Today’s competitive & economic challenges are making the status quo shaky for the banking world. The macroeconomic solutions industry is surviving a slump associated with the pandemic continues to weigh down on the industry’s bottom line, with hardly any expectation of a turnaround. The competitive landscape is also becoming more challenging as digital technology shatters the barriers. With the microfinance solution industry attracting millions of new clients, executives are facing a need for a bold plan of action that is becoming more urgent by the day.
A potential way to move forward for banks is to disrupt the disruptors. Large banks have the resources, capital, and necessary expertise to turn the tables on new competitors and launch digital attacks of their own in consumer banking, payments, wealth management, and a range of other specialist services. Some banks have already taken up the challenge and started working toward the future.
Competitive Advantage Over Business Building
Digitization is the process of converting data into a digital format via the adoption of advanced technology. Implementation of digitalization is important for the banking sector to modernize its systems.
By welcoming digitalization, banks can offer enhanced customer services. This provides convenience to customers that they had been looking for ages & helps them save time. Digitalization also reduces human error and thus builds customer loyalty.
Nowadays, people have round-the-clock access to banks thanks to online banking. Due to this, managing large amounts of cash has also become much easier. Digitalization has also impressed customers by facilitating them with cashless transactions. They need not store cash anymore and can make transactions at any time and from any place.
Here are some competitive advantages business-building banks get by adopting digitalization:
More Customers
One thing no one can deny is that digitalization boosts the customer base in any sector. The banking world is no exception to this simple fact. An increasing number of common people are relying on online banking solutions heavily every day. The contrast between cumbersome, tedious traditional banking also works in favor of digital banking.
Increased Efficiency
A common question that makes rounds at any finance table is “why is digitization necessary for the banking world?” The perks of efficiency & turnover answer the question better than any other advantage. In a world that prioritizes speed & accuracy, digitization in the banking sector has introduced both on an entirely different level. Banking processes are now executed a lot more easily and efficiently. In simple words, digitization has changed the entire pyramid of mathematics & art of banking by fetching in efficiency, ease, & more productivity to the table.
Best examples of digitization of banking are reflected in the processes such as smartphone-based banking applications, electronic signatures, quick transactions, & more.
User-friendly Experience
If we take a walk through the artistic side of digitalization in banking, we can conclude that it has fashioned a distinctive, user-friendly experience that we had never seen before. While the banking world earlier was emblematic of a slow & tedious queue that never seemed to end, it now seems like a few clicks can get everything done.
New Business Models & Structures in Banking
Digital-only Banks:
Digital-only banks deliver banking facilities almost entirely through digital touchpoints. Their key advantages are the high-quality, self-service experiences they offer customers and the lower operating cost as compared to traditional banks. While digital-only banks mostly target tech-savvy consumers & businesses, some start with narrower groups & gradually expand their range to other groups. Digital banks are mostly mobile-based, with some online banking services; and even their customer service is digital with chatbot led with minimum human support.
Digital Financial Advisors:
The digital financial advisor model bridges the private banking experience with a much larger customer base. With data proliferating quickly and becoming more accessible in the banking economy, firms such as Plum, Snoop, and TMRW by UOB, are adept at running it through different AI algorithms to understand a customer’s financial need and offer them more personalized, appropriate financial solutions.
Finance Marketplaces:
Finance marketplaces allow customers to choose financial services from a wide variety of third-party providers in an open environment. These marketplaces can be accessed through websites, apps, & also through APIs, and developer portals. As the banking world embraces open banking & open data paradigms, these financial marketplaces would highly democratize and aid easy access to the best services.
Banking Curators:
Banking curators aim to offer best-of-the-breed services by combining basic accounting with financial counseling, & a curated array of third-party services on a single platform.
Why Banks Need to Leverage the Opportunities
Even before the pandemic, digital business models were in the ascendancy; with banks & their digital competitors building new customer interfaces, streamlining customer experiences, & modernizing middle and backend offices. In many segments, banks are starting to look more like their tech counterparts, which are making waves of their own in the banking world.
Tailoring their Strengths as Skills
The strategic aim of a new build for banking should be nothing less than revolutionary disruption. Banks should aim not only to grow their own core offerings but also to create a unique combination of services and functionality that will disrupt the niche market. New launches should come with a clear sense of mission & direction, along with a road map to profitability. Whatever the idea may be, the common denominator should be a laser-sharp focus on building a differentiated proposition that solves all the problems. This will achieve the vital goal of making the system easier for customers, so it’s more liable to achieve a steady advantage in the marketplace.
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