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A Future-Proof Digital Banking: Steps To Success

A Future-Proof Digital Banking: Steps To Success
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12 min read

Do you remember the last time you had to go to an offline, traditional bank office? Nowadays, everything can be done with a few clicks of your fingers, whether a money transfer or paying your bills. Banking buildings are not so crowded anymore since the growing number of digital banks prevailed.

The coronavirus crisis in 2020 pushed the industry towards a rapid digital transformation that did not stop. About 65.3% of Americans now use digital banking services, and nearly 27% use an online-only bank.

Seeing the high competitiveness of the industry, banks are encouraged to future-proof themselves by gaining a long-lasting competitive advantage. It’s not enough to adopt innovative technologies and build a flexible digital banking infrastructure. The industry demands more, and DashDevs identified some imperatives and digital banking KPIs that make companies better positioned for the digital future.

How Far We’ve Got in the Digitalization of Banking Services

Individuals prefer to shop online or using mobile devices, have all the necessary functionality under their fingertips. The recent eMarketer research shows stable-growing user penetration, which concludes that digital banking is thriving, thus becoming a more demanding industry.

A growing number of digital banking users and penetration from 2021 to 2025

Businesses must reinvent themselves and adapt like never before. With the excessive demand for personalized products and real-time interactions, digitalization attracts more enterprises to modernize.

In 2019, companies viewed themselves mostly as “fast-followers’’, while most companies (44%) have already implemented digital transformation efforts in their business processes. According to Forrester, about a quarter of organizations have plans for digital transformation shortly, and around 12% have just begun this process.

The digital banking strategy of average banking nowadays includes adopting automated decision-making, establishing digital leadership, embedded sustainability, and focused organization.

So, with the rapid adoption of modern technology, it’s clear that companies strive to leverage innovations. For example, it’s forecasted that approximately 40% of banking roles can be disrupted by machine learning in the future.

So, AI, ML, or big data solutions aren’t such a novice; novice solutions are a must-have for any player in future digital banking.

A few years ago, let’s say 2020, banking digitalization could be compared to a trend. Nowadays, hastened by COVID, crisis, and rapid changes in global politics, it’s a vector of growth, hard to ignore, and vital to adapt to.

It requires some changes in the corporate structure, including but not limited to sales, marketing, and operations, to make it possible for a digitalbank to compete in the future successfully.

Digital Transformation In Banking: Where Is It All Going?

The banking sector is persistently trying to respond to ever-growing customer expectations and a hectic business environment. According to Statista, the foremost strategic goals for financial services organizations in 2020 were:

  1. Customers digital experience improvement (80%);
  2. The enhancement of data analysis capabilities (49%);
  3. Reducing operating costs (38%).

However, one of the strategic goals for any entrepreneur aiming to start a digital bank in 2023 should be technological transformation.

So, how to start a digital bank and become a strong player in an industry projected to value $3.2 trillion globally by 2032? Combine unique ideas, forward-thinking trends, and sharp business tactics.

Current digital banking trends are already causing a general industry shift, so let’s analyze what defines the bank of the future.

  • Full integration with daily life. People are used to personalization, similar to what they get from Spotify or Netflix, and they expect the same from financial institutions. Personalization can come in various services, from allowing your customer to change the appearance of their credit card to allow them to handle their finances wherever and whenever they want. Banks can use AI, ML, blockchain, the IoT, Open Banking and PSD2 initiatives, and robotic process automation to help users build better spending patterns, recommend places to visit or implement cash-back features. All in all, to give more relevant services and personalized advice. Relevance and proactivity may help financial institutions to embed their services into customer life and maximize their value.
  • Intuitive and seamless services. The underlying principle of digital banking is to make a customer’s life as coherent as possible. Everything in one app that’s the main idea behind the digital banking business model. Automated services for the customers, easy-to-use applications, and user-friendly interface are a must. Remember the shift from paying a taxi driver manually to automatically having Uber do everything for you? The goal is to make digital banking services nearly unnoticed, subtle, seamless, and effortless for the customer.
  • Enhanced security. For fintechs, security has been a pain for years, and it doesn’t seem to change. Digital frauds disturb many potential customers and remain the most popular reason not to use digital banks (apart from being satisfied with the current one). People often do not trust online-only services since it poses a threat to someone taking away all their savings. To improve this, firms use AI for fraud detection, Secure Access Service Edge (SASE), advanced blockchain systems, multi-cloud, and regtech.

There is more to how digitization changed the industry. The customer’s expectations and market demands change each year, and the next time you see an article like this, you’ll most likely find new information about a new vector of growth. So, the most important thing remains unwavering; evolution and being up-to-date is crucial. The biggest digital banks don’t seize their modernization as soon as they are recognized, as customers can favor and disfavor a service within seconds.

