Making banking truly digital in 2016

By: Rajashekara V Maiya, Associate Vice President & Head – Product Strategy & Pre-sales, Infosys Finacle

Time was when customers entrusted most, if not all, their financial needs to their bank, for life. Today’s young consumers have no such inclinations. They could get a current account/debit card from Moven or Fidor and personal loans from Lending Club or Avant. They could manage their investments with Wealthfront or Acorns and their mortgages through Privlo or Lending Home. They could insure their health with Oscar or Vitality, their automobiles with Goji or Metromile and their life with Haven Life.

Traditional banking has evolved into a one-stop model to solve all the financial problems of a consumer. In doing so, it may well have lost focus or ownership of problems at the level of the individual product, service or customer. FinTechs are addressing this issue by deconstructing the business into its constituent parts, taking complete ownership of specific components and building rich, comprehensive and customer-centric solutions around them. This allows FinTech-empowered consumers to unbundle their financial needs across a curated configuration of best-of-breed services that best suit their specific needs.

We believe that such unbundling will significantly influence digital banking strategies going forward, starting with 2016. Customer experience, analytics-driven insights, intelligent automation, financial ecosystems and digital security will be the key trends that will define truly digital banking in the coming year.

Creating customer-specific experiences

Customer-centricity is not enough. Today’s digitally-empowered customers demand customer-specificity where the focus shifts from addressing identical individuality to recognizing individual identity. Banking solutions will have to be tailored to ‘segment of one’ circumstances, like Alpha Bank’s wearables-linked savings account that rewards customers for an active lifestyle or the automated savings that is triggered by spending behavior, made possible by a service called Digit. Banks will have to personalize experience using analytics, enhance experience using Virtual Reality, and create interactive experiences through gamification and participative experiences with co-creation. At the end of the day, banking will be as much about customer experience as it will be about helping them achieve their financial goals.

Insights will drive competitive advantage

Analytics-driven insights will influence every aspect of the banking business including experience, operations, cost and risk. Analytics has to be seen as a culture rather than a function and must be made available to everyone irrespective of role, function or department. In 2016, truly digital banks will distinguish themselves by the ability to quickly convert real-time data into actionable insights that enhance enterprise and customer value. Analytics will help banks turbocharge their ‘segment of one’ strategies by using transactional, behavioral and life stage insights to deliver contextually relevant products and services.

Driving efficiency and experience through intelligent automation

As digital transaction volumes explode, automation will be critical not only to streamline operations at the back-end but also to create a frictionless experience at the customer interface. The imperative and scope for automation will only increase as the Internet of Things goes mainstream. Concepts like machine learning, artificial intelligence and cognitive computing will help create an ambient and autonomous banking model where algorithms and business rules manage efficiency and experience. End-to-end ecosystem automation will also allow banks to focus valuable human resources on activities that enhance value for both the customer and the enterprise. A caveat – banks will have to learn to influence these intelligent, autonomous, decision-taking machines in future.

Shifting from universal banking to ecosystem banking

Think of it as the rebundling of banking, this time purely from the perspective of the digital customer. Universal banking will have to be reimagined as a continuously expanding ecosystem that aggregates all services relevant to a customer’s financial preferences. Banking strategy will increasingly rely on collaboration and co-opetition, with financial and non-financial partners, to add new competencies that resonate with the customer. For instance, an API-driven collaboration strategy will enable banks to quickly tap into emerging technology trends like wearables and IoT and accelerate innovation at the edge of the enterprise.

Rethinking security for the digital banking age

Security is a huge concern for digital banking customers that recent high profile data breaches have only served to enlarge. For banks, the biggest challenge is to ensure foolproof security across an expanding range of digital touchpoints, without compromising customer experience. As banking shifts to an ecosystem model, there is the additional challenge of ensuring security across suppliers, partners and collaborators. Many leading banks are actively looking at latest technologies such as biometric, advanced analytics and blockchain to enhance the security of digital transactions. Starting 2016, banks need to take a holistic security view, factoring the risks involved with new models to create a secure and trustworthy environment.

As banks adopt the above trends to go truly digital, which technologies should they watch out for? We already spoke of Blockchain and IoT. Besides these, the most influential technologies of 2016 in our view, will be Cloud; those facilitating Open Banking (APIs and apps); and mobility’s next evolution powered by wearables, bio-sensors, and cognitive computing.