2020 has delivered a significant digital wake-up call for mid-sized retail, commercial and business banks. They have been positioned at the epicenter of COVID-19’s economic storm, helping businesses and consumers to navigate the financial fallout while stabilizing their business operations to ensure service continuity.
Yet many financial institutions are still struggling with the legacy of manual processes, disconnected point-to-point solutions and siloed departments, resulting in higher headcounts and a sub-par customer experience.
If mid-sized financial institutions wish to emerge stronger from the crisis, they must digitalize their core banking offerings — including account opening — and automate manual processes such as periodic know-your-customer (KYC) reviews.
Before the crisis, there was significant interest in digital-first banking, blockchain technology, automation and the concept of digital banking profiles. As banks and credit unions navigate the new normal, it is critical to evaluate where their technology investment can add true value for a better client experience and greater profitability. Let’s look at the key trends driving mid-sized institutions to accelerate their digital transformation efforts.
Disruption Has Driven The Need For Change
Banks need to now move towards non-human, automated processes during the remainder of 2020. For example, they must focus on creating a completely digital account opening process and manage data centrally for a faster, frictionless service.
Digital services are here to stay. Just look at the popularity of Spotify, Netflix, and Amazon. People are used to managing many areas of their lives online, and that same digital-first mindset has filtered into banking. Forward-thinking financial institutions are leveraging digital-first technology and releasing new products for tech-savvy customers.
In 2019, we saw the launch of the Apple Card and Marcus, Goldman Sachs’ online savings account. Both use digital client onboarding, which established the goalposts for frictionless remote account opening.
Banks and credit unions that have been slower to adapt need to get further along the digital transformation path as soon possible, so they can start offering a more streamlined client experience in order to compete, retain customers and gain market share.
And to do that, their systems need to be up to the job.
Banks Must Deal with Legacy IT Issues
Many financial institutions are still operating with legacy technology in 2020. These systems add a high-level of friction to the customer journey. There is a continued pressure on banks to reduce the number of unnecessary touchpoints with their customers, but legacy structures are not designed for this way of banking.
The drive towards digital transformation is there, but generic IT suppliers in the banking sector are not delivering the solutions. Therefore, financial institutions need to work with specialist financial IT solutions providers to streamline the customer experience.
Digital Profiles Will Become Common in Retail and Business Banking
Over the next two years, we expect to see digital profiles come into play in a big way. Individuals will have a digital banking profile that is tightly secured and managed. In the future we will be just as accustomed to using our digital banking profiles as we are to using our professional profiles on LinkedIn and other social media platforms. This digital profile will make it much easier for people to move their information across financial institutions and open accounts more easily. In many ways, you could say that banking will become part of our digital identities.
We will also see enhanced security around digital banking with technologies such as blockchain widely used. Blockchain could play a key role in client onboarding and authentication, for example, as part of banks’ (KYC) processes.
We will continue to see increased pressure on banks and credit unions to have a real-time holistic view of the customer, not just from a KYC standpoint, but from a transaction monitoring standpoint. Those things combine to make up the overall risk of a client to the organization.
Data-Led Approaches Will Be a Key Area of Interest
Banks and credit unions will increasingly be interested in innovating and in differentiating themselves and their offering from their competitors. Many will see the benefit of using a platform to take care of the operational tasks, such as client onboarding, KYC and anti-money laundering (AML), so they can focus their own efforts on creating stand-out offerings.
It does not make sense to pour time and talent into handling those operational tasks, when they can be so easily be taken care of via a solution, such as those provided by Fenergo. It is smarter to focus effort and budget on value-add activities because ultimately, it is going to be those differentiators that determine whether banks win and retain customers.
Overall, we expect to see forward-thinking banks and credit unions make stronger, more strategic decisions as they head into a post-pandemic world. Change is here and those that embrace it and use it to their advantage can look forward to an exciting future.
Is your financial institution ready to survive and thrive in the new normal?
Check out Fen-Xcelerate, Fenergo’s game-changing, cloud-based version of its multi-award-winning Client Lifecycle Management (CLM) platform for rapid, digital and compliant account opening and customer journey management.