In the digital age, customers have become accustomed to 24/7 access and seamless experiences—regardless of channel. Fintech firms in particular leverage digital and mobile apps, big data, artificial intelligence (AI) and the Internet of Things (IoT) to improve customer experience while limiting fraud and risk.
The ability to provide a personalized experience across every interaction sets apart successful digital disruptors. For instance, digital-only banks that maintain a small, agile footprint can roll new technology layers into their environment that more easily capture, analyze and correlate data. Even traditional financial firms are beginning to adopt new technologies to keep pace.
Morgan Stanley, for example, launched a roboadvisor called Access Investing to help the company’s advisors better reach millennials. And JPMorgan Chase has started to offer products such as a blockchain-as-a-service platform called Quorum, which delivers data privacy to businesses.
These seemingly robust systems, however, are limited by a number of factors: mainframe systems, messy data and internal applications that don’t talk to one another. The word “disruptor” is often taken as competitive—or even negative. But the rise of disruptive fintech companies will continue to push traditional financial institutions to look at their systems and optimize outdated technology infrastructure.
Finance, technology and the fine-tooth comb
About 48 percent of banking executives believe technological advances —including blockchain and AI—will have the most significant effect on banks through 2020. As a result, even financial regulators are rapidly adopting new technologies.
But not all innovation must happen internally. Firms that understand this and partner with innovative tech partners will have the ability to catch up and compete with these disruptor businesses. Here are three traits you should look for in a new technology partner:
Look at a potential tech partner and compare it closely to its peers. Does this company lead the pack with any specific product or service? Does it embrace the digital values you seek to implement within your organization?
Look for a partner willing to take the journey with you—and not just to make a sale and move on. A truly collaborative partner will work with you to understand your challenges and build a customized solution instead of delivering an off-the-shelf product.
It’s critical that you work with a transparent technology partner—willing to share its processes, network and tools—so you know exactly where your data is at all times. This ranks as especially important when leveraging technology to transport and store sensitive customer information and financial transaction data, as well as to capture data over the internet or store it in the public cloud.
Collectively, these attributes will enable traditional banks and financial firms to evolve their technology infrastructure and ultimately compete with and even surpass the startups disrupting today’s financial ecosystem.
Teeing up the IoT, spotlight on security
Institutions will begin to see improved customer service, reduced risk and lowered technology costs. But how?
If you were to partner with a company that provides IoT, you’d have access to the right data to improve customer service. The IoT will provide financial institutions with data from everywhere — not just computers and smart devices, but also cars, coffee machines and everything in between. Some industry sources see the number of IoT devices reaching close to 25 billion by 2020.
But this rapid growth of mobile technologies and connected devices introduces a new set of security risks as well. Collaborating with the right technology partner results in safe access and data storage. Further, the right technology in place allows financial institutions to use big data analytics as they monitor cybersecurity threats, helping them react more quickly.
While all of this might sound expensive, it will lower costs. With updated agile technology (such as cloud infrastructure), companies can leverage big data more cost-effectively and apply sophisticated analytics and AI at scale.
With a strategy executed properly and with the right partner, traditional banks can compete with the rise of disruptive fintechs—and overcome them. Disruption need not happen by chance; the best banks will take it on by choice.
Jeannette Kescenovitz, who leads development of banking-as-a-service at Finastra, joins us on the BAI Banking Strategies podcast to share her views on how BaaS might grow its presence at U.S. banks and credit unions this year.
Compliance training and professional development courses that are efficient, effective and on-point. Give your people the latest industry-approved tools they need to improve performance, reduce operational risk and better serve your customers.