What is the ‘new normal’ in banking?

Written by Anand Subbaraman General Manager, Retail Banking, Finastra
What is the new normal in banking

There has been a seismic shift in financial services over the last decade, driven by a number of factors. Firstly, there has been a massive change in the technologies used by banks, such as cloud computing, artificial intelligence (AI), machine learning (ML) and predictive analytics. Secondly, customer expectations are much higher. They have become accustomed to receiving immediate, highly personalized and accessible services from other industries, and expect banking to meet the same standards. Finally, there has been an explosion of new players on the scene. Challenger banks and fintechs are disrupting traditional business models by offering agile, digitalized alternatives to the more established banks. Disruption is visible right across the value chain, from customer engagement to onboarding, lending, payments, and alternative financing. This perfect storm has led to a ‘new’ operating model in banking. This is being fueled by three key elements.

1.    Customer and context-centric banking
Customer centricity is vital in the new age of banking. The competitive nature of financial services, as it currently stands, means that it is easier for customers to switch providers; more so than it has ever been before. Banks have a wealth of customer data that can be analyzed and used to hyper-personalize communication and offerings, but this requires an infrastructure that enables digital capabilities such as analytics. Established banks are held back by siloed data and legacy systems that make it more difficult to leverage the power of AI and ML.
However, delivering a great customer experience doesn’t stop at personalization alone; information needs to be context-centric too. This requires financial services firms to change the way they interact with their customers based on the contextual nature of the exchange. Personalized content must be accessible at the right time, across multiple channels. Banks are recognizing this and beginning to engage customers through a seamless omnichannel experience, using a smart balance of human and machine, powered by digitalization.

2.    Open Banking
Open Banking is fast becoming the standard for banks globally; there are now over 1 million customers using it in the UK. Open Banking unlocks opportunities for banks to develop new services and add value by empowering their customers to quickly understand their financial position, explore alternatives and make better financial decisions. This not only enhances the consumer banking experience, but increases competition in the market which, in turn, has encouraged collaboration and innovation between banks and fintechs. This has fostered an API-rich economy amongst banks, which are expanding their ecosystems and ultimately growing the financial services ecosystem as a whole.
An Open Banking and platform-based business approach is both a differentiator and an opportunity to serve unbanked and underbanked segments. Emerging markets in Southeast Asia, Africa and Latin America have high mobile penetration but large unbanked populations – presenting a huge opportunity for banks to provide financial access through partner ecosystems that are accessible via mobile.

3.    Banking in the cloud
To compete in the new era of financial services, all banks need to ensure their technology is aligned to their business strategies. Established banks are mindful of their cost income ratios knowing that, with shrinking margins, they need to reduce their total cost of ownership. This is leading to a rise in demand for cloud, whether public, private or hybrid. This has encouraged some of them to launch their own digital banks as a way of competing with challengers, without embracing a full-scale transformation.
For their part, challengers need a scalable platform that enables them to grow and very quickly exploit their niche markets and unique selling points in line with their business model. For challenger banks, the only way is cloud. Cloud enables fast and agile development, helping to bring new products to market quickly and seize opportunities in the shortest time possible. Ideally, this is done in less than four months. With accelerated time to value, and continuous delivery updates, challengers can start to meet their business plan objectives and satisfy investors in optimal time. Once live, cloud banking delivers scalability and elasticity as well as operational efficiency, and reduces cost and risks.

To learn more take a look at our challenger bank white paper.

Written by
Anand Subbaraman

Anand Subbaraman

General Manager, Retail Banking, Finastra

Anand Subbaraman is the General Manager for Retail Banking Solutions at Finastra. In this role he is responsible for end-end product vision, strategy, execution of delivery of our Retail Core and Digital solutions including Fusion Essence, Fusion Equation, Fusion Midas, Fusion Phoenix International...

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