Blog· 4min February 17, 2023
The banking industry has undergone significant changes over the past few years. With the continuing emergence of digital banks and new players in the industry, the game has changed, and both traditional banks and fintechs are now faced with new challenges and opportunities. The question that arises is, how can banks stay relevant and add value to their customers in this new banking battlefield?
Traditionally, the banking industry was divided into two camps - big banks and smaller banks. However, with the emergence of digital banks, the question became, will the big banks get smart first, or will the smart banks get big? As start-ups scale up at tremendous speed and enter the banking ecosystem as new players, the game has changed, bringing new challenges and opportunities for all players in the industry.
A lot of banks, and indeed fintechs, are still a bit lost in what to do with all the opportunity. With the rise of new digital technologies, there are endless possibilities, and it can be challenging to know where to start. However, one thing is for sure - keeping up with the pace of change is one of the biggest differentiators on the banking battlefield.
The biggest differentiator on the banking battlefield is speed. Keeping up with the pace of change is critical for banks and financial institutions to remain relevant and add value to their account holders. The impact of speed on customer satisfaction cannot be understated. Customers today are accustomed to receiving fast, efficient, and seamless services from their banks, and they expect nothing less. Banks must focus on delivering digital services that meet or exceed their customers' expectations.
Regulatory changes are another area where speed is essential. With change seemingly being the only constant we now see in the payments space, roadmaps, budgets and resources for many banks are predominantly filled with the mandatory changes that banks must adhere to simply to remain compliant.
Finally, the speed of customer expectations is increasing. Customers today expect fast, efficient, and seamless services from their banks. They want to be able to access their accounts and complete transactions quickly and easily, without any delays or complications. Banks must focus on delivering digital services that meet or exceed their customers' expectations, or risk losing them to competitors who can provide better service.
In the old world, payments processing was hidden behind multi-day/multi-hour payment cycles, tech puzzles, and heavily manual processes. Batch overnight and next-day processing were the norm. However, the world has moved on, and at a rapid pace. Change is the only constant when it comes to payments processing, and the once hidden back office is becoming more and more visible to the extent that it is now front and centre.
In the new world, customers have full visibility of exactly where their payments are and how they're behaving, at exactly the same time as their payment tech providers through their API. The importance of payments tech, its stability, its availability, its capability, and its ability to change and adapt at pace is only increasing, and rapidly.
Because there's no time spent trying to hide, it's all about getting it right as often as possible and showing customers the reality. Being ahead of them wherever possible, being ready to highlight issues and work together with partners, customers, schemes, or whoever it takes to fix issues and move forward.
The importance of payments tech and its ability to evolve at the same pace as regulatory changes and customer expectations is essential for banks to remain relevant and competitive in the rapidly changing payments industry.
The role of technology in banking cannot be understated. Differentiating through digital experiences and products is essential for banks to remain competitive and relevant in today's digital age. Banks must curate, differentiate, and evolve digital experiences and products strategically and within meaningful time frames.
One example of how banks can differentiate is by using cloud computing, APIs, and microservices. While many financial institutions operate their payment gateways on premises, there are definite advantages to using cloud-based technology here. With the increasing number of transactions being made, the scalability of cloud services means that the system can deal with any peaks and troughs.
Modern cloud-based platforms and solutions, therefore, provide a previously unimaginable level of flexibility and cost-effectiveness opposed to their legacy counterparts. Cloud-based payment platform infrastructure is especially attractive for financial institutions that have struggled to streamline, maintain and upgrade legacy infrastructure: systems they built themselves which have proven ill-equipped to deal with changing market environments and rapidly accelerating technology.
APIs and microservices can help banks streamline their operations and enhance security. By breaking down large applications into smaller, modular services, banks can enable faster development and deployment of new products and services. This approach also allows for more frequent updates and iterations, making it easier to keep up with the pace of change in the banking industry.
The future banking ecosystem will be shaped by several factors, including investments, innovation, and the transition from legacy infrastructure to new banking technology. Ultimately, the big winners in this ecosystem will be those who see the bigger picture and are aggressive in bringing together, attracting, and aligning the right partners to deliver value.
The mechanism for delivering value will be platforms. Whether it's a financial institution, a fintech, or a separate third-party entity, the best platform will win. These platforms will bring financial institutions and fintechs together to create a seamless experience for customers, enabling them to access a wide range of services and products from a single platform.
The future of the banking ecosystem is likely to be more collaborative and open, with financial institutions and fintechs working together to deliver innovative products and services to their customers. As technology continues to evolve, the lines between financial institutions and fintechs are likely to become increasingly blurred, and the distinction between traditional banking and digital banking will fade away.
The banking industry is at a critical juncture, and the future of the industry will be shaped by the ability of financial institutions and fintechs to innovate and work together effectively. The winners in this ecosystem will be those who can create the best platforms and deliver the most value to their customers. By differentiating through digital experiences and products, banks can stay competitive and relevant in the fast-changing banking industry. Strategies for evolving digital experiences and products include collaborating with fintechs, using design thinking, and adopting an agile approach to digital transformation. As we move forward, the lines between financial institutions and fintechs will continue to blur, and the banking industry will become more collaborative and open. Ultimately, the winners will be those who can see the bigger picture and work together to deliver the best possible customer experience.