Every financial institution is looking to digital transformation to meet rising customer expectations for speed and convenience, lower its operating cost, and fend off competition, including from tech companies moving into financial services. Some are spending over 10% of yearly revenue on technology investments, according to Bloomberg. “This is a huge investment and most financial institutions cannot support this for the long term,” says Michael Fei, SME banking CEO at OneConnect Financial Technology, an associate of Ping An Insurance.
The covid-19 pandemic has revealed how even financial institutions that considered themselves digitally advanced are, in reality, still wedded to analog processes along the chain of processing.
“For many financial institutions, this has been a wake-up call,” says Fei. “In the past, many had thought that if they have an online portal and a mobile application then that’s enough. But now they’ve realized it’s not. Some banks have online portals and mobile apps where you can apply for loans, but they still need to send items to the customer and carry out on-site inspection before they can process the loans, which hasn’t been possible during covid. Banks have had to reshape and redesign the whole process of their lending products.”
Banks have also realized their lack of truly deep customer knowledge, which is crucial to inform responsible and flexible decisions during an economic downturn as customer needs rapidly change.
“Now that everything is digital, financial institutions are realizing how little they knew their customers,” says Tan Bin Ru, chief executive officer for Southeast Asia at OneConnect Financial Technology. “Customer hyper-personalization tools, to understand what products to offer, have been acknowledged conceptually for a long time but not implemented—now banks are moving towards it and really getting tools to do it.” Traditional banks that were not previously utilizing alternative datasets now want to integrate them more into secure lending, Tan says.
The power of partnerships
Banks have increasingly understood they need outside help to execute their digital transformation agenda. “Banks usually have very rigid systems and procedures,” says Fei. “For instance, if you want to launch a new product you have to follow the process, and it takes at least six months. In the age of digitalization, this doesn’t work, as customers want things immediately.
By: Martha Leibs
Title: Banks need to strike the right balance for digital transformation
Sourced From: www.technologyreview.com/2021/01/15/1016087/banks-need-to-strike-the-right-balance-for-digital-transformation/
Published Date: Fri, 15 Jan 2021 15:00:00 +0000