Whilst digitalisation has impacted almost every area of modern life, the financial services sector remains rather resistant to welcome this change.

Digitalisation has transformed manual processes, transactions and activities into digital services. Across all verticals, consumer needs have been met in entirely innovative ways, disrupting existing enterprise value chains.

Amongst the numerous trends that have arisen in our ever-growing digital era are two recent ones pertaining to the financial services sector. Firstly, the expansion of mobile internet has resulted in seamless and omnipresent connectivity, which has enabled 3 billion people internet access at any time and place.

The second most noteworthy trend is the rise and domination of social networks. Facebook has almost 1.9 billion monthly active users. YouTube, Uber and Airbnb continue to transform the landscape as they place their customers in the centre of their business, regularly designing their user interface to the customers’ needs.

Financial services organisations, with their colossal institutions, old legacy systems and highly detailed manual processes, are yet to be truly hit by the Fourth Industrial Revolution, in which new technologies continually fuse the physical and digital worlds. Although it requires investment, digitalisation will be essential for these businesses to keep up.

How can financial services be molded into the digital era?

Traditional banks begin with an ace up their sleeve. The majority of new start-up banks spend money having to build their client list from scratch, whereas traditional banks already have a vast customer database meaning more money can be spent on digitalisation projects. Even with the $765 million investment that European tech startups are about to receive, banks remain ahead of the game by the sheer size of their customer base.

How can financial services organisations build a relevant value chain?

Rather than isolate themselves, digitalisation gives banks the opportunity to branch out and collaborate with other sectors, providing customers with more diverse solutions. Mobile payment platforms and e-commerce sites are pioneers in realising the potential of these partnerships. In China, $5.5 trillion were exchanged via mobile payments in 2016 as a result of these successful partnerships.

However, demands from online users for more service offerings available on any device means banks need to step up and scale their platforms accordingly. An example of this is the recent Challenger Bank Tandem and House of Fraser partnership, who invested £35 million into Tandem to improve customer offerings across all devices.

According to a recent Deloitte report, only 13% of customers said they received customised information from their bank. The developments in FinTech are pressuring banks to reinvigorate their engagement models. Companies such as Guidewire and Zillow provide personalised offers and complete end to end user experience, thus setting the benchmark for customer service.

The static data stored in banks’ Systems of Record lack the contextual, real-time data that can be obtained from social networks. User-friendly engagement models provide banks with further insights into their customers’ behavioural patterns, hence allowing them to more accurately predict their customers’ future needs.

Failure to do so can result in customers ‘unfollowing’ their financial services provider. The previously mentioned study also found that poorly targeted communications has caused 69% of customers to close their bank accounts.

Adopting these new engagement models mean banks have to handle the vast amount of data that floods in. Embracing technological advancements, such as in-depth analytics, helps operations run smoother. Banks previously depended on one set of products to attend all its customers around the world.

Now, on the other hand, customers expect Uber-esque service delivery and banks must keep up with new technology, providing more direct and personalised customer engagements.

What does the future hold?

Financial services organisations must focus on two key aspects to fully take on digitalisation: firstly, they must create a user-friendly platform or take advantage of existing ones suited to their business, and secondly, financial services must adopt new business models of engagement in order to keep pace with competitors in an age where the customer is placed at the epicenter of the business.

By adopting this customer-obsessed mentality, banks can successfully offer their customers better service and agility. For customers, this means more value. By satisfying customer demands, banks will experience augmented customer acquisition and better customer retention. Customers will feel that they have greater control over their financial future.

The financial services sector has reached an age where digitalisation is essential for their survival and future success.

Sourced from SunTec

See also: What is fintech? And how is it changing the financial services industry?