By exploring customer data, banks are becoming technological pioneers and offering tailored services to strengthen their position in the financial sector.
Just as convenient retail has been disrupted by the convenience factor brought about by digital transformation, the global banking industry, once characterized by brick-and-mortar branches and face-to-face meetings with customers, has evolved in response to the expectations of today’s digital-savvy customers. Customers now want a personalized experience, instant transactions, 24/7 access to their data and services, and the ability to switch banks with just a few clicks.
This phenomenon creates a challenge for traditional banking institutions and provides an opportunity for competing banks that are inherently more agile and less dependent on existing technologies. Monzo Digital Bank, British FinTech startup, shook up the market when it was launched in 2016 by offering customers an all-digital experience.
But all is not lost for traditional businesses. By allocating more resources to change strategies rather than operations, traditional banks are rapidly adopting new technologies and focusing on user-centric experiences to improve their offerings, automate back office processes and remain competitive globally. where competition from FinTech startups is intensifying at a breakneck pace. However, banks urgently need to adopt a more omnichannel experience for their customers.
Mastering technology to succeed in digital transformation
Banking has been around much longer than digital technology. However, over the years, banking platforms have grown in complexity and today integrate many tightly coupled systems. Basic banking applications are gradually modernized using the pillars of today’s technologies, which include:
- API, creating a “bridge” between old ways of using endpoints within branches and today’s omnichannel experiences.
- Data analytics, processing vast amounts of data and gathering insights into customer transactions, behavior, preferences and trends.
- THE machine learning state-of-the-art, which makes it possible to offer more and more personalized offers.
- Robotic process automation replacing human interaction to speed up decision-making in cases, including loan and mortgage applications.
In banking, there is a well-known concept of managing the bank rather than changing it. The bank’s operations involve ensuring its stability and dedicating a significant portion of technology resources to “keep the lights on” while ensuring that core systems are maintained, efficient and free of outages that could affect customers. On the other hand, changing banks is exactly what you might think: it involves investing in new digital solutions aimed at improving the customer experience and enabling the creation of new products and services accessible through browsers and mobile applications. Banks must constantly find a balance between maintaining day-to-day operations and innovating to meet customer expectations, a daunting but achievable task.
Challenges and prospects for improvement
Legacy Platforms – Outdated and outdated technologies continue to hinder service agility, innovation and efficiency, which in turn hinders rapid adaptation to changing customer needs. Furthermore, in many banks, existing platforms still rely on central processing units written in COBOL, a language that is more than 50 years old and far from attracting the “hip” developers available in today’s market. According to Reutersapproximately three trillion dollars pass through COBOL systems around the world every day.
Security – This is a huge challenge for the banking industry and this challenge continues to grow as the ways customers interact with banks evolve as the threat of cyber attacks and data breaches remains constant. The more ways customers have to conduct and access their banking transactions personal datathis makes the problem more serious and requires increasingly significant investment in fraud prevention and detection.
The solution to the problems associated with traditional platforms and security concerns lies in digital transformation strategies, which are structured along two main axes:
Microservices – Decomposing traditional monolithic banking applications into lighter microservices-based applications provides greater agility and accelerates time-to-market for digital customer offerings. Microservices support the integration of existing systems and apply a gradual transition without the need to redesign the entire system.
Cloud Native Technologies – Banks should increasingly, and where regulations allow, prioritize cloud native technologies to leverage the scale of cloud infrastructures, avoid bottlenecks that hold back performance, and reduce operational costs. Here, competing banks born in the cloud have a decisive advantage. But while all banks are racing to compete in the new digital landscape, cloud-based core banking has already rewritten the rules of the game and must therefore be recognized as a cornerstone of any financial institution’s future IT strategy.
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Banking will inevitably continue to establish itself as a technology sector specializing in financial transactions. Understanding customer preferences, usage patterns and habits will provide banks with the data needed to develop complex algorithms that can identify customer needs in a way that the bank can respond to within customer statements across customer lifecycles. L’predictive analytics it will provide new ways to detect fraudulent transactions and activity early, help reduce the risk of loss on the bank’s side, while improving the customer experience through smarter ways to limit the potential disruptions associated with identity theft. Automation will become increasingly intelligent and efficient, improving decision-making and customer satisfaction.
In addition, societal developments, regulatory reforms, work habits and competition for talent, particularly in software development andArtificial Intelligence, will multiply the challenges and factors of change. For the banking sector, this means constant adaptation and technological development, which will be decisive for its competitiveness and efficiency in the digital age.