Ones and Zeroes: How Banking is Doing Digital

The impact of digital transformation in the banking sector has, in recent years, been enormous.

The growth in online connections and the general ubiquity of mobile technology has caused the same cultural consumer shift for financial institutions that it has for retailers. Customers now want services they can connect to in whatever way they choose – be it in person on the high street, at home, or on a handset from anywhere they happen to be.

In the banking world, attracting customers now means creating the right digital framework in order to offer those experiences and build towards an ever more agile and technology-focused future.

This piece will look at digital transformation in banking and some of the tech trends that will shape the industry in the years to come.

The ‘death’ of in-branch banking

‘The death of the high street’ has become a popular way to describe the decline in footfall into retail stores as online giants like Amazon grow in popularity. A similar – albeit less dramatic – shift is happening when it comes to high street banking.

According to Finder.com, around a quarter of the UK’s banking branches have closed in the past nine years. And according to FT.com, 80% of Santander’s sales happened digitally by the second half of 2020.

Both statistics point to a dramatic upsurge in the popularity of mobile banking apps – especially during the global pandemic. However, the same is true for technology-assisted customer interactions, with NatWest’s number of video banking calls rising from 100 a week in January 2020 to 9,000 a week by that September.

Whether based purely on money management or in customer service terms, digital transformation in the banking sector clearly necessitates a rethink if traditional financial institutions don’t want to be left behind.

The rise of Fintech

As if adapting an established business model to new consumer habits hadn’t created enough pressure for established financial institutions, digital transformation in banking services has also given rise to start-ups built from the ground up to take advantage of it.

These ‘Fintech’ companies like Monzo and Revolut offer a digital-only service that’s become increasingly popular with Millennials and Gen-Zs. In fact, according to a study by Crealogix, one in four of those under 37 years of age now use these ‘challenger’ banks.

And it’s not just banking that’s seen huge changes. Digital transformation in investments has seen a boom in trading and investment apps like Robinhood and Trading212 which do away with charges for buying and selling, and even allow users to purchase fractions of shares for as little as a couple of pounds.

Apps like these recently led to the Gamestop saga, which saw thousands of users on web forum Reddit band together to drive up the price of US retailer Gamestop, causing Hedge Fund Melvin Capital to lose billions of dollars in the process. In the end, Robinhood restricted trading and, in an unprecedented move, the US government, even got involved.

The above examples show how digital transformation in banking is proving disruptive for the old order. With these developments being only the beginning, the real question for those institutions is: will you adapt? Or will you be left behind by not doing so?

Financial technology trends to watch

Looking at how the banking sector is changing digitally, we anticipate three key technology trends for the near future:

• APIs will allow mobile banking apps and other Fintechs to offer an open banking experience. This will enable banks to better serve users, letting people access more products and services from trusted third parties (all in line with FCA guidelines).
• Artificial Intelligence (A.I.) will be used to improve both risk management and in-app identification and authentication, alongside delivering increasingly sophisticated chatbots and voice-led virtual assistants.
• Blockchain will also be harnessed increasingly to streamline processes, cut costs, and in the case of established ‘old guard’ financial institutions, compete with Fintechs.

Is your bank considering these potentially game-changing technologies? If not, you’ll want to work with someone who understands how to harness them so that you don’t get left behind.

Preparing your bank for the future

Here at One Beyond, we have extensive experience in taking businesses of all sizes, and in all industries, through the (sometimes steep) change curve of digital transformation.

Whether you need to modernise a legacy banking institution, or you’re looking to launch a Fintech start-up, we can help.

Get in touch today to find out how.