The outbreak of COVID-19 is having a massive impact on the Banking & Finance sector. Retail banking has either been stalled or stripped to its bare minimum. Digital banking is emerging as the savior, allowing consumers to fulfill their banking needs while also maintaining the necessary social distancing.
The World Health Organization has reportedly encouraged the use of digital, contactless channels for transactions to minimize the risk of transmission through paper currency. To cope with changing times, the banking sector is undergoing long-lasting changes and is being compelled to fast-track the adoption of digital banking and FinTech solutions.
For a better understanding of how COVID-19 is transforming the finance sector, it’s worthwhile to explore the challenges faced by businesses offering financial services.
The Need for Digital Transformation in Banking
Although many financial institutions have, indeed, integrated digital solutions to their offerings, banking in the post-COVID world demands more. To meet future demands, banks must undergo holistic digital transformations: that is, become fully-functional digital banks with minimal or no retail functioning. This applies to other kinds of financial organizations, as well.
For success in the “new normal” after COVID-19, banks need to rely upon FinTech firms, not just for digital transformations, but also for ways to enhance customer engagement and more. The pandemic has resulted in a significant boom in the adoption of financial applications worldwide.
According to the Swiss Finance Institute, there has been a 24-32% increase in daily downloads on such applications amidst lockdowns. Roughly, this is equal to 5.2-6.3 million downloads daily, and around 316 million more apps downloaded since the outbreak. As such, the global financial technology market is expected to hit $460 billion by 2025. (Source: Adroit Market Research)
Rising Customer Expectations
Despite its need, digital transformation comes with its own set of challenges. Complex technological upgrades require substantial initial investments and also involve substantial risks. Unless done adequately with expertise, organizations may not achieve the desired operational efficiency and customer experience levels. When digital banking becomes the norm after the pandemic, retaining a competitive edge would require banks to undergo rapid transformations while also sustaining their legacy systems.
Threat from Fintech Startups
As new entrants and FinTech startups increasingly demand a more significant share of the market, traditional businesses need to be prompt in their actions and futuristic in their vision. Otherwise, they might risk losing out on significant opportunities when the world regains normalcy.
Startups offer a specialized service or a single, intuitive solution, at a much lower price than traditional offerings. In turn, this is compelling financial service providers to offer fragmented services, each of which needs to be developed fast, independently, and continuously.
Emerging Trends in Digital Banking
Some of the following trends in digital banking have been on the rise for some time now. However, the pandemic has significantly heightened its impact and implications.
AI-based Customer Insights
With the rise of consumerism in banking, financial organizations need to be able to provide personalized solutions to their customers.
Apart from the fundamental alerts regarding due dates, loan or credit card payment alerts, transaction alerts, etc., AI-based solutions can enable more. For instance, Bank of America’s Erica can alert customers when they are double-charged for any purchase, and can also guide them through the redressal process.
Moreover, real-time monitoring and analysis of transaction data enable customer insights regarding spending behavior and more.
Collaborations for Customer Lending
Often, lending and credit management is the most grueling aspect of the bank-customer relationship: long processing time, cumbersome paperwork, hidden clauses, low recovery, and more.
However, several Fintech, PaaS, and Blockchain-based solutions can impart the required transparency and agility to these processes, in turn enhancing customer experience. While banks face an increasing spike in bad credit post-COVID, as well as low credit generation, there will also be greater collaborations in digital lending.
As such, many such collaborations have already happened in the recent past: HSBC and Amount. Using intelligent systems for pre-approval, background review, and so on, several fintech companies license their solutions to traditional banks.
Available Solutions for Financial Service Providers
This section outlines some of the available solutions for financial service providers. In the post-COVID world, these solutions will enable them to facilitate disruptions while developing intuitive systems for their clientele.
1. Accounting Information Management System: Enables timely management of internal business operations through better information management. If built at hyperspeed, these systems help organizations to gain a competitive edge by reacting promptly to the changing business landscape. As such, they enable an efficient collection, storage, and processing of financial data.
2. Insurance Management System: Helps insurance service providers to handle calamity-induced spikes in claims effectively and could be especially helpful post-COVID. These end-to-end systems can automate and digitize claim documentation, policy administration, claim processing, reinsurance, and more. For optimal ROI, however, such systems must be extremely scalable, robust, and intuitive.
3. Intelligent CRM Solutions: Enable full-scale digital transformation through cloud-based, intelligent CRM that significantly heightens the overall customer experience. Microservices, voice technology, A.I., and ML are some of the common elements of these systems.
4. Custom Solutions: These are company-specific solutions that help scale one or certain aspects of their business. These could involve finance applications (web and mobile), data analytics systems, payment gateways, and more. Individually or in unison, they improve customer engagements, while also strengthening fraud detection and smoothening business operations.
Amidst the lockdowns under the influence of COVID-19, most banking and financial processes have shifted online, just like in many other industries. Holistic, robust digital transformations have been a necessity for banks; the pandemic is just catalyzing the process.
At Unthinkable, we help fintech firms to deliver robust, scalable, and cost-effective solutions to their clientele, at 2x speed and half the time-to-market. Working with a design thinking-led approach, our teams use reusable code blocks, enabling innovators and disruptors to develop intuitive account information management systems, insurance management systems, custom fintech solutions, CRM solutions, and more. We ensure that you reach the market faster than your peers.
Over the last few years, we have utilized our data-driven software engineering services to develop 100+ web and mobile for organizations of varied sizes and domains.