The significance of digital banking can be attributed to its various benefits like reduced operational costs, attracting and retaining customers, and staying ahead of competitors by adhering to new regulations and using latest technologies
The demand graph of digital banking has certainly grown at an unrivaled pace, with the world of IoT empowering consumers and compelling businesses to tread along the path towards digitization for remaining competitive in the financial services space. Numerous industry verticals have enjoyed the monetary gains realized by going digital, including retail, marketing and education, though not as extensively as the banking segment.
On-premises transactions at banks have traditionally been considered as vital but arduous, primarily due to long queues and the time it takes to process requests like fund transfer, mortgage loans and investment options. Digital banking helps to address all such concerns, which is necessary to meet the expectations of the tech-savvy and conspicuously busy consumers of today.
In its entirety, the term digital banking indicates not only the digitization of a bank’s product and service delivery but also all of its processes, from customer service to product development. Modern methods and technologies like AI, analytics and big data play a crucial role in implementing and managing a digital banking platform. Continuously changing regulations and surging investments in the fintech sector have enormously increased the number of technological solutions available, enticing domestic and international banks to develop customer-friendly banking platforms. The digital banking market, slated to surpass a remuneration of a mammoth USD 9 trillion by 2024, has indeed been transformed due to the ever-growing competition between financial instructions and demand from consumers to provide simpler retail, corporate and investment banking systems.
Key digital banking trends to watch out for:
The increasing significance of digital banking can be attributed to its numerous advantages, some of which include reduction in operational costs, attracting and retaining customers to amplify revenues along with staying in front of the competition by adhering to new regulations and deploying latest technologies. The overall landscape of digital banking can be defined by the emerging trends being observed globally, with regard to the modernization of major banks and the rise of numerous specialized services.
Digitization of major financial and banking institutions
Essentially, large banks have the potential to drive tremendous investments towards digitization and are gradually understanding the disadvantage in just upgrading the legacy software and hardware systems, which is an expensive and continuous process. These established firms also comprehend the need for gathering customer information to help improve their services, and digital banking could provide them with a complete view of customer needs and behavior. Digital banking assistants are another novel provision available on the platforms of prominent banks to support and advise its users, signifying a remarkable evolution in customer-bank relationships. Representing a common trend in today’s financial marketplace, Lloyd’s Banking Group in 2018 invested in a fintech company to adopt its online banking system.
Lloyds’ move was aimed at meeting the Group’s goal of digitization over the coming three years, through which its customers operate convenient and tailored services accessible via smartphones. An increasing number of consumers are performing cross-border transactions, and the digital banking platforms offered by such banks could greatly streamline the process of fund transfer. Separately, the Spanish bank Santander, operating in numerous European countries as well as in the U.S., has also developed a digital banking platform for providing its customers with access to a range of products and services, including control on funds, managing cards, loans, among many others.
Besides retail banking customers, most of the major banks have thousands of small businesses as part of their clientele, who need to manage their daily banking needs in addition to maintaining successful operations. Digital banking could potentially ease up the business process for these enterprises by offering more convenience in handling transactions, dispersing wages and keeping track of payments. The Bank of America, as part of its digital banking offerings, has quite recently unveiled a host of digital tools particularly designed for small enterprises. The new tools would help in streamlining major expenses, transactions, generate cash-flow projections along with easy connectivity with small business bankers for quick advice.
Emergence of niche applications pertaining to digital banking
The scope of banking has been consistently expanding with every generation and different categories of customers may utilize one type of service more than any other. With shifting consumer preferences, rising disposable incomes and growing investment opportunities, innumerable small players wanting a stake in the domain of digital banking have been striving to cater to specific customer requirements and niche segments. For instance, PayPal, now in operation for more than two decades, has simplified payments and transfer of funds with a promise of security, fulfilling one of the most widely used banking functions. It eventually paved the way for other similar businesses to open up, followed by digital platforms that cover other products and services.
Lending is one such service which has found millions of customers dashing towards digital banking applications that are offering suitable loans at attractive interest rates and for specified industry segments. Quicken Loans is a business belonging to this category and is one of the largest mortgage firms in the U.S. Another feature of banks which is slowly gathering momentum is investment and wealth management. Customers are increasingly looking to invest in stock markets, bonds and mutual funds, a process that conventionally involves complex decisions and paperwork. Last year, JP Morgan Chase introduced a new investing app for its digital banking customers, enabling them to trade conveniently and also leverage in-built portfolio-building tool.
Future growth opportunities for companies planning to tap the popularity of digital banking
Over the next few years, more and more small banks are expected to fully digitize their processes and support paperless transactions, keeping up with the declining preference of consumers towards going to physical branches. New digital banks, which are completely on the cloud and have no traditional banking experience and infrastructure, will gain immense traction among young customers who have been directly gifted the convenience of online features.
In terms of technological advancements, the escalating obsession for and interest in cryptocurrencies will coerce platforms to incorporate crypto savings and investment features, or risk losing customers. This will also result in the development of an alternate niche category of customers and businesses to serve them. In a nutshell, the global digital banking ecosphere holds massive untapped potential for growth, from meeting the day-to-day needs of consumers and enterprises to preparing for disruptive future technologies.