Digitalization in Banking Industry

It is a rather dramatic era for the banking industry, as digital disruption has forced many incumbent banks to step out of their comfort zone and up their digital game

Changing customer behavior, increasing expectations, omnichannel experience and the digitization of business and society, in general, have brought along what some people call the digital arms race in banking. Banks around the world are realizing how investments in digital technologies could benefit customer acquisition and satisfaction.

Impact of Digitalisation on the Banking Sector

One of the tendencies in the banking industry is that the largest banks have invested a lot in digital and into the future, while many smaller and regional banks have more difficulties to keep up as they are more dependent on technology vendors. As a result, the market share is clearly moving toward the large players because they have more means.

As another by-product of the digital era of changes, the financial sector is under constant pressure from new Fintech disruptors. Given that the disruptors tend to be startups focused on a particular technology or process, they are more flexible and faster when it comes to adopting innovative solutions and offering more personalized user experience.

Advantages of Digitization in the Banking Sector

Changing from analog to digital form comes with many advantages for the banking sector. Here are some of them:

  • Above all, it improves considerably the customer experience.
  • The number of customers grows thanks to the convenience of the service that permits users to save time.
  • The costs for banks and customers can be reduced by using ATMs, cashless transactions etc.
  • On the other hand, now that we have more digital data we can use it to make data-driven dynamic decisions. This is helpful to both banks as well as customers.
  • Digitization reduces human error.

Banking Tech Case Studies

By now it has become obvious that banking apps are becoming part of our day-to-day life. A study reveals that for example in the U.S. the banking apps are being used to the same extent as social media and weather apps. The digital world is in constant flux and there are already many valuable examples of digital transformation in the banking industry.

BBVA

Over the past two years the banking group has made remarkable progress in the digital arena that hasn’t gone unnoticed and has earned them widespread recognition (top spot in Forrester Research’s 2017 and 2018 European Mobile Banking Benchmark).

In 2018 BBVA Spain’s mobile banking took the top spot as a leader in Europe, offering the “perfect balance between exhaustive functionality and excellent user experience and scoring way higher (87 points out of 100) than the European overall average (68 points).

One of the most well-received functionalities of the app is BBVA Valora, which allows users to calculate the best price at which to rent, sell or buy a property and whether they can afford it. BBVA’s app also scored highest in the area of money management with their financial wellbeing tool Bconomy. This tool helps the customers to get a picture of their financial health and how to improve it.

Sberbank

The largest Russian bank initiated the digital transformation process in 2017 when the preparations for the migration of banking data from four rented data centers to the new bank-owned data center become.

Today, despite its massive market share, Sberbank benchmarks its performance against technology companies, not other banks, in order to be able to respond to the changes at speed and scale. Sberbank Online has grown to be the largest alternative payment system to bank cards with an impressive 40 million monthly users.

With all the digital data available to them, Sberbank aims to have fully-filed profiles of 95% of its customers and base 90% of its sales consultations on these profiles by 2020.

By cooperating with financial technology startups across the globe, investment and shareholding, Sberbank hopes to create a marketplace interface, such as those of Apple and Android to come to the market with new solutions for other institutions to use and create apps on.

In this era of digital changes, even the smallest players can cause big waves, so the largest banks have all been forced to invest big sums to keep up with the digital transformation. At this point, there is no denying: the future is digital, whether you are one of the top five or a small Fintech company.

Digital disruption has forced many incumbent banks to step out of their comfort zone, It's time to move digital!

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