Fintechs and the Digital Banking Experience Part 1

by Anne Guenther
September 04, 2018

Customers today are pushing the boundaries of digital innovation for the banking industry, and banking organizations are paying attention. In fact, according to industry research, banking executives’ strategic priorities are:

  • 71% redesign/enhance digital experience for consumers
  • 41% digital enhancements for improving the customer experience1

To help drive these goals, banks are increasing innovation investments in the following areas:

  • 84% in customer experience
  • 82% in channels2

These priorities are triggering investments in emerging technologies that will enable and accelerate the speed of change, as well as evolve a once regulatory-driven focus to an innovation-led transformation.

Customer experience transformation

At the core of this transformation is the customer experience (CX). The CX today is about greater mobility, convenience and personalized solutions wrapped with the traditional values of trust and service. To deliver on these demands and attract and retain new customers, banking institutions are innovating the omnichannel experience and turning to technology as the enabler. Yet the breadth and depth of these demands are increasing beyond the capabilities of most banks and credit unions, forcing them to look outside of their organizations for options that can accelerate their speed to market, free up internal IT resources and provide a new level of agility.

As the industry shifts to a more cloud-based ecosystem, the ability to leverage technology partners and fintechs with different characteristics from conventional providers is becoming a differentiator for success.

81% of banking CEO’s are concerned about the speed of technological change

Fintechs (which stands for financial technology) is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. Fintechs are exposing customers to new and more personalized ways of conducting business, services, which were conventionally reserved for more affluent customers. As such, asset managers are seeking to push these services downstream to add revenue and differentiate in a competitive landscape. With this momentum, a number of regional and community banks, as well as credit unions, are evaluating whether to replicate what fintechs are doing—partner to leverage speed to market or pursue a mix that can advance their strategic position and gain market share.

Ways in which fintechs are evolving the banking ecosystem are expanding, for instance, peer-to-peer (P2P) payments, journey analytics and artificial intelligence (AI)/robotic process automation (RPA).

P2P PLATFORMS, JOURNEY ANALYTICS, AI AND RPA

P2P platforms: Payments directly between people allowing a person to transfer funds from his/her own banking account into another person’s account via online or mobile applications.

Journey analytics: Map of the process customers take when interacting with their bank via a call center, online banking or text message. By capturing data throughout this process, banks can apply analytics to see what’s working and what’s not, which is critical to developing a more frictionless customer experience.

AI and RPA: Developments in cloud-based technologies and AI that focus on machine learning, speech recognition and natural language processing are availing new applications to tailor customer preferences and automate service delivery at lower costs.

There’s no doubt that fintechs play a catalyst role in the evolution of the banking industry—one that’s helping to set more competitive benchmarking and to sharpen the focus on the CX. As such, this presents the question: Are fintechs a threat to incumbent banking organizations or an opportunity? Stay tuned for more on this in part 2 of this series.

1Capgemini – Top 10 Trends in Retail Banking 2018
2Efma & Infosys Finacle – Innovation in Retail Banking 2016