Over the last couple of years, as embedded finance has experienced a rise in popularity, experts across the world have dubbed it a threat to traditional banks. While this might be true, there are several steps banks can take to ensure that they survive and thrive in this new age of connected financial services and in today’s blog post, we will speak about exactly that.
A Mindset Shift
from individualized control to a collaborative approach. The modern consumer demands a seamlessly connected experience between financial and non-financial offerings, and this can only be orchestrated by adopting ecosystem thinking.
One of the most efficient ways to do this is to form a tightly integrated network of
collaborative players who strive together to provide the best customer experience. Integrating an ecosystem mindset will not only help banks tap into new customer segments and foster new revenue sources but also encourage innovation and growth for all stakeholders
Digital Transformation
One of the most pertinent challenges plaguing the growth of global banks is their slow pace in adopting new technologies. In today’s modern world, where technology is at the forefront of delivering every customer experience, the slow adoption among banks is a significant
reason for them falling behind.
Thus, in order to meet the needs of the modern customer, it is crucial that banks embrace the ongoing digital transformation. One of the best ways to undertake this is to identify and assess the business processes which need digital transformation first. Along with this, it is equally important to identify which digital transformation will have the highest impact on overall customer satisfaction and accordingly prioritize the same.
For example, as per a recent survey, most traditional banks will need to invest heavily in the platformication of their services, and thus this can be a good starting point for the transition.
Change of Roles
Along with adopting a mindset shift, banks need to realize that their role in the banking value chain has changed. Instead of being the sole providers of financial services, they have now transitioned to become the pillars on which the new connected system functions. The reason behind this is simple – modern customers have realized that they can get better banking services elsewhere and are thus dropping out of traditional establishments. However, traditional banks still play a crucial role in back-office processes such as AML/PEP, transaction monitoring, KYC and more. The best part – the modern enablers need the bank’s
help in processing these back-office requirements, as banks already have the required licenses and expertise to handle them. Thus, in this new arrangement, both stakeholders can play on their strengths and thus facilitate a seamless experience for the end consumer.
Fragmented Ownership Structure
Since their inception, traditional banks have had complete ownership of customer relationships; however, this is steadily changing in this new era of banking. Today customers actively choose different providers for individual services depending on who provides them with the best experience.
For example, a customer can have a savings account at one bank and use the payments feature from another fintech, such that they get the best of worlds. Thus, to survive this shift in consumer choices, banks need to accept that they no longer are the sole custodians of customer relationships and instead focus on fragmenting their services and developing expertise in niche operations, as we highlighted in the earlier point.
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The faster banks realize this and focus on new developments, the higher will be their chances of survival in this new world of connected financial services.
A Culture of Entrepreneurship
Lastly, traditional banks around the world need to imbibe a culture of innovation and entrepreneurship throughout the organization. Without it, banks will continue to suffer from delayed innovation cycles, and thus it is crucial that banks adopt this culture. One of the most efficient ways to achieve this is to imbibe this culture among the highest leaders in the organization. Percolating this change from the top will not only ensure that it reaches the grassroots individuals of the organization but also that the shift in approach and mindset is permanent and long-lasting.
The Takeaway
The future of global financial services is a seamlessly connected experience which delights the customer and meets their exact needs. Embracing embedded finance is the most efficientb mode of achieving this goal, and thus traditional banks across the world need to start working fast if they want to survive and thrive in this rapidly changing market.
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