According to McKinsey, 90% of European banks invest less than 0.5 percent of their total spending on digital. This amount must rapidly grow if traditional banks, financial services institutes, and insurance companies want to stay competitive in the era of digital disruption when innovative startups try to seize market share with their customer-centric financial solutions. Digitization of financial services industry is the key to the future success: it will help to restore profitability by reducing costs and consequently increasing margins.
What is holding back financial institutions from innovating and digitalizing their services and offerings? Among others, the most important are probably the legacy technology, strict processes, and regulations that ensure security.
Banks must develop a holistically digital approach to transform the way they operate. They need to achieve connectivity across customers, systems, apps, enterprises to make better use of the enormous amount of available big data. Historically, transforming operations of the financial services industry were perceived as a risk for banks and insurance companies. However, now with integrations, the industry can start its path towards digital transformations to provide customers and stakeholders with the innovations that are norms these days.
Act before the PSD2 directive come into effect
Integrations can help the financial services industry to become more customer-centric, boost connectivity across the organization, and make adequate use of the available invaluable data.
The PSD2 (Revised Payment Service Directive) will come into effect in 2018. It aims to remove the monopoly of banks on the customers’ account information and payment services. PSD2 will enable third-party businesses to access customer accounts and information through open APIs, therefore they will be able to build innovative fintech services on top of the data and infrastructure of traditional banks.
To remain competitive, banks need to develop a digital transformation strategy, keeping their most precious assets, the customers and their data, in mind.
Data, data, and more data
In our last blog post, we wrote about data being your most valuable asset that can be used to one’s advantage to stifle the competition.
It is especially true in case of financial institutes. Banks have an enormous amount of big data available that sits in silos and they struggle to share this data across different systems, as well as the transformation, translation, migration, aggregation, and synchronization of structured and unstructured data both from traditional and non-traditional data sources is a challenge.
Data sharing is key for the financial industry: data sharing in real-time is essential and those banks that don’t adapt to appropriate data practices will fall behind. Utilizing data integrations will enhance operations, product development, as well as addresses compliance challenges.
Utilizing behavioral customer data for predicting the future needs of the consumers to increase customer satisfaction will help organizations to leverage the available data better.
Organizations need to use to develop a holistic data integration strategy to become more customer-centric and connected.
We all have many anecdotes about that time we contacted the customer service of our bank. How long you had to wait before you reached someone from the help desk, then they switched you forward to the next one, and the next one. In the end, you still didn’t get an answer to your question or request, so in the end, you needed to pay a visit to one of their physical location.
Maybe you also sent a few emails regarding your case, or you complained over social media – and maybe you even received a promise. However, over the phone, no one knows about it.
Does this sound familiar to you?
Banks and insurance companies need to map out the pain points of their customers and develop a solution that can make the customer experience better than the one of the competition.
Integrations could make the process a lot simpler, while the security would still remain strong. All data from all interactions regardless where it happened (over the phone, email, or even via messaging platforms (WeChat, Skype, Messenger, etc.)) would be available within a single view for all the relevant stakeholders. A 360-degree view of the customer would help the customer service representatives to know the customers better and provide answers to their pains faster.
Customers are the number one drivers of the digital transformations that are happening across different industries now. They want highly personalized digital experiences that work well and ideally is also cheaper than traditional solutions. If traditional institutions are not catching up they can risk losing their customers to others that have realized the need for digital innovations, such as popular fintech and insurtech startups that are utilizing modern technologies.
Data sharing also makes sure that banks have all the necessary data available to their customers, such as behavioral data. This helps to develop the products that meet the demand of the customers the most, and market solutions, services, and products to the right customer segments.
The need for advanced customer-oriented services leads us to the next important part of this article, which you might have already guessed, the need for a holistically connected enterprise.
Fully replacing the core, legacy IT banking systems is too big of a risk to undertake for the industry, however, with a modern integration platform it is possible to leverage these systems better, whether in the cloud, on-premise or as a hybrid integration solution depending on the requirements of the industry. A lightweight integration layer is the best tool for bridging the gap between legacy technology and requirements of the modern digital age.
Integrations will help to break down data silos by connecting systems and apps quickly regardless of the age or nature of them, so all information will be available in the right place, at the right time, for all the right stakeholders. This consolidation of systems will help to streamline operations and automate processes. According to McKinsey, European banks could save anywhere between 40-90% by automating their processes.
Data integration will provide financial institutes with the agility and flexibility that they need to overcome the past. Without changing the core systems, it is now possible to enhance the applications while considering data governance regulations as well as security concerns. Stability, reliability, and availability won’t need to be sacrificed.
Find the right tool
Developing an organization-wide digital transformation strategy is challenging, however, with the right data integration solution the project can be rapidly executed with minimal risk.
Youredi’s Integration Platform as a Service (iPaaS) is capable of translating, transforming, migrating, aggregating data of any forms, as well as connecting any systems and applications. The solution is based in the cloud, however, it is capable of supporting also hybrid and on-premise integrations, as well as can handle data transactions beyond firewalls without compromising strict security requirements, too. It is a modern, robust, and inexpensive data management tool that is essential for an exceptional digital transformation strategy.