Digital banking as a mainstream in FinTech - are you ready?

Any bank that is not ready for the digitalization should prepare to keep up with rivals. The competition is strong and demand is high. There are a lot of already transformed financial institutions into successful mobile banks and they raise their influence every day, as they operate faster and provide smarter and more efficient services.

Both retail and business banking are accelerating their digital initiatives. Digital banks have successfully taken over traditional services in the retail banking sector. Small and medium-sized enterprises, which have long been underserved with the products offered by traditional banks, enjoy the novel products and services.

Game-changing models in the banking industry:

Artificial intelligence (AI), Machine Learning (ML), and big data analytics are becoming must-haves for banks to compete and respond rapidly to the new banking market conditions.

Retail clients can use tech-enabled AI to plan their spending, earn higher interest rates on deposits, do smart budgeting and wealth management without the need to interact with potentially biased advisors. AI also helpful in credit loan underwriting, tax processing, digitalization of documents and extracting information out of them and automation of call centers (to calculate customer wait times accurately, for instance).

Open Application Programming Interfaces (APIs) and platformization are also key trends.

To illustrate the usage of APIs, let’s have a look at the Open Banking or, as it is also known, an "open bank data." Open banking is a banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of APIs. The adoption of the Open Banking model is in progress nowadays, due to the challenge of meeting the sufficient quality of the regulatory standards for integration with the third-party APIs. Financial institutions also have to figure out how their Open Banking setups will look in terms of technology and branding. Based on the surveys, customers tend to trust a third party to aggregate their banking data, especially those with 4+ accounts in different banks.

Another relevant example of an API use, is the marketplace banking. The marketplace model is a data-intensive, platform-based marketplace, where several financial services providers compete to offer customers tailored, good-value products. Customers will be able to use a single banking interface to access products and services from a multitude of players, including banks, other financial services providers as well as select customer service providers.

Platformification is an extra key to success in the modern digital banking world and allows people to skip traditional banks. Customers could enjoy receiving loans without a tremendous amount of paperwork with the help of online lending platforms. Peer-to-peer lending (P2P lending) attracts users by offering more safety and transparency, less bureaucracy and quicker loans. With the rise of P2P lending apps, users can benefit from loan comparison platforms, compare financial services to find the best interest rates for personal loans and access track records, deal-flow and reputation.

Open banks, peer-to-peer lending marketplaces, and online loan comparison platforms are just a few examples of how deep digitalization can put its roots into banking. Most importantly, these game-changing models will benefit not only the banks but third parties as well, allowing small companies and start-ups to get into FinTech and provide services. FinTech providers might offer simpler business models, with tailored products that are easy to set up and access via digital channels. At Webdevelop Pro, we possess a solid experience of integration with a multitude of 3rd party providers among which are Stripe, North capital, Dwolla, Paypal, TransferWise, IdentityMindGlobal, Sift, Twillio, so that our clients could quickly accept and pay out money, make multi-currency payments, track their transactions, integrate bank transfers, verify customers and bank information, perform KYC onboarding, fraud prevention, transaction monitoring, sanctions screening as well as build, scale and operate communications, etc.

Webdevelop Pro can help you develop modern FinTech software and complex financial platforms that will help you become industry leaders. We could quickly mobilize a team of experienced full-stack developers, DevOps specialist, adjust the team according to the capacities needed and provide CTO as a service to help you realize your ambitious new digital project.

New digital banking consumer demographics:

Millennials is the dominant generation in the financial space of digital banking. This is a demographic cohort born during the 1980s and through the 2000s are making good money and are interested in emerging technologies. They want 24/7 banking services access and speedy and smooth online payment access. This target audience banks are seeking the most prominent technology trends in banking as they shop, work, and communicate online. What should banks do to attract and retain millennials? It’s time for banks to focus on the user experience and work out viable UX strategies:

• Carry out UX research, revise the user journey for clients who are doing everything on the go, collect feedback and personalize services based on what you learn from your clients;
• Design a good and intuitive UI by easy switching between accounts, simple charts and clear menus. Webdevelop Pro past work has proven that the best applications are both beautiful, elegant and easy to use.
• Create an omnichannel experience, reducing interactions with call centers, branches and email while investing in digital platforms. We, as a software contractor, focus our attention on reliability, and scalability for our customers, so that application we develop run smoothly and perform well in the full capacity mode during the peak hours. From the stage of building an application’s architecture, we perform automated and manual testing as well as benchmark and unit testing to encompass all points of possible failure.

Challenges:

Along with positive impacts and competitive advantages, digital transformation entails challenges banks facing on their way.

According to the PWC Digital Banking Survey, 2013, top barriers to the success of your organization’s digital channel strategy are:

• Complex and legacy core banking system
• Regulatory environment
• Lack of budget
• Culture of organization
• Lack of talent/skills storage
• Lack of commitment from board/CEO

FinTech security. Secure access, protected financial data management, and fraud prevention and detection are top challenges for both FinTech startups and traditional banks. Additionally, focusing on the simplicity of your UX doesn’t mean neglecting security. Webdevelop Pro Security development expertise has helped our existing clients meet financial industry regulations and remain compliant without increasing costs.

Legacy systems. Before adopting innovative practices, banks must sort things out with their complex software for retail banking technology that’s built on obsolete technologies. Outsourcing teams of software specialists rather than relying on the in-house hiring might speed up the processes. Webdevelop Pro could outstaff the right talent from Eastern Europe to provide you an improved experience across digital channels and resolve challenges associated with disjointed legacy platforms.

Organizational issues. A large number of employees at most banks is an obstacle to digital mobilization. Again, an experienced outsourced IT team might be a component to align with the in-house specialists and help them more quickly adapt to market changes. Webdevelop Pro facilitated such a productive dialogue with the in-house team on introducing new features and functionalities for the Security Company (link to the case).

Customer preferences. Not everyone wants a progressive digital approach applied to their daily lives. Statistics show that consumer demand for traditional branch banking services remains substantial and a simple desire for human interaction is still crucial in the world of digital devices. Banks should pay attention to the differing demands of clients. Credible digital banking requires a cultural switch both organization-wise and client-wise. Impress users with advanced product functionality while keeping your expenses low. We don’t always seek the simplest solutions; we propose the most effective ones in terms of long-term profits and customer value.

Get in touch with us to learn more about the technological side of digital banking services.