The ever-changing landscape of global technology has the banking and financial sectors sweating. The influx of fintech companies, big tech giants, and the increasing customer demand for technological advances has caused banking and financial services to be on alert. Here are a few ways that banking and financial companies have met these challenges head-on.
Digital platforms give consumers the ability to conduct banking and financial transactions entirely online. With the emergence of digital banking platforms, consumers no longer need to visit a bank or a financial institution's physical location. Online and mobile banking platforms have made life easier by providing 24/7 access to banking, even on weekends and holidays.
As a result, customer expectations have changed dramatically and not having an online platform has become unacceptable. Gone are the days of waiting in long lines at the bank, speeding to the bank to beat closing time, or taking time off from work to get to the bank. Simple transactions, personal and small business loan applications, and even mortgages can now be completed anywhere with an internet connection. Customers can now seek online payment options and save a great deal of time.
To keep up with online banks such as Ally Financial Inc., American Express, Discover Financial, & Synchrony Financial, traditional banks and financial institutions have had to make a change. Traditional brick-and-mortar institutions have seen a steady decline in foot traffic and so the need for physical branches has also decreased. So, for the past several years, many traditional banks have integrated digital banking platforms into their strategies to stay competitive and relevant.
The importance of digital banking platforms became blatantly clear during the COVID-19 pandemic. According to a recent study, during the shutdowns the use of contactless payments went up by 30%, digital account registration went up by over 70%, and the use of mobile banking apps went up by over 80%. Covid-19 accelerated the demand for digital platforms and, as a result, many financial institutions suddenly needed to start closing their branches.
As the digital landscape has continually evolved, banks and financial institutions have needed to become more efficient. Many traditional brick-and-mortar banks have been operating for decades and were slow to move when new technology hit the market. Bank operations were inherently inefficient in their business operations, and technology revealed just how outdated and wasteful the banking and financial institutions were.
Banks needed to invest heavily in modern technologies to keep pace with consumer demand. They needed to provide faster services to their customers while reducing overall costs. For the banking industry, automation has been at the forefront since the early 2000s, but the onslaught of fintech and the recent pandemic has forced an increase in technology spending.
The banking and financial sectors have faced a brutal reality for the past few years. Either they have needed to invest heavily in technology, or experience decreasing profits and risk being forced out of business entirely. In response, big banks such as Wells Fargo, Bank of America, and JPMorgan Chase, ramped up spending on technology to $8 to $10 billion annually.
The median average for the entire banking industry, including community banks, local banks, state banks, and credit unions, is roughly $1.69 million per year. Across the board, technology has been placed at the forefront as banks and financial institutions try to retain customers and to innovative new customer experiences.
If you're not quite sure what FinTech is, it broadly refers to “financial technology”, but more specifically, it designates a company whose sole purpose is to automate and improve the use of banking and financial services for customers, business owners, and companies. Fintechs have been around for decades but became extremely popular after the global economic crash of 2008. After the crash, people began looking for a reliable way to obtain funds without using traditional banks, and fintech started to gain momentum.
In 2009, Bitcoin came on the scene and let the world know that they didn't need big banks for cryptocurrency and digital currency. In 2011, Google introduced Google Wallet, and in 2014, Apple introduced Apple Pay. The entry of two tech giants sparked a boom in fintech, and the banking industry took notice.
As a result, the banking industry feared that fintech companies would be competitors that could cause a substantial impact on the industry. However, as the world became more open to fintech, the banking and finance sectors realized that rather than working against fintech companies they could work with them.
The collaboration turned out to be a win-win for the financial industries and for fintech. Banks dealt with more regulation from the government when it came to innovation, and fintech companies realized the benefits of working with the banking industry's well-established customer base. By collaborating with fintech, the banking and finance sectors have utilized cutting-edge technology and, consequently, have been able to provide better, more flexible options to the customer.
The banking and financial sectors have taken significant steps to make the customer experience more convenience and easier use. People love online banking and the power it provides to them. They can check account balances, deposit checks, pay bills, transfer funds, apply for credit or loans, and download monthly statements at any time they choose.
Digital platforms have become the norm and continue to gain popularity for customers of all ages. The processes that banking and finance customers have grown accustomed to are now all digitized, and consumers rarely need to contact customer service. Streamlining banking and financial operations has enabled companies to be more agile in meeting the consumer's needs while reducing costs at the same time.
Banking and financial institutions are fully aware that customers are the only reason they are in business. To remain in business, they have prioritized consumer needs to retain and increase their customer base at every opportunity. Features like contactless cards, paperless billing, 24/7 account access, overdraft protection, and mobile check deposits have helped the banking and financial sectors alleviate customer anxiety.
In addition, banking and financial companies provide more content that teaches consumers how to be financially literate and utilize the companies’ services for their benefit. With the influx of millennial and Gen-Z customers into the marketplace, banks and financial institutions have recognized that, in a heartbeat, customers can take their money elsewhere and so banks have changed their strategies to keep their business and their loyalty.
APIs (application program interfaces) allow software applications to communicate with one another. We use such software to send instant messages, use Facebook, Twitter, Instagram, and even check the weather. These applications interpret user data and make it more readable. It's what allows you to do what you need to do when you need to do it. A modern banking API connects complex backend data sources with friendly user interfaces, lets you ask questions and answers you with relevant, updated answers to whatever you ask.
As technology has evolved, the banking and financial sectors have become more attuned to the benefits of APIs. Banking and financial institutions have incorporated biometrics, facial recognition, and machine learning to secure the way customers use their platforms. APIs allow banks and financial institutions to gain a deeper understanding of how users utilize their online platforms. Consumer interaction provides valuable information that helps companies meet the needs of their customers.
Regulations, new competitors, new customers, and the need for new revenue streams have caused banks and financial institutions to seek new possibilities for growth. By using new technologies such as AI, cloud storage, and machine learning, the banking and financial sectors can analyze the information between the banking industries and their customers.
There you have it! These are the five critical ways that the banking and financial sectors have adapted to the rapidly changing landscape of technology. Are there more? Of course. The banking and financial sectors will continue to use whatever analytical capabilities are available to maintain profitability, retain customers, and increase the bottom line.
Author Bio: Katie Tejada is a writer, editor, and former HR professional. She works with several fintech firms including Seamless Chex. She also covers developments in business communication, and law but also enjoys writing about travel, interiors and events."
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