In 2022, Banks Are Refocusing Their Efforts On Innovation, Sustainability, And IT Improvements

The last two years of the pandemic have led to rapid tracking of digital behavior and redefining how customers interact with their banks. We saw how the new cohort of customers for the first time uses digital banking, accelerating contactless and mobile payments, and the growth of QR codes and applications for ordering at the table! However, the “death of cash” was once again exaggerated. One thing is for sure, digital channels now dominate. According to Forrester Analytics, in 2021, 76% of Spanish banking customers used their mobile banking app at least monthly, and 34% of adults in the UK who applied for a loan in the last 12 months conducted a survey on a smartphone. Meanwhile, digital (online and mobile) is now the main channel for US borrowers to buy home loans.

Innovative entrants are changing the landscape of the industry

Although some of the worst pandemic predictions have not come true, banks continue to face long-term revenue pressures and tougher competition. They also feel pressured to act on resilience. And while major banks are accelerating their plans to close branches, digitize their expertise and launch new products and experience ESG (environmental, social and managerial), new entrants are doubling innovation to deliver their business to customers. ‘pockets, create new business models and drive the next wave of transformation. Here are some of the trends we have outlined in our report on the state of digital banking for 2022:

  • Challenging banks are back in vogue. After falling during the pandemic current account switching returned to normal in the UK. According to the Office of Financial Control, 8% of personal current accounts are now in a digital applicant bank, compared to 1% in 2018. Forrester Analytics data show that 40% of adults in the UK online would consider banking from a provider who has no branches. Digital banks are also penetrating the small and medium business (SMB) banking market, forcing banks and lenders to step up their game. In early 2022, four digital banks focused on small and medium-sized businesses – Brex and Novo in the US; KoinWorks, located in Indonesia; and French company Qonto – have raised a total of more than $ 1 billion to create credit platforms that complement credit cards, business accounts and cost management tools.
  • Inclusive finance has become a hotbed of innovation. A new variety of financial technology has emerged that uses mobile technology, open data access, artificial intelligence and machine learning to stimulate innovative business models targeted at under-consumers. In 2021, Nubank – one of the world’s largest digital banks, targeting underperforming banks in Latin America – increased its customer base by 62%, bringing the total to 48 million in Brazil, Mexico and Colombia. In Africa, non-digital consumers and non-banks, which are largely ignored by traditional lenders, are now turning to fintech startups such as Chipper Cash, Flutterwave, OPay and Wave.
  • Fintech technology is driven by the green wave. Sustainability is a new reality. A variety of environmental, social and management-oriented and sustainable financial technology investments have entered the market to satisfy customers based on values. In the US, digital bank Aspiration allows customers to measure their impact with a personal sustainability score based on where they spend their money. In addition to its banking products, Aspiration offers managed IRAs and taxable accounts that invest in companies that are 100% non-existent without fossil fuels.

Banks are improving their IT to deliver innovation

How do banks, credit unions, card issuers and lenders respond to seismic shifts affecting the industry? We surveyed decision makers in financial institutions around the world and found that:

  • Covid-19 has put more emphasis on innovative products and customer experience. While revenue growth once again dominates business priorities, financial services firms also prefer to improve their products and services, their customer experience and ability to innovate.
  • Improved IT has replaced operational efficiency as a major driver of digital transformation. As Covid-19 changes customer expectations and competition intensifies, more and more banks are embarking on a thorough transformation, focusing more on improving their IT technologies to drive speed and innovation. Banks also focus on improving customers, innovating products and services, and improving operational efficiency.
  • Technological strategies and lack of resources hinder banks. Twenty-five percent of service decision-makers say their company’s technology strategy is one of the biggest challenges to digital transformation. Twenty-five percent also say that employees have time dedicated to digital transformation around their other job responsibilities is also a problem.

To meet the needs of future customers and the rapidly changing financial landscape, banks need to turn around and reset their strategy. The economy of the next decade challenges banks to adopt a technological strategy for the future approach that is based on customer obsession and will provide an unprecedented level of adaptability, creativity and sustainability, or fail. Banks need to take advantage of the pace of change and innovation and set their course for the next decade.

This post was written by senior analyst Aureli L’Hastis, and it originally appeared here.

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