Reshaping Financial Services: Embracing Change for a Digital Future
As technology has reshaped the financial landscape (and continues to do so), banks and financial institutions must adapt to remain relevant in an increasingly digital world. From digital banks such as Monzo, Revolut, and Starling giving the “old school” banking industry a run for its money, to digital payments and security becoming front of mind for the financial industry, Financial Services is an exciting industry to be in right now.
The rise of digital banks
Although digital banking has been present for over a decade, it was nowhere near as popular or robust as it is today. An article produced by McKinsey back in 2014 detailed that “retail banks have digitized only 20 to 40 per cent of their processes; 90 per cent of European banks invest less than 0.5 per cent of their total spending on digital. As a result, most have relatively shallow digital offerings focused on enabling basic customer transactions.” Fast-forward to today and an article also produced by McKinsey in 2021 stated, “In 2021, more than 40 per cent of core retail banking sales originated digitally, which unsurprisingly represents a new high.”
Within 6 years, digital banking has swallowed the retail world, demanding changes such as accessibility, user experience, and better customer service. Technology has completely reshaped the financial landscape from a consumer perspective, and most countries around the world (particularly the UK and Europe) have adapted to ensure that retail banks are predominantly, digital. Digital banks such as Monzo, who have been around less than a decade (incepted in 2015) have now become major players within the financial services space.
Change and financial services
“One of the reasons for the slower transformation in banking is that bank executives have tended to view digital transformation too narrowly, often as stand-alone front-end features such as mobile apps or online product-comparison charts. Commonly lost in the mix are the accompanying changes to frontline tools, internal processes, data assets, and staff capabilities needed to stitch everything together into a coherent front-to-back proposition.” [Mckinsey]
Embracing change hasn’t necessarily come naturally to the financial services industry, with transformations being a lot slower than others. However, the digitization which we are witnessing an increase in year-on-year, is making the financial services industry an exciting place to build your career.
Predominantly an industry associated with old men in suits carrying leather briefcases and pocket hankies, has now been replaced by the “tech dudes” that we’ve known and loved for years.
It could be argued that financial services are less clunky, and are now geared toward a “FinTech” way of operating, which has been demonstrated by the aforementioned Monzo and Starling bank.
But it isn’t just banking that has embraced digitization and change, personal investment, loans, and payments are also getting a digital makeover. In essence, any financial service that would have traditionally been done in person and is now transferred into an online capacity (app or on a website) has gone through some kind of digital transformation to get where it is today.
Technology has largely supported this, too. The birth of APIs enabling banks to sync up with online purchases and multi-platform money transfers has created a fluid ecosystem that would never have been possible before. Companies such as Afterpay and Klarna have built brands that have put customer experience (and satisfaction) at its forefront.
This has only been achieved over years and years of digital transformation and partnerships with some of the best banks globally to make it happen. That in itself, is exciting.
Why must the financial services industry become less stiff to digitization?
Going digital doesn’t need to feel like pulling teeth. Technology is reshaping the financial landscape as we know it, but it’s making things easier as opposed to making them harder. AI, platforms, apps, and integrations are consistently cropping up, and the choices available for banks and financial organisations are tenfold in comparison to even three years ago.
The pandemic sped up the need for digitization and ease of access, and developments within Blockchain have further allowed Financial Services to operate even more securely than ever before.
“Blockchain can streamline banking and lending services, reducing counterparty risk, and decreasing issuance and settlement times. It allows: Authenticated documentation and KYC/AML data, reducing operational risks and enabling real-time verification of financial documents.” [source]
Seeing how the financial services industry is evolving is something that is exciting - who knows where we will be 12 months from now. The key thought process that organisations must have is that change must be a continuous thing that they embrace, not just to keep up with their competition but also to ensure that they’re fulfilling customer demands.
