Next Generation Digital Banking Strategies

The disruption that banks are facing from fintech startups and others is not a losing battle. Fintech is not a proprietary industry, although the actual software and coding used in fintech typically are. Traditional banks and lenders are not bound to “stay in their lane” while their present and future customers march off to borrow from the bright and shiny fintech company down the block. In other words, banks can get in on fintech, too; it’s called next generation banking.

What is Next Generation Banking?

Next generation banking is all about banks putting aside notions of traditional banking interactions with customers and integrating services and products into a digital experience. Adaptation and adoption of technology move banking into the next iteration of financial services. Next generation banking is about leveraging what's possible through technology into a transformative and convenient customer U/X that rivals what fintech offers.

What is Fintech?

Fintech, or financial technology, refers to a new type of financial industry where technology meets financial services. More precisely, fintech is an integration of technology into financial services. Although new to the financial stage, Fintech companies are quickly usurping market share and making it tougher for traditional banks and credit unions to compete for customers who are increasingly demanding next generation banking services.

Examples of fintech include:

• Automatic investment apps
• Mobile payment apps
• Personal finance apps
• Crypto apps
• Lending apps
• Social media payment apps

At the rate these new fintech companies are popping up, traditional lenders have little choice but to adapt to a system of digital banking that surpasses anything that’s been available previously.

Is the Future of Banking Digital?

The use of technology to make financial services more accessible, efficient and profitable is not a new concept, although some fintech startups might like to think so. It really all began back in the 1950s, when no one had even heard of the word “digital,” “computer” or “mobile app.” The true birth of fintech happened as soon as the first credit cards were issued in the 50s. For the first time, consumers weren’t “saddled” with having to make a trip to the bank to withdraw cash in order to shop.

Modern-day factors have certainly contributed to the exponential rise in digital banking. Although the lockdown caused a sharp increase in remote/online purchasing, which in turn led to a rise in the use of digital payment systems, there is no denying that the pandemic has resulted in widespread digitization across businesses. The use of cash decreased dramatically very quickly, and as non-bank competitors developed payment systems, the digitization of banking operations accelerated even further.

Digital banking also contributed to the delivery of an improved customer experience, which in turn led to an increased rate of adoption. It is equipped with customizable offerings, real-time customer service, personal service, much shorter turnaround times, plus 24x7 accessibility 365 days of the year.

Today, the convenience of bypassing the bank is still (arguably) the number one reason why the public is so in love with fintech. And, at this point in the evolution of fintech, it’s safe to say that we as a society will never have to return to the old days of standing in line to withdraw money from our bank accounts. The future of banking has already arrived and it most definitely lies in the digital realm.

What are the Latest Trends in Banking?

Key market trends are driving the optics of next generation banking. By utilizing cloud-based services, many banks are choosing to reduce the cost of the IT infrastructure required for on-premises setup. This enables them to rapidly scale their infrastructure, deploy new products, and serve a larger customer base with a variety of needs. It also allows banks to manage the rapidly rising number of real-time payments while maintaining state-of-the-art security standards.

Additionally, mobile, next generation banking platforms empower banking customers to transact the whole banking journey on their mobile devices, from account opening to transactional banking demands, thanks to the use of the cloud. Due to customers' shifting desire for mobile banking, banks are quickly implementing mobile banking platforms.

Taking a page from the world of crypto, an increasing number of banks are adopting blockchain technology to strengthen security.

Next Generation Digital Banking Strategies

Traditional banks and credit unions can compete with fintech startups in a number of ways. But before they can fully scale, some work needs to be done.

First things first, would be to update outdated systems and data architecture. By concentrating on incorporating digital banking and agile operational platforms, the financial ecosystem can get rid of data silos and make room for the adoption of cutting-edge technologies. The potential of API in the banking industry is enormous, particularly for institutions looking for a means to connect more modern technologies to dated software and ease the transfer.

For banks looking to achieve full digital transformation in a shorter amount of time, the following strategies make the best sense:

Prioritizing Cyber Security

Cyber security needs to be front of mind when contemplating any kind of digital banking strategy. The digital threat from hackers, political enemies and more is very real and has been proven to have the potential to be highly dangerous. One only needs to read the news to read how financial institutions have been targeted.

Cyber security needs to concern multiple fronts; the institution itself, the institution’s consumer, and the transfer of data. These are the three areas that are vulnerable in any cybersecurity attack.

Digital “Upskilling” of Existing Talent

Traditional lenders needn’t reinvent the wheel and start from scratch when it comes to talent. Existing talent, who knows the company, is trusted and experienced, can be educated to transition into next generation digital banking. In most cases, this is better than hiring all new “digital” talent, because your existing employees understand the foundation of the traditional business model, while younger job candidates will likely not.

Innovating and Building Out More Digital Products and Services

Finally, traditional lenders who want to be in the next generation of digital banking should look to do their own innovating, with an eye toward creating more digital products and services for their customers. A team of innovators and creatives could be formed to assess client needs and come up with either value-added services or totally new products to market. Eventually, if the products are a hit, others will follow. And in the world of digital banking, it’s always better to be a leader than a follower.

Red Rock Financial exists to help you get ahead of your competition. Whether you want to learn more about Quilo or find out all we offer to financial institutions, please contact us today to get started.