Digital transformation allows banks to provide more efficient and personalised services and products to their customers through optimising customer data.
FREMONT, CA:Today, digital transformation is imperative for banks as changing customers demand pressure to use modern technology to reduce costs and increase efficiency. These changes, however, come with certain risks and banks need sustainable business models to address these challenges. Nonetheless, these technological transformations benefit customers and the prospect of a more competitive banking sector, encouraging banks to achieve useful innovations.
The pandemic significantly impacted digital transformation, creating an immediate need for banks to communicate with their customers via digital channels like platforms and apps, while social distancing was the norm. This increased the number of digital users. However, these technological developments are not new, rather they have already been shifting from traditional branch-based banking to online and mobile alternatives for some years.
Customers have become more familiar with the use of products online. This paved the way for new entrants, such as fintech firms and big tech platforms, to develop attractive and easy-to-use customer interfaces for their services. This increased the efficiency of services to customers, enabling the financial services unbundling and providing customers with a varied choice, creating more customer involvement in the process.
Many companies provide only online services without branches and have witnessed greater efficiency levels. A few also offer credit cards and personal loans, using customer behaviour data and their own algorithms to perform assessments. Tech giants were also able to start offering financial services. They use their network, customer data, and available technology to focus on specific financial services attached to their other services. Traditionally, only banks possessed relevant customer data, especially data needed to assess consumer creditworthiness. But today, big tech firms can also increasingly perform a similar assessment by optimising their customer data.
Convenience and other user-friendliness are the success factors of these new market players. Customers appreciate accessing all their financial services online or through mobile devices. In addition, customers can choose from more customised options, such as non-financial services, to meet their specific demands. These options are based on the extensive data providers collect about their consumers’ regular behaviour. For example, some banks use customer data and analytics, allowing providers to offer services to customers with no strong credit history. This leads to greater financial inclusion. New mobile applications also increase the availability of financial services, having a significant impact, particularly in emerging markets.
Another crucial factor driving user-friendliness is the new layer between banks and their customers. For instance, some platforms allow consumers to compare offers from several banks and choose the best option. Banks must increase these platforms to attract more customers, as opting out also means losing customers. It is not the bank but the platform that collects customer data, so development leads to banks becoming factories of services and products sold to customers via platforms or apps. However, offering technology-based, user-friendly services will not ensure immediate profitability.
