The current watershed event – the coronavirus crisis – will have a far-reaching impact on every industry. In fact, at a time when the world is fighting a fierce battle from the virus, the only winner emerging in this situation is digitalization, a strategy which has kept businesses as well as the society afloat!
The pandemic has created a fiscal crisis that is further widened through the skewed supply and demand patterns, changing buyer behavior, and reduced mobility for people and goods. At such a time, banks, accountable for managing people’s money, credit, and facilitating payments, must upkeep their services to help individuals facing immediate cash requirements and uncertain cash flow. Yet, using a reduced employee count and increased workload isn't an easy feat unless banking institutions embrace digital technologies in everyday processes.
Digitalization in Banking
While the pandemic has made digitalization essential for that banking sector, most banks and financial institutions had already taken some strides in the direction previously few years.
The arrival from the internet is symbolic of an upswing of digital banking – starting from the development of ATMs to mobile banking to numerous money tracking apps, and more. However, this is just the tip from the iceberg. Increasing competition and better interest in touchless transactions are pushing banks towards increased digitalization, such as the use of AI/ML for process automation, using AI-enabled chatbots and live chat for communication and also the personalization of customer experience.
Here are several ways that banks can improve digitalization to enhance profits and provide their customers the convenience they demand throughout the times during the the pandemic and beyond:
1. Partner With Tech Firms
As tech giants like Amazon and Apple foray into consumer finance, they require someone to handle the complicated banking processes at the back-end. For banks, this opens up the possibility of tech partnerships and accessing the strong customer base of those firms. Even when we ignore the part played by the tech giants within the financial industry, it's inevitable for banks to maneuver beyond their core capabilities to stay competitive. McKinsey’s article highlights the three levels into which the banking ecosystem can efficiently extend through partnerships with relevant tech firms.
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The article also identifies the main advantages of this approach:
- Banks can tap their existing client base and operational capabilities
- Improve customer engagement
- Capture more data to understand their clients better and introduce a higher degree of personalization
- Banks can gradually create an ecosystem of services necessary for their clients to add new revenue streams and prevent their subscriber base from shifting to emerging fintech companies and digital firms
A popular example is of Post Bank, that has become a significant phone services provider in Italy. Another example is a web-based lender, Elevate credit, that offers credit to non-prime consumers. The organization is continuing to grow phenomenally by giving a 100% online consumer lending landscape by utilizing virtual customer support technologies like co-browsing by Acquire.
2. Purchase Automation to Boost Convenience & Reduce Costs
Automation in various processes can decrease costs and streamline operations to deliver more value to customers. Additionally, it minimizes overheads by reducing the reliance on human staff, which can be forwarded to customers by means of reduced charges. For instance, within the times of COVID-19, a little convenience like on-demand e-statements or online account verification can help to save time and money for everybody and lower the risk of infection through contact.
According to some McKinsey report, banks can leverage AI/ML technologies to automate as much as one-third of the processes to keep costs down and eliminate human error. One such example is JP Morgan Chase’s>COIN, which utilizes a private cloud network and ML-based algorithms to review complicated documents. According to one estimate, the platform can complete regular tasks that previously used to 360,000 hours in just a few seconds.
Below, we have identified several key areas by which banks can benefit through emerging technologies:
Fraud Detection
From using decentralized systems to enable touchless payments that are highly secure to presenting big data and AI for anomaly detection, leading banks are embracing technology to create their financial landscapes highly safe and secure.
Predictive Banking
Many banks are utilizing predictive machine learning algorithms to identify the needs of their customers and also assess their risk profile according to their past behavior to allow loan approvals or otherwise.
Predictive analytics could also be used to analyze the sentiments of different financial markets to make sensible predictions which help users make informed decisions.
3. Foster Innovation
Necessity may be the mother of invention, and innovating new ways to touch base and look after your customer base is really a necessity to remain competitive as well as help your loyal customers during the pandemic.
Today, most financial institutions are using sophisticated technology for maintenance operations like customer support. However, it's important to channelize part of this budget towards innovation to create services that address the customers’ emerging needs.
For example, due to the ongoing social and financial crisis, many purchasers have wholly moved to e-payments. Some are struggling to make their mortgage repayments, and others are scrambling for emergency cash and insurance products to pay for future costs. With access to rich customer data, banks can assess both transactional and behavioral data to offer personalized services to their customers. Some measures include:
- Increasing the bounds for online transactions
- Offering relaxation in EMIs, repayment holidays, less stringent KYC norms, mortgage refinancing, etc.
- Extending emergency credit services like low interest-rate unsecured loans and access to fixed saving accounts
- Monetizing data by creating insightful reports and benchmark analytics for various industries
Banks may also use data to create personalized and engaging web stories to advertise the products mentioned previously to enable them to be discovered by those who require them.
4. Improved Data Management
In yesteryear five years, there’s been an outburst in data collected by various organizations, including those in the loan industry, owing to the industry’s digital transformation. However, only a small percentage of the information is utilized because of the operational silos in most organizations.
As any expert would agree, this untapped data can potentially help businesses scale faster in a customer-centric manner. To enhance data management, financial institutions and banks must create a unified data management approach that consists of a centralized data hub associated with a strong management platform.
Besides the unification of data and ensuring accessibility, it is also fundamental to have proper security measures in position for user data protection.
Data Management Best Practices
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Final Thoughts
Investing in thoughtful digitalization might help banks in boosting their revenues while also helping customers influenced by the current pandemic. From disincentivizing branch visits to offering online loan approvals and account opening to educating people on digital banking so that they can make use of the facilities being supplied by their banks – financial institutes can use technology in more ways than a single to achieve an aggressive edge and also lead community initiatives.