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Digital-first Approach to Banking

Kafi Khan

This new wave of accelerated demand for digital and self-service interactions is only expected to continue. And its challenging banks and financial institutions to transform the way they do business — to innovate faster, differentiate their offerings and offer a greater breadth of digital products and services. It’s also intensifying the need for personalized experiences, advice and guidance.

Financial institutions that fail to make the adjustment will fall even further behind. To get things moving quickly requires a shift in mindset. From the ever-growing array of new competitors including fintechs, challenger banks and tech companies to the effects of the COVID-19 pandemic, banks and financial institutions are experiencing immense pressure to keep up in a digital-first world. These developments have triggered a fundamental shift in consumer experiences, expectations and behaviors. With branch closures, social distancing and financial uncertainty, digital banking has become a critical touch point for more consumers and businesses than ever before.

This accelerated demand for digital and self-service interactions is only expected to continue. And it’s challenging banks and financial institutions to transform the way they do business — to innovate faster, differentiate their offerings and offer a greater breadth of digital products and services. It’s also intensifying the need for personalized experiences, advice and guidance. While digital transformation has been an area of focus in most industries for years now, the pandemic has accelerated those efforts. Most CEOs locally and internationally indicated the COVID-19 pandemic has significantly accelerated their digital transformation plans. For financial institutions, the pandemic’s impacts have also fast-tracked the need for a digital-first approach to banking — one that puts the customer at the center of the experience.

Factors affecting the Shift: Over the past two decades, financial institutions have primarily focused their efforts on providing low-friction transactional experiences. They’ve historically operated in storage towers, often resulting in fractured experiences and back-office complexities. This operating model has created innovation challenges and has made it difficult to deploy new banking technologies and experiences across channels without introducing friction. It has required mending together disparate systems and applications to bring new products and services to market — often adding expense and further complicating the experience, leading to massive inefficiencies. Other issues are disjointed experiences, challenging to sell efficient services, lack of centralized data and intelligent workflows, absence of full visibility into their customers’ financial lives and hindering the ability to provide the truly tailored experiences and integrated service consumers require.

Cultural Shift: Culture can either empower or hinder an organization’s success. It’s the very backbone of an organization and determines whether there’s a solid foundation for growth and innovation. For many financial institutions, embracing a culture shift is vital. This culture shift must encourage innovation — and it needs to come from the top down to be successful. It requires organizations to reevaluate their digital strategies, including their overall approach to channels and how they operate and serve their customers through self-service channels, in person and behind the scenes. Alignment needs to occur across the enterprise to begin to break down silos and implement change. This means taking a holistic view of the entire ecosystem and working together across business lines and departments. It involves cross-collaboration to ultimately eliminate friction in the customer journey and provide new ways to interact with customers in a convenient and straightforward manner. In this digital-first world, those that do not embrace an innovative, digital-first culture may experience damaging consequences. Thinking of innovation as a mindset to foster change, and adopting a culture that encourages innovation, will position banks and credit unions to keep pace with consumer demands.

Banking transactions tailored to ease our day-to-day by banks through bank specific apps

Embracing Modern Technology: Forgoing antiquated, rigid silos in favor of more modern technology and architecture will position financial institutions for long-term success. They will be able to break free from the legacy infrastructures that have hindered their ability to keep pace with the evolving landscape. Technology that offers rich data and analytics, APIs, developer tools and the ability to integrate third-party products can give them the flexibility, agility and scalability to respond to market changes more rapidly. Financial institutions that prioritize the critical convergence of physical and digital interactions will equip their businesses to reap immediate benefits. Taking an integrated approach to digital self-service, branch and ATM/ITM technology will enable them to provide engaging, connected interactions and build brand loyalty. They should also maintain a sharp focus on making their branches more efficient and profitable while continuing to enhance the user experience across channels. As ATMs remain a critical touch point, more institutions will consider transferring the burden of machine maintenance and updates to a trusted partner. The ATM as a Service model can simplify this self-service channel — offering a digital-first user experience while reducing the total cost of ownership. With this model, financial institutions that do not have the expertise, budget, time or resources can stay current through patches and updates for their ATM applications.

Implementing Change: Investing in modern technology with flexible, open architecture introduces infinite possibilities. And it opens the door to becoming more agile, improving business processes and significantly reducing integration and operating costs. But with technology, there is always a process for governing its use. And when there’s a technology change, there’s most certainly a change to processes and people. Therefore, the use of any new technology requires evaluating the impact on processes and resources to improve business performance. Introducing a fully digital account opening solution, for example, will impact workflows and processes across the entire organization. Bringing new products and services to market more rapidly may also require new skill sets to maximize growth and innovation opportunities. Hiring in-house developers, software engineers, data analysts or product managers, say, can help speed the delivery and support of new products and services. Having these skill sets readily available can dramatically increase efficiencies and drive financial institutions ahead of competitors that don’t. These trying times have pushed banks and financial institutions to redeploy their efforts. But they have also granted financial institutions the opportunity to take a more thoughtful approach to banking for the long term. By embracing a culture that encourages innovation, they will be able to make the shift to a digital-first mindset. And by investing in modern, flexible technology, they will establish a foundation to broker change and compete in the face of disruption.

Digital Agility: There are four primary reasons your banks and financial institutions are needed to have digital agility in place quickly. Firstly, rising customer expectations shape a need for digital-The average consumer is more empowered to demand what they want. Lenders are expected to deliver seamless service in every interaction. Today, that includes simplicity and ease of use, efficient processes, and personalized experiences. Successful disruptors typically offer a better customer experience and greater convenience at a much lower price.” Technology is key in enabling the responsiveness needed to meet these expectations.

Secondly, digitally native organizations are gaining market share. Disruptors and tech companies offering consumer lending and banking products, have been gaining market share each year. Agile by the costs of physical branches and boosted by fast-paced structures, these organizations can move faster than traditional banks. They can spin up new products due to their nimble structures and have access to capital to spend testing the latest technologies. Tech giants have already displayed their ability to break into consumer finance.

Thirdly, The birth of new technologies brings life to new opportunities-Countless new technologies, including artificial intelligence and machine learning, are predicted to redefine the lending space over the next few years. This value can be realized in many ways, including higher profit margins and personalization. In Bangladesh, to what extent the banks are utilizing certain machine learning capabilities to detect fraud, provide quick answers to customer queries, and market new offers to customers, still needs rigorous study . To support forward-looking preparedness in advance of relevant and effective technologies, lenders are needed to turn to digitally agile architecture.

And finally, the accelerating pace of change challenges even the most responsive companies-The financial services industry has historically been slow to change, but this is no longer the case. Continuous innovation is required to keep up with this new pace.COVID-19 necessitated big changes in lenders’ operations, and for some, it quickly became clear that they were not as prepared as they may have thought. Some lenders utilizing technologies that helped ease the transition to working from home and remote customer interactions fared better than those who hadn’t implemented these tools. New technologies can be brought to market faster than ever before, and as a result, most of the financial services leaders are concerned about the accelerating pace of change in the industry. Lenders can’t afford to be caught flat-footed.

Increasing Agility: Evolving consumer expectations, increased competition, and new technologies are all contributing to the disruption of the industry and the speed at which it moves forward. Setting a foundation of digital agility and governance framework can support being ready to adapt regardless of the ways the industry reshapes in the future.

The writer is the Company Secretary of the City Bank Limited and Decorate of Business Administration( course Completed) IBA, Dhaka University, Research area Corporate Governance and Risk Management of Banks of Bangladesh. 

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