Banks, investment houses and other financial organisations are being challenged to change – and it is customers that are in the driving seat. Retail and business customers expect the same seamless service from their banks that they receive from digital monopolies such as Amazon, Apple and Netflix.
Regulations are changing to facilitate the shift, actively encouraging innovation in the industry. The Bank of England’s Future of Finance report provides a blueprint for the future of banking, and it’s digital-first.
Here’s how technology is shaping the future for financial organisations:
Future of banking
The COVID-19 pandemic has accelerated the transition to digital-first finance, and there’s no going back. Business and domestic customers are heading online, with 83% of SMEs using a mobile banking app to manage transactions.
Consumers are attracted to tech-first banks, with 27% of British adults holding an account with a digital-only bank. That’s 14.1 million adults.
The increase in online retail mirrors the rise in digital-first finance. Online spending by UK consumers increased by 34% in 2020, to reach an incredible £141bn. That’s 30% of total retail sales, and it shows no signs of slowing down.
Innovation can disrupt established ways of doing things and create new threats, with cyber-crime and sophisticated fraud on the rise. When shopping online, customers want safe, secure and speedy payments. They also demand total transparency, provided through intuitive and accessible online banking platforms and apps.
And if banks fail to deliver, it’s easier than ever for customers to change. The stress-free switching service means customers can move between banks in minutes.
Behind the scenes, the processing power of big data is transforming what’s possible. While innovations such as the cloud have offered exciting potential for banks to streamline operations, they have matured to a point where they can now meet the requirements of regulators, says the Bank of England.
New technologies are also more efficient, streamlining operations and saving costs. This can help banks to manage the challenges of today and those emerging tomorrow.
According to McKinsey, transitioning operations to the cloud could save banks up to 40% compared to traditional. While previously hampered by regulation, new standards and protocols from the Bank of England enable banks to move processes to the cloud.
Automation continues to promise incredible potential. In the same report, McKinsey estimates that up to 35% of all activities could be automated, unlocking even greater efficiencies.
These savings can help shore up the bottom line or be reinvested in developing new products, features or functionality that can improve the customer experience. In doing so, banks are increasingly adopting agile methodology to rapidly test, develop and introduce such new features, shortening timescales from months to weeks.
COVID-19 has established that cash is no longer king in the world of finance. To serve the new, digital-first economy, finance businesses and banks must change.
Embracing new technologies in financial markets could bring leaner, faster and more customised operations. Adopting automation and embracing the potential for big data can help streamline processes and reduce costs.
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