But to understand how to adapt, you need to understand what people want. So, let’s take a closer look at the users’ expectations from the future of digital banking.

Users of Future Digital Banking Services: What are Their Expectations?

Is digital banking the future, and what the future of the digital banking industry looks like according to the customers? Let’s start from the basics. The digital bank is still a bank. So, the crucial functionality remains–quick transactions, safe savings, investments, lendings, mortgages, etc. However, along with this comes new functionality like financial advice and technological advancements that can provide more customer awareness and control.

As investment becomes more accessible for people, and so does financial literacy, more digital banks need to innovate and develop new solutions for the users.

So, how do people see the future of banking technology? Let’s break it down.

  • 86% of users interact with their financial institutions through online services rather than offline branches;
  • If a big corporation such as Apple or Google opens an FDIC-insured checking account, 61% of people would consider depositing with them;
  • Users want to see clear bank transcription descriptions, as about 17% of users get frustrated by unclear data;
  • 27% of users use online banking daily;
  • Around 70% of users have from 1 to 3 financial applications (e.g., PayPal, Venmo, etc.) installed on their phones.

Aside from this, more and more users prefer to use mobile applications as their primary banking method.

Visual interpretation of the distribution of users’ most popular banking methods.

Meanwhile, when it comes to what users would value the most in the banking of the future, they identified the following:

  • Provide information about new, improved deals–94%
  • Be able to turn on/off the card and/or report it lost via the app–74%
  • Show credit score information–44%
  • Keep a list of recurring subscriptions–41%
  • Available budgeting tools–34%
  • Schedule branch appointments via the mobile banking app–33%
  • Personalized financial advice via the app–27%

Since nearly all types of cyberattacks have increased in 2022 compared to 2019, financial institutions should introduce additional security measures and data protection services to promote customer trust. However, this saddening tendency doesn’t stick to physical attacks and human errors, which decreased in the latest years.

In general, customer needs regarding digitalization in the banking sector can be encapsulated into three core elements:

  • Secure: protect the user’s identity, information, and funds;
  • Smart: utilize all the collected data to know the user better and help them master their finances;
  • Simple: help the user clear up the confusion and streamline their financial life.

At the same time, for banks, the ability to adapt will serve as a foundation for constant innovation. Our experience shows that the required agility should come from within, and consequently, financial institutions should start implementing their digital banking strategy with future-proofing the workforce.

Forward-Thinking Workforce as the Leverage of the Digital Banking

Fostering a more future-ready and flexible workforce is one of the most urgent issues for banks and other financial organizations. So far, many people are afraid of technological advancements as they believe the latter will replace humans and take up workplaces. On the other hand, optimistic observers state that innovations will free humans from routine, unleash new opportunities, and generate employment.

At DashDevs, we assist with financial software development, provide digital banking consultancy, and integrate recent advancements into the business; hence we can assess the situation first-hand. So, these are the reasons behind our optimism about the excellent combination of human efforts and technologies:

  • Banking is a service-based business; in this case, the employees drive the real value. Skilled, they tell the difference between leaders and laggards. Augmenting them with emerging technologies and tools may turn into an enduring competitive edge;
  • Automation is mostly associated with cost reduction, but to drive better output, it needs human minds. Forward-thinking firms embrace RPA, AI, chatbots, ML, and other technologies to automate particular duties, mostly to allow employees to work faster with processes that used to take ages. The main goal is to free up funds and invest them in employees’ re-skilling to let them contribute to more mission-critical tasks, better understand consumers, and improve the quality of service.

So, how can business owners prepare employees for digital banking future trends? How to ensure you lead your bank to the future? Let us share three ways management and HR teams can help workers qualify for the changes.

#1 Promote skills mapping

Being realistic about the company’s potential and evaluating future needs regarding new skills is critical. Management teams should be able to detect the gaps and promptly hire or re-skill talents to satisfy business demand. Competency or skills mapping is a useful approach for workforce skill management as it allows companies to keep up with the quick technological evolution.

It’s a common practice for managers to assess workers’ current competencies, look for new roles, and discover what training they need to advance. Moreover, managers may analyze the market and identify developing skill sets that will be popular soon and suggest courses to grow proficiency.

#2 Advocate continuous learning

Too often, on-the-job training is only included in the employee’s onboarding program. Although considering the pace of future trends, ongoing corporate training is needed to help workers keep up with technological progress and bolster business initiatives. Consequently, knowledge sharing should be brought to the core of talent management. Workshops, webinars, meetups, and panel discussions are just a few methods to introduce lifelong learning to your teams.

#3 Stay agile and open-minded

Learning and development (L&D) teams should stay open to new options and methods when it comes to formats, frameworks, skill sets, and technologies. Though L&D facilitators remain the key stakeholders, you can engage content curators, data analytics, or learning experience designers. The integration of modern technologies, like robotics and AI, helps with personalization and makes learning paths more efficient and captivating.

