In today’s always-on, demand-driven economy, customers have made clear their preference for digital payments and e-commerce over traditional methods of banking such as cash payments. At ING Direct, digital transactions have risen by 14 percent in the last 12 months alone, with mobile - which makes up 69 percent of all interactions - proving most popular.1
For business leaders in the financial services sector, remaining relevant means taking an agile approach to banking. Meeting the expectations of your customers and staying ahead of competitors requires rapid innovation.
One topic discussed at Sibos last year was the capacity of the banking sector to innovate.2 But a lot can change in 12 months, and the changing winds in the payment industry are sweeping traditional financial institutions along with them.
One key driver of this is the Second Payment Services Directive (PSD2) in Europe. PSD2 requires financial services organizations to introduce real-time payments, while also opening the sector up to greater competition from digital disruptors such as ClearBank and Monzo.3 This shift isn’t exclusively European, however. In Israel, Bank Leumi has launched a unique mobile-only banking service to enable its customers to access its services anywhere at any time.4
Map out your transformation journey
Understanding your current technological capabilities is crucial to the timely and efficient implementation of the real-time payments services your customers expect. Businesses in different geographies are likely to take very different journeys. For example, many financial organizations in developed economies continue to have extensive legacy systems that are siloed by line of business or geography. This makes it difficult to form a complete picture of your customers.
By contrast, many emerging economies are not subject to the same restraints, as they lack the technologies, such as age-old clearing systems, that add complexity to the transformation process. There are, therefore, different obstacles to and incentives for transformation, depending on the circumstances of your organization. Understanding what these are will help your business to reach its destination much more efficiently.
Understand the business potential of payments transformation
Centralizing your business infrastructure and data architecture can do more than just enable real-time transactions. It can also provide you with rich new insights into what your customers want. For example, one leading financial institution was looking to move beyond its traditional rule-and-model based approach, which divided customer data into segments. Instead, it adopted a more comprehensive approach, using an Intel® technology-based artificial intelligence (AI) solution to analyze five years of customer data. This enabled it to gain more accurate insights into what customers were likely to purchase.5 It achieved this in just a few weeks, in contrast to a traditional method based on customer modelling, which took over 18 months to complete. In a competitive marketplace, insights that are more than a year old are likely to be of limited value, especially when compared with results generated in a matter of weeks.
Ensure cyber security remains your top priority
Innovation aside, as a financial services business leader, cyber security should remain your number one priority. In the cashless, data-driven era the all-important ‘Know Your Customer’ (KYC) rule remains just as important. It will also be key to keep investing in biometrics, such as fingerprint and facial recognition technologies, as the value of the traditional password continues to fade.6
From a security perspective, the move to a cashless economy also offers particular benefits to emerging economies. PwC recently reported that regulators in these countries believe cash payments present huge costs, risks and inefficiencies.7 By acting as a tool to combat fraud and stem the tide of illegally obtained income, electronic payments will also boost economic growth. Online payments can also help boost access to credit, helping to drive GDP growth, according to PwC.
While there are obstacles to overcome, it’s clear that a cashless global economy has the potential to transform the customer experience and generate economic growth. Leaders in the financial services industry must understand the demand for real-time payments. And they must have a clear idea of how to position themselves to offer these services to new and existing customers before a disruptive competitor gets there first.
Find out more about how centralizing your data with a multi-cloud approach can drive new insights for your organization in this recent white paper from Intel.8 9 10
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