like Silicon Valley. Fintechs are leading the way in Europe, London and Asian countries like Singapore, Thailand, Indonesia, Malaysia and India, Australia and New Zealand.
The future is bright, especially for tech savvy Indians. It doesn’t take much to launch a FinTech in any market; By leveraging cloud technologies, more and more fintech startups will emerge over time, every year. The Internet and cloud computing platforms have made it easier to operate and reach customers around the world.
Complex banking institutions around the world are striving to reduce their dependence on traditional infrastructure. Having said that, it is a difficult task due to heavy regulations. Banks have realized that their infrastructure is not flexible as FinTech companies and unable to meet changing customer demands. As a result, they started funding Fintech startups to improve CX and quickly create new products. Some banks participate in startup events, create their own accelerators to fund startups in their ecosystem, or invest in late-stage startups through investment vehicles.
It’s time for traditional banks and financial institutions to harness the value of FinTechs to their advantage and not fight with them. Partnerships, collaboration, and investing in them should be considered if you care about your customers and want to continue to be their bank in the future. FinTechs are here to stay and they are a key disruptor, so it is best to exploit them.
In general, IT helps banks and credit unions take advantage of next-generation technologies to help improve the end-customer experience, be it in opening accounts, reporting information, KYC, or regulatory compliance, by better organizing data services within the financial institution or even partnering with a data service provider to help create next-generation experiences for their end customers in managing data. retail, commercial and investment assets.
Most next-generation banks offer digital integration to their clients from the comfort of their own homes, as they don’t need to go to a physical branch to initiate this relationship. They leverage fintech partners to enable this seamlessly and with as little friction as possible. Banks and credit unions are relying on Fintech partners to achieve digital KYC which can now happen in minutes versus days before.
The pandemic was a wake-up call for many banks and credit unions that had not started their digital transformation journey. Digital transformation efforts have been accelerated, new business models are adopted, new offerings are created to improve the end-user experience, the use of AI and machine learning techniques have enabled leverage existing data and create components to better serve customers. Banks are a lever CRM systems like Selling power to collect data on the customer, but above all, to better manage the customer relationship. A number of leading banks are leveraging Salesforce, IA / ML, and NLP technologies for the future. Banking needs to be accessible to all segments and many efforts are underway to serve unbanked / underbanked customers.
Established banks must reinvent themselves to stand a chance against disruption caused by digital fintech companies.
The author is Chief Strategy Officer, BFSI at Persistent Systems