Importance/Benefits and Use Cases of Digital Transformation in Banking and Financial Services – Techbytes

When it comes to banking, the game has changed. Those who look to the physical model may be finding that there is an increasing push to the digital world. There are already banks like Tangerine and EQ that rely on solely off-site solutions for banking needs. Now though, even with conventional banks, people can obtain meetings online in forms such as video banking. In the following article, we will explore why there has been a digital transformation in banking and financial services as well as the importance of digital transformation in banking and financial services.

Signs of the Times

One of the reasons that digital modalities are emerging is COVID-19. Now, even banks that were reluctant to offer services online will do video banking. Additionally, there has been technology disrupters in place for a while that will inevitably change banking. For example, Artificial Intelligence can work on sites where a chatbot is all that is needed for simple questions and answers. Banks already have been turning to menus that are partially automated by AI. In just four years between 2015 and 2019, there was an almost 50% increase in the use of fintech according to an EY report. This means that even before COVID-19 protocols, the technology was getting ready and adapted to the financial marketplace.

Pioneering Examples

The Japanese came up with Sony Bank in 2001. There are no physical branches or ATMs that come with the Sony Bank offerings. However, even though banking is on the Internet, people can still get physical debit cards and anything else that comes with banking. The same model applies to Western banks as well. EQ Bank is another digital bank where people can get savings accounts and other offerings. This Canadian bank is powered by a bank that was established 50 years ago, Equitable Bank Canada's Challenger Bank. Equitable Bank Canada's Challenger Bank has $37 billion dollars in assets. This makes them Canada's ninth-largest schedule 1 bank. While EQ Bank is younger as it was founded in 2016, it still has $6 billion dollars and is Canada's first digital bank.

The impressive force with which the digital banks are propelling forward has started a precedent. Forbes just released a list of the best online banks for 2021. This proves that American banks such as Varo Bank and Ally Bank, while having physical locations, still are strong with their online banking presence.

There is Still a Push for More

Clearly, the digital transformation in banking and financial services has not reached its pinnacle yet. Banks are starting to wake up to the importance of digital transformation in banking and financial services. There are many areas in which digital banking can occur. It can start with processes, as many banks are beginning to adopt. Most banks will offer online banking as part of their offerings. Also, there can be more technologies that are put into place. The emergence of AI is a perfect example of this. Additionally, digital banks have to rely more on mail carriers to get their cards off to customers. They must collaborate with existing banks if they want to be able to offer ATMs to customers. Who knows in the future how cash will be distributed if all banks go digital. Right now, the element of collaboration in banking institutions between physical banks and online ones cannot be understated.

A digital bank will mean remote employees. This changes the landscape. COVID-19 has already seen people working from home, but the banks not set up for digital meetings were scrambling to keep up. Thankfully, technologies such as Zoom helped with these processes. However, a digital bank is not necessarily bound by centers of employment. There may have been employees that went completely remote home-based during the pandemic. As long as the technologies are implemented into a CRM interface, employees can work from home who work for digital banks.

How Are Things Changing Now?

There are many ways that banks can go digital. They can implement new encryption, optimization, AI, automation, AR, and distributed ledger technology. There are still rules that govern banking that also must be adhered to in the digital world as well. There has become a competitive atmosphere in the banking sphere as banks scramble to begin offering more and more online. It will require the upskilling of the employment sector as well as the adoption of new modes of doing things. Security will always be an important concern going forward. However, it appears that consumers are looking for ease of use now as they abandon traditional platforms. If a bank cannot offer security as well as completely digital services, there are already banks that can. It's easy to switch providers, and banks should recognize that consumers expect an already seamless experience.

There is still the option for consumers as to whether they want to go full digital banking or bank with a branch with physical locations. One could argue though that there really will never be such a thing as full digital banking when the world still relies on cash payments. These cash payments are still necessary for places where the only option is to pay with coins. The world though is steadily moving towards the option to have credit payments in such places, for example using parking podiums instead of parking meters. There is a way to go, but the importance of digital transformation in banking and financial services is being seen through demand as well as a necessity in all financial sectors.

Conclusion

There are many models of digital banking, from Omni to smart banking. There is no one size fits all approach for an organization. Rather, banks will have to find the strategies, technology, and staff that can bring them into the digital age of banking. There are pioneering banks across the world such as Sony Bank and EQ Bank that have already managed to navigate the waters. Part of the competition process will be for the other banks to find niches in the digital marketplace that make them competitive and desirable. They will need to retrain staff or just scrap the old model and start from the ground up. All of these challenges must be navigated while respecting the rules put in place by governments. The digital transformation in banking and financial services has the potential to make things easier for all parties. However, it is only with the right security measures and technology that banks will see any real staying power in the digital sector.