Many consumers today rely on mobile banking, with 87% of consumers in a recent survey saying they used their bank’s app at least monthly, and 66% saying they couldn’t live without it.1 Banks are fully aware of the importance of digitizing financial services, with more than 8 in 10 bank executives reporting that their banks increased their technology budgets over the previous year.2 Digital transformation in banking is enabling financial service providers to streamline processes, increase efficiency, and offer personalized retail banking experiences to their customers.
Where are Banks on the Digital Transformation Journey?
Approaching the market with a non-traditional perspective, many FinTech companies have introduced innovative, personalized banking experiences that are radically different from what we used to think of as financial services. With a direct-to-consumer business model, these alternative providers of digital personal financial products and management tools are reshaping the way consumers think about and manage their finances.
In order to remain competitive, banks have made significant changes to their systems, processes, and customer experiences – and all are at different points in their digital transformation journeys. Some common challenges that impede the journey include a reliance on legacy systems, limited tech and data science resources, siloed business units, and data and security concerns, among other factors. Having a digital transformation strategy that addresses these challenges is key for banks to succeed.
The Shift from Traditional to Digital Banking
Consumers today expect highly personalized, fast digital experiences, and banks are meeting these expectations with digital banking apps and experiences. These experiences save customers as much as 20 or 30 minutes by not having to go to a traditional branch. With quick access to bill pay tools, person-to-person money transfers, loan services, and financial planning apps, consumers are empowered to manage their financial lives wherever they are. With the transition from traditional banking to digital banking, banks are able to offer personalized financial and banking experiences to more customers than ever before.
What is Digital Transformation in Banking?
For banks to fully realize the benefits of digital transformation, they need to have a strategy in place to implement the technology, train internal teams, grow consumer adoption of digital products and services, and develop a long term vision for the bank’s technological landscape. As big data and artificial intelligence make personalized experiences the norm, financial institutions have everything to gain by shifting company cultures, organizational mindsets, and business models.
What Are Examples of Digitalization in Banking?
There’s no end to the tasks that digitalization in banking can help consumers and banks accomplish. Some banks are using technology to categorize consumers’ transactions and help consumers get a better handle on their spending. Other financial service providers are aggregating consumers’ accounts to help investors gain a clearer view of their finances and optimize investment decisions. And others are combining digital wealth management tools with objective advice from registered financial advisors. Data-driven digital tools are enabling banks to transform lending, payments, financial wellness experiences, account opening and verification processes, and more.
Advantages of Adopting a Digital Transformation Strategy
Digital banking offers a number of advantages for banks and their customers, like increased efficiency, the ability to derive meaningful insights from data, and the opportunity for a more personalized customer experience. The benefits of digital banking transformation include:
Improved User Experience
With the ability to quickly access financial information and get personalized views and insights, digital banking can help users see their financial situation and understand what’s needed to optimize financial health. Digital transformation can also accelerate account onboarding and payment processes by verifying accounts and managing risk in real-time. By personalizing and streamlining the user experience, banks can support customer acquisition and retention.
Use of Big Data
Streamlining data management to handle big data and leverage the power of data through advanced data science and data analytics can help financial institutions better understand and connect with customers and drive strategic business decisions. For example, by analyzing spending trends and investment patterns, banks can recommend products and deliver advice to help consumers address their goals and increase the bank's wallet share.
Leveraging Artificial Intelligence to Increase Insights
Artificial intelligence (AI) has enabled massive innovation in the banking industry, powering everything from chatbots that help customers manage their accounts to financial wellness solutions that provide users with specific recommendations on improving their financial health. By enabling banks to examine millions of data points to identify and uncover patterns or trends people may miss, AI can help banks detect fraud, measure users’ financial health, provide intelligent financial guidance based on users’ past behavior, and more.
How Envestnet | Yodlee Enables Digital Banking Transformation
Digital banking transformation enables banks to do everything from obtaining a holistic picture of a client’s financial situation, to verifying users’ account info to decrease fraud, to uncovering financial insights for more strategic and relevant financial advice. As a global leader in financial data aggregation, Envestnet | Yodlee’s banking solutions can help your bank adopt a digital transformation strategy to personalize and inform your customer experiences, increase engagement, uncover new insights and opportunities, and maintain mindshare as the primary financial provider for your retail banking customers.