How will digital banking shape the financial sector over the next 1-3 years?

According to Google, 90% of all media interactions are screen-based and we spend as much as 4,4 hours of our leisure time in front of screens every day. Managing our finances are among the top 5 activities that people do on their devices.[1]

Are banks up to the task for this new digital world? How high among our priorities is the digitalization of our industry? Are we following? Or are we leading?

There are 7 powerful forces that are posed to reshape the financial sector over the next 1-3 years:

Incumbent vs Regulatory Innovation

There are currently too many differences among financial markets across the world. In countries like the USA, there are great innovations in mobile payments and social network integration of financial services. Most of these innovations come from individual companies first and then are replicated by their competitors.

In other countries, such as Chile, the innovation comes from the industry as a whole in response to regulatory requirements. This kind of environment has made it possible for instant online fund transfers, funds from check deposits are available the following morning, there’s a national ATM network available to every customer at no cost, etc.

Individual innovation is the engine of forward thinking and of new product development, but regulatory and industrial agreements gives them the power to push these innovations forward.

Mobile only/mobile first

As new generations enter the market, new expectations arise. Millennials expect their financial transactions to be as seamless as checking their status on Facebook, sending a picture on Snapchat or access their files on Dropbox.

The current design of mobile banking is a raw adaptation of the web services that banks have been offering for the past 20 years and that has become obsolete as new technologies emerge.

The ones that will succeed with millennials are those that think of the mobile experience from the ground up, not as a redesign, but a totally original way of thinking. Integration with mobile-only functions as biometric sensors, geotagging, face recognition, etc. will be the base for a new banking experience.

 Account executive role

The account executive has become more of a financial advisor and less of a bureaucrat. Digital transactions allow the customer to be self-sufficient when it comes to day-to-day operations. The account executive must be able to guide their clients in complex financial decisions, offering advice and expertise and leaving the operational load to the back office or the customer himself.

Digital branch

Much has been said about branch obsolescence, but banking digitalization will not make physical locations disappear; it will transform them into digital hubs, where clients can learn to use remote banking, have access to wifi or devices when theirs are unavailable or interact with state of the art ATMs for cash operations, ticketing, card issuing, etc.

Human tellers will probably become obsolete, but that will leave more room for the account executive to fulfill the role previously described and for the client to feel more at home.

New entrants

As mega corporations such as Google, Facebook and Twitter develop new payment platforms, the question every bank should be asking is: Is it easier for a bank to reach as many users as Google or for Google to develop as many financial products as a bank? The answer should be making banks work 24/7 to widen the gap of expertise through innovation and more customized financial products.

Socialization

As part of the “new entrants” threat, it will become essential for banks to match their brick and mortar presence with their bits and bytes involvement. Ubiquity of a brand is no longer given by a bank’s branch network but also by its presence in social networks, not only through fan pages, but with the development of tools that let you share your goals, achievements and ask or give financial advice. Banks must be where their clients spend most of their time and nowadays that means Facebook, Whatsapp, Twitter, Snapchat, etc.

Paperless

Finally, advances in digital signature such as fingerprint scanning, iris reading, voice and face recognition and others are changing the document signing landscape, getting rid of the face to face requirement that many countries impose on their financial industries to enforce money laundering prevention.

As a worldwide registry of biometric ID becomes more feasible, the prospect of a 100% paperless bank lurks even closer.

So, as this force looms on the horizon, are we ready to take the lead and start thinking outside the box? Can banks think like a startup? Can we defy our own status quo? The challenge is there and if we don’t take it, someone will… soon.

 


[1] Google. The New Multiscreen World. August 2012

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Matias Fuenzalida

About Matias Fuenzalida

Mr. Fuenzalida studied Commercial Engineering and obtained his degree in 2000 in Chile, and also has degrees in Sales, Balanced Scorecard and Strategic Planning from different Universities in Chile and abroad. He is currently obtaining his Master's Degree in Innovation. He has worked in different industries such as Construction, Advertising, Metallurgy and Freight Forwarding, but for the past 7 years he has been in the financial services industry, in 2 of the top 4 private banks in Chile, in positions ranging from customer service, strategic planning, process development and currently digital banking and channel development. For the past 2 years he has been mentoring startups from Incuba UC, one of the top 25 incubators in the world (according to UBI index) and he has become the go-to expert for startups that offer banking apps and services.