The challenges of digital banking
What are the challenges faced by digital banks? Following the global financial crisis, the Spanish banking sector has undergone major restructuring. According to the report on the Spanish banking sector by Funcas the number of banks decreased in 2008, as there were 281 entities with a banking licence, while by the end of 2020 191 were left. The banking landscape has changed a lot and this has caused banking entities to adapt, but how?
Mergers and digital transformation
Firstly, as the Funcas report rightly points out, this transformation has been marked by the mergers carried out by some entities such as CaixaBank and Bankia (March 2021) or Unicaja and Liberbank (July 2021).?
The motivation for some of these mergers was to improve the solvency and financial capacity of these banks, but today this has changed. Why? Because competition, market size, pricing and ways of capturing funds have changed, and this leads to a restructuring both at a bank- and branch-level.
This is where the key ingredient of this whole revolution (we could call it that) comes in, which is nothing more and nothing less than digital transformation.
Technology is advancing by leaps and bounds, all sectors have undergone a digital transformation, but banks are undoubtedly the ones that have noticed it the most,? by a wide margin. In the report on the Spanish banking sector by Funcas, it is commented that banking and payments are moving towards a "platform model" (words of the European banking supervisor).
Specifically, banks have had to compete with digital platforms that offer financial products and services that, when combined, are the perfect mix to attract new customers or retain them.
It is clear that the passage of COVID-19 accelerated this change.
The challenges of banking digitalization
The outbreak of the pandemic has highlighted the relevance of the changes the banking sector has been undergoing. Let's take a step-by-step approach:
Undoubtedly, a digital transformation in the product but also in the customer profile.
领英推荐
Digitalized payments
As we mentioned in the last point, social change is playing an important role in the financial sector. Purchasing and payment habits after the pandemic have changed: in the following graph extracted from the Funcas report, it clearly shows that people have changed their attitude towards cash payments and digital payment instruments.
The chart is from the report on the Spanish banking sector prepared by Funcas.
Before COVID-19, cash adoptionwas at 30.83 %. In autumn 2020 (during the second wave), this percentage dropped by almost half, settling at 15.89 %. The decline in the preference for cash was greater (9.34 %) during the first wave (spring 2020).?
It can also be observed that while the use of cash fell, consumers' preference for making payments with their mobile devices increased by 7.5 percentage points.?
What the industry will offer and what consumers want
In summary, digital transformation has led to the birth of new companies that offer their technology to provide a new service to financial institutions, as is the case of Triple.
At Triple we provide financial institutions with our pioneering payment data technology in Spain. Our technology allows the development of cashback programs (rewards) that are integrated directly into banking applications.?
Cashback is a trend that is in crescendo: the system has been very popular in the US, but little by little more financial institutions are interested in having this service within their applications in continental Europe, because of its differentiating attribute in this? highly competitive sector.
For more information on how to implement our technology, contact our team.