Mainstream Banks Must Innovate to Stay Ahead of Competition
Cash, deposits, customer interactions, and everything else aren’t the same in the financial sector anymore. The banking industry is undergoing a significant change alongside a high degree of disruption. And the wave of the pandemic accelerated the change. Not only did it change customer behavior, but it also brought banking into a much clearer and more instant focus.
And with individuals managing their finances through smartphones, the banking industry is looking towards a paradigm shift, where there is a focus on convenience. But that’s not all!
In this article, you will find the challenges faced by the banking sector, the importance of using advanced technology, the rise of fintech, and what banks can do to embrace the changing consumer preferences.
Let’s begin!
Challenges Faced by the Banking Sector
The younger generation saw a transformation into a digital world. The fact is that this generation uses a smartphone to manage their life aspects. Using old or traditional business models won’t engage or attract new customers. While the global economy isn’t at a point where one should be rushing into bitcoin investment, the expectations are different from what they used to be a decade back.
For instance, brand loyalty is dropping. Consumers look for cheaper deals and better services. The research found that one in five millennial customers switched banking providers in 12 months. Since active and engaged customers are prepared to move on if they aren’t happy with a service, there is a market to exploit. And if you are not prepared to innovate, and advance at the pace of the changing consumer preferences, challenger banks or neo banks will become your roadblocks to success.
Innovation, service, and reliability are the key phrases here. But to achieve them, you need to understand the importance of digitization in banking.
Digitization in Banking: Unraveling its importance in 2022 and Beyond
Digitization is important if you want to diversify your service offerings. This is why there is a need to invest in large portions to improve user experience. The greater focus must be to make every day banking a dynamic occurrence so that it can help customers feel assured that their banks are changing with their evolving needs.
For example, in the UK, banks streamlined their operations by adapting to the digital world and did this: They closed branches and cash machines. They started offering mobile services in less accessible areas. And the second was that they streamlined the specialist knowledge.
They provide services that help with moving away from branches and being closer to specialists from the comfort of their homes. Belgium is, in fact at the forefront of such progress. They encourage new players in the fintech space and banking sectors to innovate and create new jobs. This improved customer experiences.
But that’s not all!
Fintech is challenging the future of the banking sector
Personal finance is the buzzword now. Over the last few years, you will find so many apps in this space. App providers aren’t only from banks, but there are so many solo developers to create stand-alone savings, budgeting, and money management apps.
You will also find options like app-only banks. You can create current accounts that you can manage using a phone or a tablet. You can receive services through a live chat service. The customers are using such challenger banks because of rapid action in cases of lost or stolen. Only a few taps and they get a replacement rather than going to the branch or calling customer service. While the challenger banks might not be at the level of traditional banks, their presence alone will encourage the conventional banks to adopt a digital-first approach and continue evolving.
This is how conventional banks are catching up
It won’t be surprising that mainstream banks aren’t slow to adopt a digital-friendly approach. The mobile-first focus is growing in importance to keeping up with the changing consumer landscape. Further, apps to help customers manage finances on a day-to-today basis are increasing significantly.
For instance, Yolt allows its customers to add and view all of its accounts in one app. Apps like these are becoming quite common nowadays. What else is helping banks improve their processes and engage customers?
1. Open Banking: One of the benefits of the 2008 financial crisis was that it changed the focus towards “how banks interact with” their clients. Plus, with the Payment Services Directive, the rules of how users access financial information have changed. That’s when open banking became quite popular amongst providers and customers. While there is still a long way to go, these developments will help banks to be ready for the future of banking.
2. Blockchain technology: This will improve the transactions and their processing time. It will help you carry out large business transactions without any issues with security or compliance. It will help them innovate ways to track fraudsters and keep their customers safe.
Final Takeaways: Embrace technology to help customers and keep them engaged
It’s vital that traditional banks outpace their competitors and adapt to the digital landscape. For this, you have used the data-driven approach and best market research insights to act dynamically and offer more holistic services to their customers. Offer your customers an app where they can carry out everyday services.
They should be available streamlined so that customers don’t switch to other people. It’s more like old banks should add a fresh perspective. Ideally, when combining cutting-edge technology with the customers’ needs and pain points, banks will increase the quality of their offerings.
The banks must work towards working in the following areas to stay competitive in 2022 and beyond:
- Offer customized services related to finance management
- Give personalized recommendations on budgeting or savings
- Send reminders of services related to spending and saving behavior
- Provide a fast and secure way to engage with customers
- Offer access to other services that aren’t financial
- Provide top-notch security
The banks must move towards the future of banking and provide a holistic offering that helps customers grow their finances. The next decade will be about gen Z and other generations who want services a click away. Are you ready for that?
