The love-hate relationship between banks and digitalisation

By Madhvi Mavadiya | 15 February 2016

The relationship between banks and digitalisation has been tumultuous. Where some banks have embraced technology, partnered with fintech startups and created innovative technology, others have not. It could be said that we are in a transitional period as the first few digital transformations are being implemented, which means that humans are being replaced by robots, payments are going mobile and banks are becoming unnecessary. What’s next for banking fintech and how will big data, blockchain and other revolutionary technologies make an impact this year?

A recent SunTec report, “Digitalisation – Not just a buzzword”, highlighted that even before the fintech boom, there was a need for modernisation in this industry because of the strong focus towards banking products. In reality “few customers truly think of bank services such as checking accounts, mortgages, loans and foreign exchange as ‘products’”, the report told. The way that banks have attempted to tackle problems in customer service is to create an application, however there are questions arising about if this really benefits everyone. “Customers do value services which save costs and increasingly, time. The rise of banking apps and online banking are examples of innovations in the sector. From a bank perspective these are additional costs, which do not guarantee more revenue, are increasingly seen as status quo services and are additional ‘opportunities to fail’ on customer service,” the report said.

bobsguide spoke to Max Speur, chief operating officer at SunTec about the digitalisation of banking and their recent work with ING bank, which has been known to take on next generation technologies and have transformed themselves to add speed to their business models. “Their ING DIRECT banking concept, one of the leaders in online banking and mobile applications, is strong in that space. Where we initially started working on the back office, we have now evolved to facilitate the front office in order to serve both the corporate and retail banking sectors,” Speur said.

Security

With the introduction of new systems comes risk, and security is a top priority for banks, but is there a system that truly works? The SunTec report explores how “core banking systems can be the lynchpin in the evolution of customer service, but this would mean putting extra pressure, and additional risk, on complex technology, some at least half a century old.” Recent reports have suggested that the secure nature of blockchain technology is what is needed to fully ensure that threats to data are kept at bay and the UK government is advocating this attitude. Speur agrees with this and believes that blockchain technology is a variation of the different concepts that are currently being experimented with as a means for data to be processed in a secure way. “I see blockchain technology catering for a niche market because I don’t think that it is capable of processing high volume transactions, but the tech is secure.”

Mobile

SunTec’s research in partnership with Gartner revealed that only 18% of financial institutions feel mature in using mobile technology directly for corporate and wholesale banking. However Speur continued to explain how the convergence of the banking and telecommunications industries to the digital has allowed for increased personalisation of banking, and this has been done in certain countries with the use of the PDA. “India sees the PDA as the perfect tool for the country to move into digital banking as it takes away the cumbersome environment of many of the older infrastructures in the country.” While countries in Asia are aiming for innovation, Speur explains that in the US and Europe, regulators are occasionally delaying new technology that is emerging and perhaps this is the reason for fast fintech development in countries like India.

Location

It has been said over and over again that London is the fintech capital of the world, but what does this actually mean? Speur explores how when talking about long term investment, London has spent the most, and reports of the UK government thinking about the benefits of blockchain is evidence of how the city is for fintech. It is a different story in Singapore. “If you look at fintech innovation in Singapore, it is very difficult to get past angel investment, so you see great companies reaching that goal, but the secondary challenges of investment are where more mature investors are where this region needs some help. However, when looking at the end consumer, India and other countries in Asia have the largest adoption of mobile banking.” Speur mentions how no one in this day and age wants to wait in their bank branch for an hour to make a payment when you could make a transaction on your mobile phone.

Connectivity

Like ING DIRECT has gained popularity in the financial industry, the SunTec report explains how unlike in retail banking, innovation is harder to implement in corporate banking. “CIOs cannot merely reorient their technology strategy to offer commoditised apps, mobile banking and mobile payment services. For corporate banking, technology, and especially digital technology, should be seen more as an augmenter of human interactions in the banking relationship, as opposed to a replacement.” As the report indicates, the traditional bank has become more of a service provider rather than focusing on customer service. Speur puts across the vision of a connected bank, where in future, digitally enabled banks could be how people pay for all their bills – through one easy to use system.

In that sense, banks could become aggregators as they would be driving a trusted relationship as loyalty and legacy is retained. As well as this, the future will see banks buying fintech companies to accelerate their journey and in time, take over challenger banks.”

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