Digital Transformation is beyond just moving from traditional banking to a digital world. It is an essential change in how banks and other financial institutions learn about, interact with, and satisfy customers. An efficient digital transformation starts with an understanding of digital customer behavior, preferences, choices, lies, and dislikes. This transformation leads to the important changes in the organizations, from product-centric to customer-centric view.
According to a study by Accenture, the people prefer a DIY (Do It Yourself) approach to manage their finances. The DIY approach promotes the idea that anyone is capable of performing a variety of tasks rather than relying on paid specialists.
Open banking APIs and a regulatory push to open business models are driving banks to become platform businesses. A platform strategy can facilitate an efficient value exchange and create connections with new customers and new partners. There are four different platform banking models such as the proprietary platform, joint venture platform, licensing platform, and shared platform.
In order to be pertinent, the banks need to focus on the three approaches. Firstly, the banks have to partner with digital platform players to expand their market share by deploying the better and cheaper versions of existing services. Secondly, they have to generate revenue from existing customers. Finally, the banks have to develop new kinds of services and businesses.
According to the report from Accenture, banks spend around 70 percent of their IT budgets on traditional IT services such as managing core legacy systems and only about 30 percent on non-traditional solutions correlated to digital conversions, such as cloud or data analytics.
Google, Apple, Facebook, and Amazon (GAFA) have become masters at exploiting customer-created value. Consumers are becoming increasingly receptive to having their banking services provided by a non-traditional financial services company. Now is the time that banks figure out how best to compete in the emerging era.
Many traditional financial organizations are working hard to get to the idea where they can launch an all-digital bank. The future of banking will require new technologies, new strategic partners, new skills, an innovative spirit, and a completely different culture.