Digital transformation in Banking: 3 pushes and 5 trends

Digital transformation has radically changed the world of banking. In 2020, the bank cannot exist without digital, this is an established fact. What is less obvious, however, is that it is not just a question of home banking nor even just of digital payments: these are just two tips of a much larger and more complex iceberg. Digital transformation in the Banking sector, in fact, has been an epochal turning point that has impacted many different processes, from the financial side (including FinTech, to which we will return) to branch management, from security to the increasingly personalized user experience. It is even more important to stress that we are only at the beginning of this revolution, and there is still a long way to go. In fact, there are many seeds that have been sown that have yet to bear fruit, especially in Italy.

The Italian newspaper La Repubblica, in commenting on the 2019 Accenture Banking Conference, highlighted the need for Italian banks to follow an innovation path, which, they reported, could have a value of up to €100 billion.

For Italian banks, there is still a long road ahead, one that is full of opportunities; the good news is that progress is already being made. Let’s consider this data on the Italian banking ecosystem (bva-doxa.com):

  • In June 2019, 52.1% of customers used their bank’s website to carry out routine operations. Only a year earlier, in July 2018, that percentage was 49.1%.
  • These operations were performed by mobile devices by 23.2% of Italians in June 2019. In July 2018 this percentage was 22.4%. In this field, the lion’s share is carried out by millennials: 42.1% of users between 18 and 24 years of age use smartphones to manage their savings and carry out banking operations.

In short, based on just this study, the direction seems very clear: an increasingly convinced and accelerated Digital transformation in the Banking sector. In the continuation of this post, we will look at the 3 main drivers that support this change and the 5 trends that are decisive for Digital Disruption in the Banking sector.

 

The 3 driving forces behind Digital transformation in Banking

What are the drivers that are leading the Banking sector toward digital transformation?

  1. The first is the very availability of new technologies, which are constantly updated and increasingly accessible.
  2. The second driver is the customers themselves who are asking banks to be increasingly digital.
  3. The third push, however, was not foreseeable until a few months ago: we are talking about the health and economic emergency triggered by the Covid-19 pandemic.

Now, let’s take a closer look at each of these influences.

 

The multiplication of technologies

The development of digital technologies that are useful to the Banking sector is progressing at an increasingly fast pace.

  1. In this sense, the first keyword to keep in mind is API (“Application Programming Interface”), the set of procedures necessary to perform a specific task. Without going into technicalities, the development of specific APIs is responsible for improving services, faster digital payments, and data sharing operations (and these are just a few examples).
  2. The second keyword is Cloud Computing: and we will focus on this in the next paragraph; the Cloud, in fact, is definitely one of the 5 Digital Disruption trends to keep an eye on.
  3. The third one is “Mobile First” and we’ve already seen above how younger audiences are increasingly using mobile to interface with their bank.
  4. The fourth keyword is blockchain. It is a technology made known by the advent of Bitcoin and the so-called cryptocurrency. It’s not easy to find a clear and unambiguous definition for blockchain, but it can be seen as a huge shared digital register, one that has the enormous advantage of not needing any central body to act as guarantor of transactions. In this sense, the revolution is that of disintermediation; and it is natural that the banking sector, after an initial phase of rejection, is now very attentive to this type of technology, which risks making its processes obsolete. Blockchain, in short, is transforming itself from “sworn enemy” into “precious ally.”

 

Customers are asking for it

The second push that is accelerating Digital transformation in Banking is the customers themselves. Above all, we’re talking about the younger generations, who are used to the simplicity, speed, and user-friendly dynamics of platforms like Amazon or Uber. They also require this same level of “usability” from their bank.

Even in the Banking sector, the customer is now at the center of attention, and company processes revolve around them.

 

The post-Covid era will be even more digital

The third push was completely unpredictable, and even unthinkable, until a few months ago. We are talking about the Covid-19 pandemic, which, for several months now, has forced us into a world of physical distancing, which is necessary to preserve our health and that of others.

During the emergency, digital has been a lifesaver that has allowed many businesses to move forward. But even in the post-emergency, no doubt, some of the good digital practices that we have learned to implement will take on more and more space and importance.

It will no longer just be a matter of health, but also of efficiency (at the company level) and comfort (at the customer level).

 

5 trends for today and tomorrow

The three drivers we identified above are converging to create an unprecedented acceleration of digital transformation in Banking. For this reason, it has become even more strategic for companies to understand these trends well in advance of competitors. Here are what we see as the five most important trends for the banking sector.

 

Customer-centric optics

As we mentioned above, with digital, the customer is now at the center of all processes, even in the banking ecosystem. But how does this translate into reality?

First of all, it translates into an unprecedented centrality of digital Customer Service, which must be simple, quick, and intuitive. Such customer service must be active 24 hours a day, 7 days a week, optimized in omnichannel mode, with particular attention to mobile. Above all, it must be personalized: companies must go beyond the analysis of Big Data (however precious and indispensable) and embrace the one-to-one perspective. Therefore, it’s about collecting data on the individual customer and being able to establish a tailor-made, personalized dialog with him. All of this is made possible by technologies made available by companies such as Doxee, which already collaborates with important players in the sector.

 

The surge in digital payments

Although this trend is not new, it has been greatly accelerated with the current health emergency. Consider this significant figure: in 2019, the market for global payments by mobile was valued  at $3714.5 billion. By 2025 this value is estimated at $12,407.5, at a CACR of 23.8% from 2020 to 2025 (mordorintelligence.com). 

To explore this point further, see this post from our blog.

 

Everything in Cloud Computing

Cloud Computing in the Banking ecosystem is at the center of Customer Service and HR department processes and also for all document archiving practices. In the latter sense, there is more and more talk of “dematerialized banking.”

The advantages of Cloud Computing are many, and above all for cost reduction, which corresponds to improved performance and increased productivity; then there are the possibilities of rapid scalability and flexibility, and improved performance in terms of reliability and security (a subject we will return to in the next point).

You can learn more about the importance of Cloud Computing in banking in this post from our blog.

 

More and more security

In the banking sector, it is natural to put the issue of security first, and that’s what all the players in the industry are doing. In this sense, with digital, there are many more fronts for attack. At the same time, therefore, efforts are multiplied to guarantee maximum security, but also maximum privacy, in accordance with regulations that are constantly being updated.

This is why cybersecurity solutions and data management platforms are such high priorities for banks: the amount of investment in these areas is constantly growing. This is great news for everyone.

 

Banks and FinTech

FinTech’s players have conquered huge market shares, and this is a trend that is not slowing down. In order to maintain competitive advantage, the leading banking groups have understood the strategic importance of investing in this sector and putting fruitful partnerships on track.

The trend of acquiring FinTech start-ups by banks, or simply collaboration, will become increasingly consolidated. In fact, banks can benefit enormously in terms of digital know-how from this type of operation.

Therefore, in banking everything pushes in the direction of Digital Disruption. The opportunities are multiplying, especially as we slowly exit from the pandemic. The organizations who are able to seize the opportunities first will be in a better position to embrace and lead in the market of the future.

 

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