Three Things to Consider for Success in Banking Digitalisation

by maria
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By: Matthijs Aler, CEO, Ohpen

Overcoming cumbersome software systems that are complex and inefficient should be at the forefront of every financial institution’s digital transformation strategy. Put simply, relying on outdated and inflexible technology requires unnecessary maintenance, is costly, complex and undermines the resilience of ambitious institutions.

Without addressing legacy IT, financial providers cannot keep pace with the changing ways financial products are now consumed. The time to embrace true digital transformation in banking is now, starting with a strong IT strategy, practical transformative steps and the right core-banking technology partner. The following areas are absolutely key for consideration in overcoming archaic systems and practices.

Forming fintech allies
Robo advisors, digital-first borrowing and the likes will continue to change consumer banking experiences, but how do you power these experiences? How do you make sure the sleek front-end experience is just as optimised, automated and conversion driven in the assessment, processing and decision making aspect?

This is where forming fintech alliances to provide a connectivity layer and to power your core banking capabilities become invaluable. Yes, many incumbents have fears that doing so will mean losing (perceived) control of their security, data protection, risk management and compliance. But it isn’t a gamble.

It’s easy to strike a balance between the safety of conservatism and the benefits of innovation, while remaining competitive. When starting your transformation journey, look for a provider with deep domain experience and a proven track record with complex financial products such as mortgages or investments. All too often partners claim they are experts but don’t truly understand the complexity and time it takes to reintegrate new IT systems. This leaves you compromising on how you build your eco-systems.

Ask for both proof of concepts (POC) and prototypes from shortlisted providers. POC’s are a great experiment exercise to test the feasibility, viability and performance of technology in your environment. Prototypes help to sense check useability for everyday operational users, like third-party brokers or underwriters who may interact with the new technology.

Adapt to an API 2.0 approach
The way APIs are architecture are not always equal. For example, REST APIs, where they must adhere to certain architectural constraints or principles, are the latest iteration. But SOAP APIs, more extensible, neutral and independent allowing for any programming style, are still common. In addition, the rise of serverless computing is having a significant impact on performance and future-proofing, so is another consideration.

Regardless of the type, APIs unleash the flow of information between applications, helping link them together and provide the analysis which then informs the creation of new products. Yet, they are still seen as an isolated ‘IT matter’ at some incumbent institutions. A daunting prospect and, essentially, a risky and downright expensive project.

This thinking must be abandoned. Establishing the type of APIs you need to harness is a first step. Then it comes down to creating an API-led ecosystem that is grounded with in-house developers, external providers and fintechs that act together as API ambassadors, gradually enabling APIs to form a central part of every financial institutions’ long-term strategy.

Embrace DIY Money Management
Finally, banks must empower customers to self-serve finance. Today’s customers have no appetite for needlessly long, complex, manual processes when it comes to the key milestones in their financial lives, such as taking out a mortgage. They want instant outcomes: a decision after uploading documents within no more than 30 minutes.

Financial institutions can make these important processes much easier. Thanks to modern document management systems, customers can upload key documents to applications straight from their smartphones, leaving 100% straight through processing (STP) behind the scenes to fill in the gaps.

Additionally, using structured data mechanisms like integrations with key vendors should be a top priority. It helps banks tap into an expanded range of trusted data sources, and when paired rule based and machine learning systems, you have control via both rules and smarter decisions as landscapes change. Looking for a provider that has third-party integrations is a good idea too, as it removes some of the heavy lifting.

Over the course of the last eighteen months, we’ve seen how the pandemic has accelerated the digitisation of the financial world at record speed. While banks were already becoming tech-focused before 2020, financial institutions have stepped it up since the outbreak of the crisis, too.

What remains to be seen is just how daring and innovative banks will choose to be. We have a golden opportunity to pursue a customer-centric digital strategy today, but there can be no half-measures. Institutions must fully deploy every crucial weapon in their digital arsenal and pave the way to a fintech-first world of slick APIs and DIY finance – and ultimately, success in banking digitalisation.

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