1. Tell us about your journey in the banking and financial services sector?
When I started my journey in the banking industry a decade back, customers were heavily reliant on brick and mortar banks. This was the time when technology was secondary to businesses and a back office function. However, with time the banking industry has massively transformed. In fact, every sector has been disrupted by tech innovation and only those that have embraced this change are making the cut. Banks, which maintained their dominant position because of complex regulations, are now seeing a new set of threats emerging in the form of Fintechs. A lot of it has to do with technology no longer being a back office function but being at the centre of every bank’s growth strategy.
2. Let’s start with helping our readers understand what Fintechs are and how they are different?
With technology disrupting the banking industry, a new wave of technology-enabled firms offering financial services emerged. They used this opportunity to develop alternative platforms for financial activities. Broadly, these firms are called Fintechs, and they operate in various traditional banking spaces, including mobile payments, digital currencies, peer-to-peer lending, marketplace lending, etc. FinTechs usually focus on superior and easy to use customer experiences driven by mobile functionality, big data, accessibility, agility, cloud computing, contextuality, personalization, and convenience.
3. Why are traditional banks lagging behind?
Traditional banks have been slow to react to the fintech revolution due to their heavy dependency on monolithic platforms and legacy infrastructure. The legacy systems are built on complex mainframe technology and are hosted on outdated infrastructure owned by the financial services. These platforms and infrastructures cannot support the latest digital products, services, and applications that the bank needs to offer to compete with the Fintechs.
4. Are banks not worried about this?
Some banks are and some aren’t. For instance, take the case of Blackberry- until they lost a significant market share, they thought that they will survive. Although Fintechs are still quite small, they are gaining market shares rapidly. If you look at the US market you can see how Venmo, Paypal, Robinhood, Quicken Loans etc are rapidly becoming a huge threat to the banks. Digital technologies allow companies to place the needs of their customers first – a fintech edge that translates to higher profits and a whole new world of opportunity. Loyalty to a neighbourhood bank evaporates when consumers find that new, online banking services are not only cheaper but don’t require a car trip.
5. If they are worried why are they not acting ?
Implementing such a huge tech transformation is indeed easier said than done. There are several reasons for a company executive to feel under-confident about this investment. Most executives lack understanding of the benefits of migrating to the Cloud. Other factors like a clear migration strategy, cost overrun, and significant disruption to business also concerns for some.
6. How should a bank then approach the tech transformation?
Financial institutions that are serious about making this transformation need to have a strategy. In order to rejig themselves, financial institutions need to have a tech strategy. One of the first things that they need to do is to choose their Cloud Service Provider(s)so that they can be hosted on the Cloud. For that, they can choose platforms like Google Cloud, Microsoft Azure, and AWS, which are assisting cloud transformation across verticals. One of the most important things while choosing a provider is to ensure that the financial institution’s security strategy and customer demands align with the Cloud Service Provider’s cybersecurity offerings.
For this, financial institutions also need to understand what their expectations for migrating to the cloud are. Some of the core competencies that they should consider should be customer-centric applications and hardcore analytical tasks. Most of the time these tasks require robust storage and computing powers that can be scaled up or down based on the demand. This flexibility is a big plus of working in the Cloud.
Also, for any organisation looking to take a digital leap, it is important to have a “governance” model. This model will help everyone understand what technology/Cloud capabilities have been approved for usage and what access controls engineers should have. This would also help in figuring out infrastructure and costs, training developers, checking on how infrastructure is arranged etc. With this, banks can maintain uniform operations across the organization.
7. That’s fantastic! So all is not doom and gloom for traditional banks?Not really, banks still have access to this huge consumer base that trusts them with their money. All banks need to do is provide digital-first capabilities to retain their customers.
Disclaimer: This article has been produced on behalf of Moudeep LLC by Times Internet’s Spotlight team.
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