New-age strategies can bolster banks’ critical role within the new ecosystem

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Real-time data analytics capabilities can provide real edge to banks in a new ecosystem.

BigTech players are no longer strangers to the financial services industry. GAFA and others have steadily made inroads in multiple regions across FS domains, especially payments.[1] Leveraging their technology and expansive customer reach, these players are successfully evangelizing their products and brands among bank customers.

The growing presence of GAFA is forcing incumbent banks to rethink their business strategies to retain market share as bank customers demand the removal of friction and pain points from their customer journey. To flourish within today’s competitive and dynamic environment, banks need to leverage their most valuable asset – customer data – while collaborating with other ecosystem players.

Utilize data to enhance services

Banks have been building better data utilization capabilities, but there is still room for improvement. Harnessing the power of technologies such as machine learning, data analytics, and artificial intelligence can offer insights into customer experience, operational enhancements, workforce transformation, and security and compliance.

Customer experience

Data analytics can offer a full view of customers’ preferences and needs, helping banks to develop customized and relevant products. Custom products take in to account the lifestyle and life stage needs of users. Real-time analytics also help reduce drop-out rates as customer decision making is quick with no guesswork or long wait times. Moreover, better customer monitoring supports cross-selling and upselling the right products to maximize each customer’s lifetime value.

Operational enhancements

In light of today’s tepid growth and margin pressures, analytics may be used to reduce costs while simultaneously improving efficiency. Data analytics can identify bottlenecks and disconnected systems to save time, money, and resources. Data can also help banks determine their optimum marketing channels and targets, helping them maintain relevance rather than being intrusive.

Workforce transformation

Data already plays a pivotal role in shaping the workforce of the future by automating regular and mundane tasks and developing intelligent software that can handle complex tasks. For example, JP Morgan developed an AI system that helped to reduce nearly 360,000 annual hours of mundane work, such as the interpretation of commercial-loan agreements.[2]

Security and compliance

Analytics can help banks respond faster to regulatory requirements. Moreover, predictive analytics can help beef up risk management through better assessment of credit risk. Processed data offers insights into loan default patterns to enable banks to take preventive action versus chasing borrowers for repayments. Analytics can also help banks reduce fraud by checking customers’ spending or location patterns.

Collaborate to innovate

Source: Capgemini Financial Services Analysis, 2019

Collaboration with new-age players can help banks to develop innovative offerings that might be difficult to create independently. Therefore, it is pragmatic for banks to identify the areas in which they excel and collaborate with FinTechs or developer communities to improve areas of weakness and further enhance strengths to enable innovative product portfolio expansion.

Among banks that have adopted a collaborative approach is Standard Chartered China, which partnered with AliPay to launch a digital remittance service using blockchain technology.[3] Similarly, Dutch Bank ABN AMRO collaborated with Swedish FinTech start-up Tink to launch Grip, a popular personal finance management app with more than 500,000 registered clients in the Netherlands.[4]

More and more firms are expressing interest in collaboration to harness the full potential of financial technology. FINOS (FinTech Open Source Foundation) is a global non-profit organization made up of more than 30 organizations (developers, financial services, and tech companies) working to accelerate collaboration and innovation in financial services through the adoption of open source software, standards, and best practices. Members include Goldman Sachs, JP Morgan, Citi, UBS group, Thomson Reuters, GitHub, Red Hat, Nomura, WhiteSource, and Axoni.[5]

New ideas and shared business perspectives can be evolutionary stepping stones. However, to ensure successful collaboration, banks must first leverage data analysis techniques to identify the internal processes they would like to develop and improve. Together with the strategic use of data analysis, collaboration can help banks to improve the range and quality of services they offer to customers. The result? Success and relevance in the evolving financial services ecosystem.

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[1] BigTech players include Google, Amazon, Facebook and Apple (GAFA) as well as Alibaba and Tencent.

[2] Futurism.com, “An AI Completed 360,000 Hours of Finance Work in Just Seconds,” Dom Galeon, March 8, 2017, https://futurism.com/an-ai-completed-360000-hours-of-finance-work-in-just-seconds.

[3] Asian Banking & Finance, “Standard Chartered tapped for Alipay’s blockchain cross-border remittance service,” June 26,2018, https://asianbankingandfinance.net/financial-technology/more-news/standard-chartered-tapped-alipays-blockchain-cross-border-remittance-.

[4] ABN AMRO press release, “ABN AMRO Digital Impact Fund increases investment in Tink,” February 7,2019 https://www.abnamro.com/en/newsroom/press-releases/2019/abn-amro-digital-impact-fund-increases-investment-in-tink.html.

[5] FinTech Open Source Foundation (FINOS) website, https://www.finos.org/members, Accessed June 2019

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