Banks are facing more competition than ever as fintechs continue to leverage the power of data, networks, and innovation to create and offer their customers the products and services they need.
Many banks are struggling because they’re still using legacy systems that were built decades ago, and this issue isn’t limited to banks. Automated clearing house (ACH), real-time gross settlement (RTGS), and Society for Worldwide Interbank Financial Telecommunications (SWIFT) systems, as well as card networks, operate within an antiquated system that’s no longer suitable for this 24/7 digital climate.
Equally difficult is that each one of these systems operates within its own specifications and is not equipped to communicate with each other. Every one of these systems functions within its own regulatory framework, processing, and settlement rules, as well as messaging standards, resulting in a deeply fragmented landscape where the customer is more likely to experience a poor payments journey.
Luckily, the innovative payments landscape is experiencing a significant shift. It’s moving from transaction-based, closed, and proprietary models toward open architecture frameworks that can facilitate context-based transactions. It’s this transition that is bringing about a more omnichannel experience for customers.
It has been discovered that digital platforms should be erected based on “customer-focused value propositions” and user experience, which would enable networks to not only scale but to grow the number of members who join their community.
Networks Must Be Resilient and Ready for Increased Transaction Volumes
With the oncoming transaction volumes, banks, fintechs, and other players within the payments space must provide network connections that are robust. Therefore, it’s important that the networks that are built within the digital ecosystem are secure and reliable. The networks must also be equipped with an effective fraud system that offers real-time data analysis to prevent fraudulent transactions.
With the growth of the digital ecosystem, public internet connections will no longer be appropriate for high-value and large-volume transactions, including sensitive data.
In order to thrive in this highly competitive space, banks, fintechs, network operators, and retailers must be able to connect with their network from anywhere in the world without needing public internet access. Once their solutions are successful, organizations should consider migrating their apps from public internet structures and into private network connections.
Data Are Valuable but Not Forever
Innovative technology such as artificial intelligence (AI) and machine learning has enabled countless organizations to amass considerable data. These data are a gold mine where valuable insights into customer behavior can be extracted, paving the way for new products and enhancing the customer experience.
However, regardless of the tremendous value that consumer data hold, they do have a shelf life. Businesses can waste vast data if the data are not stored, handled, or used within a certain time. Before any of this can happen, however, the customer must agree to have their data used. In order to encourage customers to grant access to their data, businesses must offer exceptional value and convenience.
Where Banks Stand
Banks are currently missing out on the vast array of data that are both interaction- and transaction-based. Herein lies the critical information needed to both develop and launch digital solutions to meet bank customers’ needs.
To remain competitive and agile, banks must redirect their focus to offering nonbanking, third-party services. Because banks tend to be trusted institutions, the transition should be smoother. As an example, Starling Bank, a bank in Germany, offers services outside its core offerings, such as pensions, wealth management, and credit scores, all included within its app.
More than ever, customers are spending considerable time on their mobile device for their personal needs. It’s important that banks meet their customers where they are and on the platforms customers most interact with. Whatever data are mined from banks’ AI and machine learning systems, banks should use to predict how their customers will act in the future.
As with any organization operating within the digital space, banks must both ensure their customer data are secure and have all the necessary protection to prevent fraud.
What’s Ahead
The days where physical banks are important hubs within a community are long gone. Consumers now want an all-in-one solution where all their personal business can be handled in one, secure, and seamless platform. Staying adaptable and having interconnectivity within critical networks will help banks stay relevant and competitive in the coming years.