Banking Sector in the new Digital Ecosystem

Banking, as many other sectors, is currently facing a large number of disruptive threats. The new digital ecosystem and current changes in United Kingdom and European Union legislation, changes like GDPR, Open Banking Standard and Payment Services Directive (PSD2), demands banks fundamental rethink on traditional business model.

The future of banking is far from certain. However, the traditional banking companies, along with other new players and challengers, need to become more customer-centric in order to be successful in the new digital reality. 

What is the solution to success? There is not a straight forward approach. One thing is sure, the new digital technologies and customer centricity plays an important role in almost all digital transformation projects that currently happens in banking sector. 

Improving digitalization requires significant changes throughout business, the optimal strategies is likely to be a combination between several models:

·     full-service providers – banks will continue with full-service offerings, delivering proprietary products via own distribution channels with limited or no integration with third parties via APIs

·     utility – banks will give up the ownership of products and distribution to operate as a utility, providing third-party with infrastructure and non-customer facing

·     suppliers – banks will continue to have ownership over products but will give up the distribution to be operated by third-party infrastructure.

·     Interface – banks will allocate more resources to create a marketplace interface where others can provide products and services.

Banks who will find the best combination between those modules will be more likely to win the open-banking race and will become more digital, improving the ability to optimize their user data for providing the ultimate customer experience.

PSD2’s greatest impact to open up of bank-held customer account data over APIs along with new digital technologies have made bank’s innovation projects to flourish. The digital boost in preferred channels for banking services leads now to unique customer journeys comparative with other sectors such retail and telco. 

Ultimately, this will lead to marketplace interface, where customers will have the possibility to use products and services from different banks, financial institutions, FinTech and other FS and non-FS firms. 

Who will win the race in the new digital ecosystem in banking sector? The answer is – companies who will invest more in digital technologies, innovation projects and marketplace platforms.

I would love to hear your opinions on what are the challenges that banking sector is facing right now in the comments!