Do we even know what banks are supposed to be anymore? Even before 2020, the banking industry has been in a constant state of change. The digital era and the rise of fintechs and neobanks have pushed customers toward the demand for fully digital solutions that keep them outside bank branches and eliminate paperwork.
The digital shift has also caused a change in bank-consumer relations. A wide range of options means that consumers now seek those services that they can access online. While consumers want everything to be available digitally, banks must protect themselves and their customers from fraud and financial crimes.
The test of survival for banking institutions in the future will be the ability to overcome the challenges that come with a digital transformation that focuses on customer demands and shifting trends, laws, and regulations.
To survive, your organization needs to understand its most urgent needs. Banks have been put through their paces in recent years, and this has resulted in a number of obstacles that need to be addressed before looking to the future.
- Onboarding customers: Onboarding customers is a complex task. The shift to digital onboarding has only made the process more complex. A 2022 global banking report says that since 2020, the percentage of banks offering a remote account opening option went from 55% to 70%.
The rapid pace of acceleration means that your bank is no longer dealing with just online forms, but a great deal of compliance. Digital privacy and data handling laws are constantly changing.
If your prospective consumers don’t have a positive experience, they are likely to quit the process and turn to your competitors.
- Cybersecurity: Cybercrime has gone from just a few dollars to a whole enterprise that includes hacker groups, terrorist organizations, and even nation-states and state-sponsored groups. According to the International Monetary Fund (IMF), from 2017-2021 North Korea stole an estimated $2 billion from at least 38 countries.
Sixty-six percent of organizations are expecting cyber budget growth compared to previous years. Of these companies, over a third project double-digit cyber spending growth.
- Digital transformation: Many banks are still struggling with a complete digital transformation because it is something genuinely uncomfortable for the industry.
Technology in banking is complex due to several factors:
- High costs
- Opposing culture
- Poor projects
- Lack of communication
- Changing regulations
- Lack of commitment
Trying to achieve growth and differentiation at the customer end, looking to achieve efficiencies and doing it while managing risk and regulatory compliance, and doing all three simultaneously, takes a lot of energy especially when fintechs are backing into some of the most valuable parts of your value chain.
The success of your organization lies in the ability not just to solve problems, but in the ability to be prepared for the future. The banking industry is poised to undergo drastic changes and the work you put in today to adapt will pay dividends when facing tomorrow’s challenges.
- Data and Analytics: The global population produces 2.5 quintillion bytes of data per day. Data by itself is very useful, the challenge for banks, as you well know, is the complexities around the collection and handling of data which represent a huge challenge.
As we mentioned before, banks worldwide tend to be slow to innovate. 92 of the top 100 world-leading banks still use IBM mainframes to host their core systems. Old systems don’t always have the capability to handle and analyze big amounts of data.
In addition to innovation speed, banks face on major hurdle in regulation. Government agencies can’t always catch up to the speed of new technologies and can significantly limit banks ability to handle data.
- Customer expectations: Banks have already gotten a taste from the millennial generation about the demand for digital. However, when Gen Z starts entering the financial world, this demand will turn into an absolute necessity.
Consumers will expect innovation to go beyond brick-and-mortar vs digital. People want a more human experience, whether they go to a local branch or use an app. Things like customer services are cumbersome an outdated services that could benefit from innovations, such as artificial intelligence.
The era of banks dictating the standards is quickly dying. According to Zendesk, more than 80% of consumers say a positive experience will drive purchase decisions, while 61% say that a negative experience will immediately drive them to terminate the relationship.
- Compliance: Technology and customer demands are at the heart of most challenges for the banking industry, however, compliance is poised to be the biggest challenge.
The increasing demand for innovation and the speed of technology will require significant change not only in banks, but in government’s response to new technologies. Technologies have generated a number of factors that have now become your problem.
- Money laundering
- Terrorist financing
- Bribery and corruption
- Internal and external fraud
- Climate risk
By 2025, risk functions in banks will likely need to be fundamentally different than they are today. As hard as it may be to believe, the next ten years in risk management may be subject to more transformation than the last decade.
How to overcome present and future challenges in the banking industry
What’s the value in knowing the problems without the solutions, right?
By now, you have probably identified the two main drivers of the present and future challenges:
- Customer demands and expectations
Say goodbye to customers trailing after banks’ demands, now technology has allowed them to set the pace. And if you want to survive, you will have to keep up while remaining agile and compliant.
Looking after these two aspects will help you overcome present and future challenges.
Let’s break down the solutions.
- Just embrace digital: Yes, digital solutions have brought several challenges for banks, and at the moment it might be easier to hate it, but there is no fighting change, and becoming digital is no longer an option.
