How to create your own Digital Bank
Banking services are rapidly switching from physical distribution in stores and branches to digital distribution through software and servers. Between 2017 and 2021, 9% of all bank branches ?in the US have been closed, to minimise cost and drive efficiency. The same occurs in Europe, where major banks close their branches at a rapid pace.
At the same time, accelerated by the pandemic, the use of digital banking increases in a steadily high pace reaching 58% in 2021, while penetration of digital banking services is higher than 60%. To capitalize on this trend,?India launches 75 digital banking units ?across the rural areas of the country to include and help the unbanked population, with their day to day banking transactions. These units, although from brick-and-mortar, are equipped with tablets and internet services, as a short-term solution of building trust through a more familiar “traditional” structure and onboard new clients who, in normal circumstances wouldn’t have the means to engage with the local banks via technology.
Consequently, digital banks and their provided benefits for both clients and the banking industry, have attracted the attention, and dominated the go-to market strategies over the last years.
If not now, then when?
Actions should be swift. The majority of traditional banks are slow adopters of true digital transformation, mainly due to heavy legacy systems, inflexible and time-consuming processes. Fintechs on the other hand are flexible, they run on low costs and since they are not attached to the physical space, they can move fast and exploit momentum.
NeoBanks, Digital Banks, Electronic Money Institutions (EMI), Microfinance Institutions (MFI) and digitally native financial organisations popup every minute, gaining significant market share and loyal customers. At the same time, even non-banking businesses, like retailers and telecom providers,?reconfigure the banking value chain and enable new propositions ?by utilising Banking-as-a-service (BaaS) technologies and embedding financial services into their offered experience.
Whether startups or technology unicorns, the fintech industry sets the pace and gather large rounds of funding, as it was evident from the?$137.5 billion that was invested in fintech businesses, in 2019 . According to?Forbes , fintech industry’s estimated value is currently at $5 trillion, while over the next five years a further growth of 23% is anticipated.
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Which Banking Platform to choose?
So, the time is now, but which are the right banking tools to go live fast with minimum risk?
There are several banking platforms in the market today, created by established firms with years of experience in the industry. But most of them fail to keep up with a single truth; time is money! And while implementation time can take months, running costs and competition rise.
At the same time, a banking platform should be flexible and grow as the new business grows, providing all the latest features and functionalities a competitive digital bank needs end-to-end. Thus, a modular design and an open architecture are essential to meet the current and future needs of the business.
For a comprehensive Front-to-Back banking, a combination of both Digital and Core Banking functions is necessary, according to the specific priorities of the business.
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Digital Banking platform – Focusing on the client
The front-end of a digital bank is the space where the client interacts remotely with the organisation. This is where the client’s first impression plays a significant role to establish trust and loyalty. That means, it should be attractive and user friendly to support a straightforward customer journey. Moreover, it should be highly customisable to promote the brand’s style and message, differentiate the bank from its competition, while at the same time to be easily implemented and configured so it can be up and running in minimum time.
Competitive features to look for, in a Digital Banking platform
1.???Secure & intuitive customer onboarding
The client onboarding is the most important aspect of the digital banking experience. It should be consistent and seamless across the various digital channels, providing an easy and transparent step by step process, without being overwhelming and stressful for the user.
2.???Automated customer journeys
The interaction in the digital world does not resemble with the interaction in a physical place. Thus, navigating the clients through relevant information and recommending related solutions and products, adds value on the clients’ day-to-day transactions and creates extra revenue streams for the bank.
3.???Eco system banking
As the digital bank grows, it is important to be able to integrate with various internal and external systems to create additional revenue streams and enhance efficiency. With the use of APIs, the organisation can enrich their offering with complementary banking and non-banking products and services (insurance and financial products), all in a single fully integrated banking platform.
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Core Banking platform – Focusing on efficiency
The backbone of the bank is the space where all the core operations and processes are running. Efficiency and optimisation of the bank’s processes are now at the forefront, through flexible workflows and automation. Moreover, Core Banking functions should comply with the latest regulations while covering the full spectrum of banking operations seamlessly.
Innovative features to look for, in a Core Banking platform
1.???Highly automated banking solution
A competitive Core Banking platform should support automation across all functions, increasing the productivity of bank officers through a modern, efficient and seamless user experience, while being easily configurable by the bank.
2.???Infrastructure efficiency and openness
To empower STP operations and seamless flow of data, as well as to provide flexibility on exploiting the supported functionality, the platform should easily integrate bidirectionally with systems the bank already uses or planning to use in the future, as the organisation grows. Moreover, supporting deployment either on Premises, in the Cloud or as SaaS, the platform should provide the necessary cost-efficient options to the newly established business.
3.???Built by established banking experts
Undertaking such a project, requires the highest level of commitment from both the bank and the vendor. The platform vendor should have experience in international fintech projects, deep knowledge of the banking industry and its regulations and should be able to provide full support and consulting at all levels, both during the pre-implementation and the post-implementation phases.
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Conclusion
Building your own Digital Bank from the ground up is not an easy task. It needs a clear view of the objective, industry knowhow and innovative thinking. Selecting the best vendor and banking platforms to ensure success of the specific project and cost effectiveness for the venture, is of paramount importance.
At?Profile Software ?we deliver market-proven banking solutions, for over 30 years. Being recognised as an established and trusted partner of banking organisations and fintechs at a global scale, we are proud to actively support and empower the banking industry with competitive tools to proactively respond to the ever-changing market conditions.
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