In the course of digitization, traditional banks are increasingly being challenged by FinTechs.
The development of flexible, customer-oriented offers is not rocket science. On the basis of suitable data and in cooperation with start-ups, IT managers can work together with specialist departments to design new apps to support the business. The comment
Bill Gates said in 1994 his famous phrase: “Banking services are necessary, banks are not. “From today’s point of view, this sounds quite prophetic. But probably he could already take a closer look than ordinary people at what banks do for their clients – and what they should do.
While most of the time banks focused on investing their clients’ money safely, they often looked for buying recommendations based on their income – or travel advice along with a short-term loan for a relaxing summer holiday – or a better way to keep up with current spending To keep grip.
In this day and age, declining net incomes are often the norm. Therefore, household debt is a good example of what digital-based banks could do to offer more interesting services and thus gain more customer confidence. ”
Lead by example
For example, the Norwegian Financial Services Authority recently noted a worryingly high level of indebtedness in the country and examined the effects of rising interest rates.
Sbanken, the largest independent online bank in Scandinavia today, understood the anxiety it might create among its customers. She developed a new service that enabled her to determine her total debt.
Author Rahul Singh, HCL Technologies Rahul Singh is President of the Financial Services Division. He is President of the Financial Services Division at HCL Technologies and provides IT, infrastructure and BPO services to HCL’s global clients in the banking, capital markets and insurance sectors , Rahul, who began his career at Citibank in 1986, is a mechanical engineer and has an MBA in Finance from the University of Mumbai, India.
All loans, mortgages, credit card fees, etc. can thus be summarized and presented in one place. This service is based on the Sanken API platform to read in the data. Together with automation and mobile services, the bank has made significant progress. Your Annual Report 2017 speaks for itself:
“Automatically approved consumer credits and short-term loan products are immediately made available on the customer’s account. … In 2017, about 90 percent of approved mortgages and about 85 percent of approved auto loans were automatically approved. About 65 percent of the mortgages were completely paperless, with customers using the digital signature based on their BankID. ”
With these simple offers, Sbanken is presenting a smart modern strategy for banking services: creating unique value propositions and relationships with customers at each “trust point”. This allows other banks to offer services that go far beyond traditional business. As a result, they unlock new revenue streams while improving customer loyalty.
Trust is important – the example of DenizBank
A quick look at some key innovations in banking demonstrates the trend of “trust before transactions”. The Turkish DenizBank is a good example of this. In Turkey, 10 percent of GDP comes from agriculture, making this industry the Bank’s main target group. DenizBank serves them by issuing cards that charge no interest on purchases between seed and harvest. Because in this period, farmers have to invest a lot without receiving any significant revenue.
The customer-oriented innovations do not stop there. Last year, DenizBank went beyond the role of a traditional bank and launched a mobile app that allows farmers to send pictures and videos of their harvest to agricultural experts and ask them questions.
The app also provides information on prices, markets and weather and acts as a platform on which to lend and rent agricultural machinery – a kind of Uber for the agricultural industry. The app already had 100,000 users in the first year. This clearly proves that interesting additional offers pay off.
However, those who want to provide exceptional solutions to customers need to understand that their lives and needs are changing rapidly. This means that the offers must go beyond current needs and be flexibly expandable.
Faster and cheaper money transfer, simpler P2P payments, tax administration, availability via a social media platform or chat application – these are all possible measures for banks to make them relevant to customers and their changing needs.
Digital means democracy
In the future, banking-as-a-service (BaaS) with partners like Google, Facebook, Apple, Amazon or WhatsApp should become more and more important.
After all, large IT companies – but also small grocery stores or family businesses – know their customers better than banks. Many of these companies have meaningful data about their customers that can be used to provide personalized and up-to-date banking services.
It should be noted that these companies usually lack the necessary expertise to understand the financial markets, the regulatory environment and the profitability models of financial instruments.
By 2034, simplified technologies will result in BaaS reaching a turning point. FinTechs such as SolarisBank and Fidor have already launched banking platforms, proving that, in principle, any company can build a new bank within weeks, even without financial experience.
This again shows that the world is changing. To remain successful, banks need to combine their knowledge and networks with those of their FinTech partners and build technology platforms that democratize banking.
In a digital world, banks can only compete if they open their systems to partners and provide their customers with new financial services. Otherwise, someone else will.