Over the past two decades, every industry has felt the impact of technological disruptors. Innovation has become the law of today. Due to highly-regulated environments, banks have been able to retain their position of dominance but now new Fintech competitors threaten displacement and market share.
The massive adoption of mobile phones, paired with much faster WiFi connectivity, has enabled consumers worldwide to take out loans, transfer money, open accounts, and make deposits on their mobile devices – this is true even in remote rural areas. The approval of Varo as the first consumer fintech in US history to gain full regulatory approval as a national bank has escalated the threat. Further, in China, WeChat allows users to execute a multitude of financial transactions without a bank account. If there is one thing about fintechs, it’s that they are specialized with these four crucial characteristics:
- Focus on an in-demand product or service
- Provide service at a much lower cost than traditional banks but with an amazing customer experience
- They zone in on solving customer issues quickly.
- They incorporate advanced technologies to obtain competitive advantage in the market.
They focus on a single product or service, which they provide superbly, with lower costs and an exceptional user experience. One example is TransferWise, an international money-transfer application.
Take a look at small business lender Kabbage who uses artificial intelligence to grant lines of credit in 10 minutes or less. The trend is leading towards mobile-only banks who can also offer a bank account, credit card, and debit card. These fintechs, or neo-banks, are changing the banking playbook at a rapid clip. They don’t require an army of human employees or a cadre of physical branches – hence, they forego the associated costs and complexities while passing on the savings to their customers.
In fact, APIs can connect varying suppliers of differing financial products and services so that the fintech doesn’t even have to produce proprietary products and services – this is also called open banking.
Indeed, the most logical solution for traditional banks who wish to remain competitive is to incorporate new technological capabilities into their current processes with the objective of improving agility, cost reduction, and customer engagement. In the digital economy, this is the only way banks can defend themselves against disruption from fintechs even under tremendous assault. Fintechs are gaining a foothold on the market, they are no longer niche players.
Traditional banks don’t have to throw in the towel. How can financial institutions evolve? Those with a commitment to digital transformation and improving the customer experience will be in a good position moving forward.
Competing with Disruption from Fintechs
There are several ways banks can retain leadership in the digital age, we list them below:
Determine your core audience
If a bank decides their core audience consists of baby boomers, it may work out well for another 20-30 years. On the other hand, if the bank also chooses to tailor a range of products and services for millennials, this adds another 73 million potential customers. As a result, the bank can remain relevant for decades to come.
Transform the institution into a tech company
Legacy banks must embrace digitization or risk failure. It helps to think of themselves as tech companies first, who also happen to provide banking services. In addition, it is vital to adopt the startup perspective not just in terms of making processes more agile but also in relation to talent recruitment. Then, focus on the option of acqui-hiring where you acquire a smaller fintech along with their employees. For instance, JP Morgan acquired WePay. Another piece is to hire freelancers and contractors to increase specialized talent while cutting down on hiring costs.
The point is to focus on digital banking processes. When you think of the oft-told tale of David vs. Goliath, it would seem the fintechs have the advantage. However, in the real world, sometimes David wins and sometimes Goliath comes out as the victor. The solution is to have a bit of David and a bit of Goliath. Focus on an area where a distinct advantage can be obtained such as automating time-consuming, rule-based, and repetitive processes to free up your human employees so they can spend more time addressing customer needs and enhancing the customer experience.
Implement intelligent automation
Today, the technology underlying intelligent automation is mature enough to empower banks to move towards a full digital transformation. Moreover, banks who deploy intelligent automation can save up to $70 billion by 2025.
When financial institutions incorporate intelligent automation from an end-to-end perspective, not only do they increase the efficiency of existing processes but they also improve customer engagement and turnaround times. What is vital is to deploy intelligent automation as part of a business process model redesign including updates to governance, policies, roles, responsibilities, and even organizational structure. Some examples of where intelligent automation can immediately provide a positive impact include:
- Data capture – collection and analytics of structured and unstructured data using AI to understand sentiment.
- Advanced analytics – enable data-driven, real-time insight with recognition of patterns and historical trends.
- Decision-making and predictions – intelligent automation can make inferences and learn from executing tasks while performing high-volume, repetitive, and rules-based tasks so human employees can focus on solving complex issues that add more value.
Indeed, it is imperative to tie your intelligent automation strategy to your business strategy to increase agility without affecting the customer experience. Nonetheless, this takes a thorough review of your end-to-end processes, identifying the weak links, and reengineering via intelligent automation.
Design and optimize your processes to meet customer needs
Many times, legacy banks create a customer experience that does not have all of the backend processes in mind. Sometimes they spend time on net promoter scores instead of focusing on the inherent value of data to strengthen customer relations and set themselves apart from fintechs. The only way to alleviate these issues is by redesigning and optimizing your business processes with the customer’s expectations in mind. To illustrate, a bank might use intelligent automation to capture and analyze data which can help to decrease the number of touch points and time-consuming fulfillment areas.
Invariably, with the massive influx of fintechs, it is important for financial institutions to evolve by boosting productivity while optimizing costs. With a scarcity in specialized human talent, and increase in hiring costs, intelligent automation can be used to improve processes consistently.
Intelligent automation use cases for banks
Onboarding new customers
There isn’t any question that customer onboarding can easily become a long, time-consuming process due to manual verifications and more. Intelligent automation can reduce the length of the process through data capture to automatically match information against what the new customer has provided.
Opening accounts
There is a reason why many new customers loathe opening new bank accounts, because it takes too much time. Yet, with intelligent automation, banks can automatically eliminate any data errors and auto-fill forms and more. So then, data is accurate, human errors are eliminated and turnaround times experience a significant reduction.
Report processing and generation
Artificial intelligence can decipher structured and unstructured data, even compliance documents, routing the required information to designated locations. Intelligence automation can take inputs from compliance staff to process data where needed. So then, banks can save time and reduce operational costs.
Anti-Money laundering (AML)
AML processes are critical for banks in a highly-regulated industry, but searching for suspicious activity is quite data-intensive. However, intelligent automation can automate rules-based AML processes to save both costs and time.
Mortgage lending
Intelligent automation can be used to initiate loans, process documents, manage quality, and make financial comparisons. Customers are much more satisfied when decisions are made swiftly.
Processing loans
Loan processing has never been accused of being a fun activity, for either party. Nonetheless, it is a constant process for banks, especially during the COVID-19 pandemic. The good news is intelligent automation can cut down processing times for query responses, application routing, and more. How would it impact customer engagement if you can reduce turnaround time to 10-15 minutes?
Other ways intelligent automation can help banks compete against disruption from fintechs includes automating validation of credit card applications, improving compliance around account closure requests by sending automated notifications and reminders of required documents, and even automating processes around employee onboarding.
In conclusion
To keep pace with evolving customer demands and retain a competitive advantage against disruption from fintechs, banks should focus on intelligent automation. However, it is critical to partner with a vendor who has proven expertise with intelligent automation throughout transition and implementation. At Processmaker, we have established a proprietary approach to deploying intelligent automation and will work hand-in-hand with you to create your intelligent automation roadmap before going live.
