Digital Banking Future is Now

Digital Banking Future is Now

Banking executives convened to discuss the opportunities and challenges of digitization in banking. Their consensus was that becoming a 'digital bank' is no longer an option.

By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

Digital transformation isn’t new – it’s been happening in different industries over the past 20 or 30 years – with different waves occurring across various industry segments. In the 1990s, music, retailing, photography and video were all impacted by new entrants who used digital capabilities to change the way services were delivered and consumed. In the 2000s, TV, travel and recruitment were impacted, with the advent of YouTube, online travel sites and job posting boards. The 2010s find industries like retailing experiencing their second wave of digitization (first seen in the 1990’s) while financial services finally begins to discover the opportunities and challenges of digitization.

Beyond simply making current processes digital, today’s transformation is dramatically impacting the way in which customers interact with brands. Instead of visiting physical facilities, consumers in all industries are beginning their shopping and buying experiences online or with a smart phone, altering all phases of the traditional customer journey.

A new report, produced by Efma and Oracle Financial Services Global Business Unit, entitled ‘Digital Transformation – The Challenges and Opportunities Facing Banks’ looks at the current and future impacts of digitization within the banking industry. This report is the culmination of a series of three ‘Think Tank’ sessions hosted by these organizations.

Impact of Digital Transformation

While a great deal of attention is given to the individual players that are impacted by digital transformation (Kodak, Blockbuster, Borders, etc.),there is often quite a large financial impact on overall industry segments. As stated in the Efma/Oracle report, “A clear example can be seen in the music industry, where the global market now is only worth about half of its value in 2000. Another example is with the newspaper print advertising market, which is about a third of what it used to be.”

Not only is there a major financial impact to digital transformation. The report also found that digital transformation occurs significantly faster at a much lower cost than transformations of industries in the past. In addition, because of the lower cost of entry, more players can be informed in the process (enter fintech start-ups). The consequence is a more rapid pace of change.

For example, as mentioned in the report, in Brett King’s book, ‘Banking 3.0’, he chooses a level of 50 million users as the definition of a target figure for a market. For planes and cars to reach this level took over 60 years. Credit cards took 28 years but more recently, contactless credit cards took only four years to reach 50 million users, while Facebook and Twitter took only 3 and 2 years respectively. “So, the pace of change is getting much faster and the financial services industry has to adapt if banks are to succeed and survive,” states the research.

Role of Fintechs

It is well documented that there is a mass influx of new competitors in the financial services space globally, with massive funding of both new start-ups and innovations by large, established technology companies like Google, PayPal, Facebook and Amazon. According to the research study, fintechs have primarily focused on three segments of the financial services industry: payments, lending and personal finance. The two main reasons why these are the primary segments that the fintechs are pursuing include: ...

To read the rest of the article about digital transformation,  go to the complete article here ...

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