It’s safe to say that most financial institutions know the value of digital transformation and the positive effect it can have on customer service, operations, and company longevity. However, the path to digital transformation is varied and can lead to different places, depending on what issues need solving and the direction the institution wants to go.
Today is an exciting time for financial services, as technology can expand your original capabilities and create connections that simply weren’t possible fifty—or even ten—years ago. There are many paths your organization can take and many new technologies you can adopt through your digital transformation, each with their own costs and benefits.
Below, we’ve listed some of the exciting opportunities that await your financial institution at the end of your digital transformation.
Mobile devices and applications are now so ubiquitous that mobile banking for financial services is now considered table stakes. Physical locations are still important, but no longer central to a bank’s customer operations.
Customers now expect to be able to access bank services 24/7 from anywhere—even abroad. They now expect to be able to do more than merely deposit checks and transfer money. Customers want to use their phones to apply for loans and pay for transactions via mobile pay.
This expectation isn’t just being made of traditional banks. Credit unions, insurance companies, and even finance coaches all have apps on the App Store. If you don’t already have an app, you’re ten steps behind.
Speaking of mobile payments, there is a growing rise in demand for retailers to offer mobile payment options to their customers. Many credit Apple Pay with this surge in popularity, although competitors like Square, Google and PayPal are certainly providing consumers with a healthy variety of options.
Companies are experimenting with innovative uses for mobile pay. Take the Honda Dream Drive, for example. It’s an in-car payment system (partnered with VISA) that allows drivers to purchase gas, food, and parking from the convenience of their in-vehicle console.
If there’s one word that can sum up today’s use of digital technologies, it’s “connection.” Connecting users with each other. Connecting users to your business. And connecting businesses with each other. Specifically, connecting their technologies to yours.
Integrations help expand your financial institution’s technical capabilities in ways that would have been expensive or impossible in the past. Now, instead of having to build your own marketing automation software to tell customers about your latest credit card offerings, you just purchase one and have it connect to your CRM. And this is integration at its most basic.
Advanced integration applications can include a whirlwind chain of triggers, conditions, responses, reposts, and resolutions that happen instantaneously across multiple technology applications and services.
Open-API environments may also allow institutions to support “beyond banking” business models such as producer-driven models where the financial institution produces a suite of managed solutions, which are then marketed and sold by third-party vendors. There are plenty of unique and innovative models in the works, and all need robust integration between diverse databases and tools in order to function.
Facebook’s recent congressional hearing on Libra wasn’t good publicity for cryptocurrency in general, but much of that negativity was driven by Facebook’s own reputation. Cryptocurrency is still moving in from the fringe and becoming more commonplace in investment and personal finance applications.
Bitcoin and Etherium are still the top players, but that hasn’t stopped other companies from developing their own cryptocurrencies, each trying to improve on or address the weakness of older-generation cryptocurrencies.
Whether it's investing funds into cryptocurrency or developing on their own, a financial institution can do well if they are clear about their goals and approach cryptocurrency cautiously and conservatively.
Biometrics, for the uninitiated, refers to using human measurements and characteristics as a means of identification or cybersecurity. This includes facial recognition, fingerprints, and retinal scans.
Financial institutions all over the globe are turning to biometrics as a supplement or even upgrade to traditional PIN codes and passwords when it comes to account security.
Banks in the UK have begun testing biometric payment cards with higher or no transaction limit. It is hoped that the biometric technology will improve security while maximizing customer convenience.
Peer-to-peer payment systems
Peer-to-peer payments allow the transfer of funds between two individuals through a website or mobile app. These apps are connected to an individual’s bank account or credit card. PayPal was one of the earliest innovators in this space and is still the biggest player, but is seeing competition from companies like Venmo, Zelle and Google Pay.
Despite the larger number of competitors, there is still plenty of room for more competition, especially larger financial institutions who may be able to use the digital transformation as an opportunity to combine peer-to-peer payments with other financial services or offerings.
Automated account switching
This application is quite a bit more niche than some of the other items on this list but nevertheless impacts customer convenience and account health. Switching account holders between financial institutions has historically been a slow and painful process that has slowed the growth and development of new business.
But technology has progressed to the point where financial institutions can integrate with one another, through platforms like ClickSWITCH, which was developed by the Alaska USA Federal Credit Union to make it easier for customers to migrate their accounts to their organization. This would be an excellent inclusion for your own digital transformation program that prioritizes customer experience.
Over 2.5 quintillion bytes of data is created on a daily basis covering nearly every aspect of our daily lives, from what we buy for breakfast to what we do when we retire. And the financial industry is one of the most data-intensive players in the global economy. Institutions use big data to make better investment decisions, anticipate customer behavior, prevent fraud, improve customer service and drive marketing and product development strategies.
Institutions that haven’t already undergone digital transformation to leverage big data are at a severe disadvantage. Not only are their competitors miles ahead of them, but it will take significant resources and manpower investment to catch up. It’s not enough to simply collect data. It has to be properly stored, managed and analyzed for it to even be remotely useful.
Before financial institutions can transform and overhaul their data infrastructure, however, they need to pay due consideration to regulatory requirements and data security. These are among the two biggest challenges financial institutions face when moving into big data, and it's where most of the trouble happens years down the road. All you need to do is look at the news and check who the latest corporate hacking victim is and you’ll see what I mean.
Of course, big data by itself isn’t enough to keep a financial institution competitive.
Data is useless unless it can be accessed by those who need it. Independently-maintained data silos are costly to manage and inefficient. Employees should have access to real-time data depositories that can quickly provide the information they need when they need it, and also allow them to update the database with new information that’s immediately reflected across the board.
Of course, this need for accessibility has to work hand-in-hand with the need for cybersecurity. As you undergo your digital transformation, balance ease of access with measures that prevent unauthorized access from both inside and outside the organization.
We’ve already covered cryptocurrencies in an early point, but blockchain has other applications beyond crypto.
Security is most definitely a high-profile application, as blockchain can help secure your digital business—including digital payments, loan processing, escrow services and more. Blockchain can also be used to speed up existing services, such as clearing checks and exchanging funds with other financial institutions. The processing fees will be reduced or disappear entirely, thus saving money for both the customer and the financial institution.
Artificial intelligence / machine learning
Businesses across the financial services industry have adopted artificial intelligence in some form or another, but we’ve probably only seen the beginning of what AI can do.
Machine learning is already being used to secure portfolios and detect fraud, but it can be also used to make better trading and investment choices. Banks are also using machine learning to power chatbots for better customer service. There are already apps like Wealthfront that help customers build a financial plan and receive financial advice.
Further advancements in artificial intelligence could include profiling customers, document interpretation and processing, trade settlements and process automation.
The opportunities offered by digital transformation in financial services cover a wide range of purposes and scales: from small, customer-focused tools to enterprise-wide applications that have a global impact. Some require minor technological investment, while others need you to gather many internal and external resources.
Every option you consider has to be properly weighed, reviewed and scoped before you can commit to adding it to your digital transformation plans. How will this benefit customers? How well does it align with our business goals? How does the cost of implementing this digital strategy compare with the potential reward?
It’s great that today’s financial services companies have so many choices for improvement. When these opportunities are carefully considered and properly built as part of an organized digital transformation effort, the institution will reinforce its value to customers and help service them decades into the future.