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Author: Brendan Kavaney |03/01/19

4 Ways Banks Can Use Digitization to Transform Their Business

Possibilities Podcast Episode: 2

Banking customers have changed. No longer is providing security for funds the only concern -- security is simply table stakes. Customers now demand optimized agility in an age of digital transformation.

Entities like PayPal and cryptocurrencies have stepped in where traditional banking has failed to define the industry. But that’s not the end of the story.

Fintech provides an opportunity for banks to not only provide new services, but change their mentality. With digitization comes the opportunity to reposition and redefine as not only a security or product company, but a technology company who has countless touchpoints with customers.

Indy Sawhney, Client Partner & Global Head of Fintech Solutions Group at Mindtree, joined us on our latest podcast to provide a few keys to open the power of fintech for banks.

From Bartering to Banking

The transformation of financial transactions has went from bartering to trading beads and feathers to something else of value. Eventually, bank notes became the new “beads and feathers.”

Bank notes indicated value, backed by the promise of a bank, and became an easy way to transfer value from one individual to another in exchange for goods and services. Banks served an irreplaceable service in backing those notes.

Cashless Society

In an age of digital transformation, many companies and industries are virtually eradicating the customer involvement with the financial transaction itself. Customers are so uninvolved with the transfer of value they are nearly unaware of it happening at all.

Indy Sawhney

Take ride-sharing services for instance. You tap your phone, hop in a car, and arrive at your destination: no cash, no credit cards, nothing physically changes hands. It all happens without either the driver or the customer’s involvement.

As goods and services have gone digital, traditional banking has often lagged. Many of the systems and protocol banking systems have relied on are 30 or more years old, and simply haven’t caught up with the times.

Companies have started providing efficient and inexpensive solutions to transfer funds between parties quickly.

Embracing Change

Individual banks need to not just allow but embrace digital transformation. Their business model has to go from being a bank, to being a technology company providing financial solutions to customers.

Here are a few thoughts Indy left us with to rethink the way fintech can help redefine banking:

1: Seamless Monetary Transaction

Traditionally, customers have been tediously involved with the method of money movement.

The whole financial system has been built on a double entry ledger system, designed to keep money behind vaulted doors. As technology has evolved, banks have layered on products and services.

Today, customers don’t even need to be aware what service is being provided. By utilizing appropriate IT, customers experience seamless monetary transaction between one party and the next.

2: Be Ahead of Your Customers

Too often, there’s a big difference between how people want interact with banks, and how banks interact with their customers. Many banks offer a wide array of products and services, allowing customers a variety of options to choose from.

The problem? People don’t go to sleep thinking, “I’m going to open a savings account tomorrow,” or, “Perhaps I need to renegotiate the complexities of my mortgage.” People live their lives and go to school, graduate, change jobs, get married, buy assets., etc.

As individuals go through life, they interact with banks as they need to based on their changing life events.

Banks need to reimagine themselves as a tech company that seamlessly integrates themselves within a customer's life to the point the customer doesn’t need to know what services they need.

3: Digital Integration

Old philosophy: Don’t trust anyone, especially third-party vendors
Fintech philosophy: Maximize partnerships and build bridges to third-party vendors

It's difficult for banks to trust other vendors -- banks were essentially built on protecting their customers. It’s a huge mental shift to start trusting any third-party vendors, and, what’s harder, to work well with third-party vendors.

Indy noted that the path to digital transformation can be challenge the mindsets of many in the banking industry:

“I met with the CIO of a bank after one year of being on that journey, and over dinner I asked him, ‘so, how’s it going?” and he said, ‘Indy, I’ll tell you one thing. Trying to do anything cool at a bank is very very painful.” - Indy Sawhney

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4: Easily Movable Funds

No longer do people reside in the same house, or even in the same country for long periods of time. Customers want to take their jobs and life and move, sometimes thousands of miles away, and still have access to their funds.

Traditionally, money has moved via expensive and time-consuming wire transfers.

Yet, with the right IT solutions and software integration, banks can integrate their own customer platforms to transfer money -- transfers that used to take days and cost a high percentage, now cost cents and happen within minutes.

Wrapping Up Banks & Digitization

Banks have no reason to be concerned with the digital transformation. A few mental pivots, and the game is changed.

This post is based on a podcast interview with Indy Sawhney. To hear this episode, and many more like it, you can subscribe to the Possibilities Podcast.

To listen to this episode, click here

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