Five Tactics for Building Future-Proof Digital Banks and Preparing for the Global Development in Banking Technology

Nowadays, choosing based in the US or Europe digital bank, people no longer compare the experience. They are rather adding and supplementing the experience by holding several bank accounts and fintech applications.

Check a balance, update an account, make a payment, or pay bills — all these and other functions are available on their smartphone. They are quick, easy, and seamless.

To survive the competition and stay relevant, financial institutions should have a valid strategy in place. Based on our experience in mobile banking development, business stakeholders should implement the following tactics:

#1 Omnichannel experience

The typical strategy with detached channels is neither effective nor employee- and customer-friendly. Each particular line in banking requires its own workflows, designs, content elements, and other supporting means. Ensure that your channels work well in correlation with each other, and give users unique experiences as clockwork, seamless but sharp.

Rather than investing in digital features for every business line separately, it makes sense to create all the elements once and distribute them through a centralized hub. It is crucial for digital banking platform to manage customer interactions across all touchpoints and thus ensure consistent and high-quality service.

#2 Modular digital banking architecture

The Amazons, Facebooks, and Ubers of this world release smart new features regularly, and it is always a sensation. Despite being large, they remain flexible enough to not only meet but also surpass customer expectations with no tremendous changes or heavy expenses. They deliver new products and scale them up and down as necessary. Sometimes, their new ideas aren’t taken well by the audience, but market leaders are ready to listen and change, making them leaders.

And what is a digital bank in this large world of quick-fashion innovation? Well, fortunately, digital banking can innovate similarly — quickly and seamlessly. To implement small but significant changes, look for feedback, and adapt.

Such an approach to digital banking development allows firms to live up to customer expectations and anticipate and create them together with the user.

#3 Leverage Open Banking

Once the PSD2 and Open Banking initiatives have heaved in sight, banks faced the risk of being disintermediated. Open APIs provide other parties, including market disruptors and (in)direct competitors, with access to banks’ large data volumes. But we shouldn’t forget that customer expectations have also changed, and those institutions that fail to capitalize on new initiatives will end up disintermediated anyway.

Current regulations require banks to make their APIs available to other companies, but it can be turned into an advantage. With the APIs, financial institutions can leverage third-party capabilities, expand and improve their offerings, and thus create added value for their end-users. Being directly involved in the future of Open Banking, financial leaders may gain the advantages that, as a result, will outweigh the risks.

#4 Go the extra mile for personalization

Continuous data harvesting from multiple sources and further analysis to obtain actionable insights can help digital banks not only in customer experience enhancement but in more efficient business processes. Big Data is the core that powers all personalization efforts, and banks should be well-versed in reading their own data and researching their competitors.

The evolution of personalization promotes the need for new competencies to collect and structurize massive amounts of data, turning them into meaningful insights. Effective customer tracking, segmentation, and targeting is to be a must, so digital banks should invest in data scientists and smart technologies to turn figures into business and client value.

#5 Good results are an output of a good strategy

It’s no secret that a good strategy can change the result of any process, and digitalization isn’t an exception. Prior to taking this step and hoping that your digital bank will become future-proof, turn your hopes into definite steps toward the goal.

Based on our expertise, DashDevs concluded seven critical components of a successful digitalization strategy that will help you understand how to build a digital bank that won’t crumble under the weight of competitiveness.

Conclusion

Future-proof digital banking defines your ability to stay on the market despite the circumstances. The future of information technology in the banking sector is mostly indefinite due to the high adaptiveness to the ever-changing market demand. What is definite, though, is that the answer to “how to build a digital bank from scratch” , as always, lies in your determination and the technical provider’s hands.

The technology slowly exceeds the simple feature’s implementation, tending towards complex products development.

Modular architecture, a good understanding of data, full cooperation in the banking ecosystem, and agile techniques — all these components will help financial firms to innovate faster, deliver more quality products, make end-users happier, and morph into ‘banks of tomorrow’. Start your transformation today, as any delay may result in more risks and higher costs.

FAQ

Why is digital banking important?

Digital banking is one of the most comfortable and innovative methods for companies and individuals to manage their finances. Due to this coherency, banking applications evolve fast and shape the market, creating new customers’ expectations and demands for other players in the industry.

How to open a digital bank?

First, ensure that you have an understanding of the needed licensees for the area you operate in. Complete your idea with a precise vision of what you want to achieve, find investors and technical partners and start your complex long journey that will undoubtedly end in success.

Why is digital banking the future?

The future lies in technology. That’s no wonder. With the innovative and disruptive technologies in the banking sector, changes the customers’ expectations and the only way to satisfy their needs now is digital applications. Customers want to operate in real time, have everything under their fingertips, and be able to complete fast transactions, which can be achieved only with digital banking.

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