According to McKinsey&Company, retail banks in Europe, North America, and developed Asia need to embrace new technologies–including a digital-first business model and hybrid-cloud core technology stack– to lower costs, fight cyberattacks, and identify new sources of revenue.
Maybe you are looking at technology as an obstacle. However, when technology is used correctly you can go beyond knowing your customer to understanding them. Artificial intelligence can process large volumes of data and help you widen the scope of things like loan standards.
Technology leads to convenience, and financial institutions that offer convenience to their customers will have a higher chance of retaining them.
The daily banking platform would focus on simplifying daily shopping activities by embedding transactions seamlessly (and often visibly) within customer journeys and giving customers fast, convenient access to diverse retailers and service providers.
If you can loan more money to more people, you can automatically transfer and increase every other service.
- Don’t fear compliance: It’s easy to be overwhelmed by the inevitable cascade of legislation and changes that will accompany any technological development or changes in banking. The reality is that just as the sector transforms, so will the speed at which your institution can keep up with any changes.
Embracing technology goes hand-in-hand with your future ability to achieve compliance. A good compliance protocol protects your company, the customer, and any third parties.
Successful compliance must be embedded into sales and service processes, and this starts with a mindset that’s trained into your staff and ends with both automated and manual compliance checks, that protect the customer, the bank, and support staff.
Your bank needs to keep up with regulatory changes. If your banks continue to prioritize manual processes over automatic, there is an increased risk of falling into non-compliant patterns.
- Happy customers mean bigger profits: Is catering to customers difficult for you? Maybe it’s a difficult transition from so many years of banks leading the chase. Once again, technology will continue to lead this inevitable shift to the status quo.
Neobanks have shown customers the possibilities. There are two options for you, you can either try to fight the customer-centric vision of neobanks or realize that your organization has the largest resources to take neobanks visions one step further.
According to EY, 27% of global consumers have relationships with neobanks. Thirty-seven percent of these consumers include Gen Z, which will become your future customers, and who put great importance on personal relationships and trustworthiness in a fully digital ecosystem.
Banks need to get better at listening to their customers and becoming more customer-centric, just as leading technology and digital businesses do. They need to better understand their customers, identify specific needs or pain points, and respond by providing more personalized, targeted offerings to address those needs.
- Say goodbye to yesterday: This doesn’t mean that the brick-and-mortar model will automatically die, but that your customers will expect to move from physical to digital seamlessly. In addition, they will expect solutions tailored to them and customer service that goes well beyond current offerings.
Don’t look at technology as a one-way street that only provides benefits to your customers. As we mentioned before, technology can give you the ability to better know and understand your customers.
The more and better services that you can offer, the more clients you can attract. Digital solutions can help you create opportunities for your company, as well as your customers.
Customers and technology, are the two pillars of today and tomorrow. We have already talked about KYC, but as we mentioned, technology can help you go beyond just knowing your customers, to understanding and predicting their behavior.
MetaMap is the key for today and tomorrow
Talking about embracing technology is easy, but doing it while looking after your customers is a major challenge. At Metamap, we know and understand the challenges for both banks and consumers. This is why we have created solutions that go beyond KYC and create actual opportunities for both sides.
Our focus is to remove the barriers between you and your consumers so that you can have a better and more accurate picture of them.
Metamap offers new ways to understand and verify financial, legal, work-related, and social data. Through workflows, your company will be able to quickly build the logic to evaluate a user and decide if they should be accepted or rejected.
Using pre-configured workflows such as those for Onboarding, Password generation, or KYC considerably reduces developing time and allows you to integrate and scale your compliant operation and risk management, from beginning to end.
Through different merits and using Artificial Intelligence, MetaMap can verify in real-time, and in just a few seconds, any of the almost 8 billion people who live around the world. Some of the main merits we work with are:
- Fraud detection on ID Verification
- AML Screening & Monitoring
- Liveness Detection
- Email Verification
- Government Identity Verification
- Location Intelligence
- Face Recognition Authentication
- and many more.
Through the use of our solutions, you can tackle technology challenges and customer expectations.
But. what about compliance?
We make it easy to operate in compliance with PLD & AML policies worldwide.
With MetaMap, you can check your users against more than 1,200 criminal, terrorist, anti-money laundering, and politically exposed persons (PEP) watch lists from national and international bodies such as the FBI, Interpol, and the United Nations.
In addition, you can even create custom watchlists based on your criteria. With this, you can filter users with whom you’ve had contact, but don’t appear in official lists.
With our fully customizable workflows, your business can automate onboarding and verification processes in minutes and analyze users on 25+ reputational merits, such as financial and professional history, credit analysis, background checks, identity authentication, and much more.
Are you ready to tackle every challenge that comes your way today and tomorrow?
Schedule a demo of our product now, you can join an ecosystem of 500+ businesses around the world that are unlocking borderless growth with us.
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