Banking is notorious for being slow in Digital Transformation when compared to other more agile sectors such as Retail and eCommerce. This harsh reality is especially true for incumbent banks. Their complex and long-standing core require substantially more time and resources. Plus, the fixed mindset of the workforce usually rejects a thorough revolution like Digital Banking. Instead, they prefer a more gradual change.
Reportedly, Digital Transformation in the banking sector is still responsive. When banks launch digital initiatives, it's mostly a response to major market trends and shifts in customer behavior that leave them with no choice but to change. Mobile Banking or electronic Know-your-Customer (KYC) are prime examples.
However, as more market challengers like fintech and neo-banks entered the banking scene, we can expect to see more success stories of Digital Transformation in Banking.
The benefits of Digital Transformation can differ slightly from bank to bank. But in general, there are some common advantages to consider, which we will make clear in this article.
Leading banks are combining Artificial Intelligence (AI), Robotic Process Automation, and Process Orchestrator into what’s called Intelligent Banking Automation (IBA). By allowing all repetitive, rule-based manual workflows to be automated, therefore minimizing unnecessary human interventions, IBA is the automated future of the Banking industry.
Today, banks are also investing hugely in an effort to combine their automation capabilities with data analytics and human creativity. The result is advanced automation where, across the business, complex issues are automatically resolved, deep insights are generated, and new service ideas are generated.
There is an abundance of areas where IAB can be applied, both in the customer-facing front and in the back-office operations: Budget Transfer Approval, Reconciliation, Income Processing, Data Upload, Account Opening.
With IAB, banks can:
Data Analytics is nothing new for bankers. Quite the contrary. Banking has always been pioneering in innovations related to data analytics. Beyond data processing, data visualization, and data warehousing, the applications of data and advanced analytics solutions in banking have become numerous. Some notable ones include customer analytics and risk. The other ones that are being improved are finance, workforce, and supply chain.
Banks are now leveraging data analytics into every part of their businesses, enabling them to:
Banking data falls under the category of Big Data, as it's only natural for a bank to process thousands to millions of transactions on a day-to-day basis. In these mountains of data is the nearly unlimited potential for insights into their operations, customers, and the market as a whole. Therefore, it’s essential for banks to have a comprehensive strategy for data analytics - one that allows them to utilize both internal and external data, whether they are in structured, semi-structured, or unstructured form.
When setting out on Digital Transformation for Banking Sector, most banks would put “customer experience” first in their agenda. In Banking, customer experience is the combination of all experiences when interacting with banks through different touchpoints. These include online banking systems, call centers, emails, online advertising, and even social media.
To enhance customer experience, most banks are applying these strategies:Instead of holding on to monolithic core systems that are dragging them down, banks are applying dynamic APIs to enable composable banking - i.e. the idea of decomposing core banking systems into independent components, each having a best-for-purpose functionality. Composable banking holds phenomenal potential. It helps banks digitize their very core. What’s more? Thanks to it, banks can become as agile and nimble as fintech start-ups, where they are able to plug in and plug out new functionalities without causing disruptions to their architecture.
Composable banking brings old banks the best of both worlds. On the one hand, banks have the agility of fintech. And on the other, they still remain the advantages of the incumbents, in terms of data security, fraud management, and credibility.
Composable banking brings benefits such as:
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