By Andy Cease, Director of Product Marketing at Entrust
One of the few constants in life is change. This is particularly true for the banking and finance industry. In the last decade or so we have seen a significant shift in the way banking is carried out, and it is unlikely the pace of change will slow. Banks and financial institutions are facing a confluence of challenges and ever-changing trends, which together create more complexity for established traditional players.
The constant barrage of new entrants into the market has become a challenge for banks. Neobanks have arrived on the scene offering account opening, card issuance and customer support fully online. Fintechs have quickly claimed their corners of the market and even big tech firms are dipping their toes into the market by offering financial services such as lending, digital wallets, and credit cards. Each of these new entrants face less regulatory oversight, allowing them to operate more nimbly. This surge in competition has pushed more “traditional” competitors to jump on the digitization train, enhancing their physical card portfolio with digital options, including online banking or mobile payment options.
This has resulted in a drastic shift in customer preferences towards banking and payments, meaning banks need to evolve in order to keep up.
The challenge for banks
We all know the economy is challenged right now and that has had an effect on the financial and banking industry. Chip shortages and the rising cost of goods are negatively impacting technology providers, banks and card manufacturers. With all of the above happening, consumers are also driving change. Cardholders demand more digital experiences, increasingly using the bank’s mobile application as their first stop for most banking transactions. This demand stems from the desire for the ability to access services when and where it’s most convenient for them, avoiding the dreaded bank queues.
To stay competitive, banks and other financial institutions will try to reduce costs and enhance their product offering to meet the challenges of today and adapt with changes in the market. It’s not about replacing what works, it’s about answering customer needs with a unified card portfolio that will provide them a seamless and elevated cardholder experience that meets their needs. Incorporating enhanced monitoring and management solutions, self-service options and digital cards are a great way for banks and other payment card issuers to reduce the costs of card issuance and customer service. Utilising these solutions allows banks and financial institutions to reduce costs while focusing on the more essential parts of their relationship with the cardholder.
Ever changing preferences
The way consumers shop is changing fast, with the norm now being a tap of a contactless card or mobile device to make a payment. But contrary to belief, it’s not killing the physical payment card, it’s actually reviving it. There is a new wave of payment cards – the flat card and vertical card − both becoming an evolution in banking thanks to their creativity and differentiation.
However, the innovation in banking doesn’t stop at mobile apps and unique cards that allow customers to complete basic transactions. In fact, as consumers expect more digital-first experiences, banks have adopted ID proofing technology to eliminate the need to enter a physical bank branch at all. ID proofing technology authenticates customers’ identities from their devices by using facial recognition or thumbprint technology and allows them to securely access their bank account. From there, users can open new accounts, transfer money and more.
The convenience of this technology has encouraged users to continue using mobile banking, rather than stepping into banks. This forces banks to expand their digital offerings to reduce the need for customers to enter a physical branch. With customers opting to use more digital options, we will begin to see fewer physical bank branches. What’s more, many of the processes within the branches are likely to be conducted with machines, rather than actual people.
The future of payment security
The way we secure payments, as well as make them, is also changing. As mobile payments become more common, the risk of identity theft is likely to increase. We have already seen a rise in Multi-Factor Authorisation (MFA) to secure and authorise payments, and this is being supported by cloud-based identity and access management (IAM).
Identity as a Service (IDaaS) provides a secure foundation for online banking, mobile apps and other digital offerings. Identity proofing creates a streamlined digital account opening experience, without sacrificing security. This allows customers to verify their identity in seconds with cloud-based ID proofing.
Pre-pandemic, financial institutions tended to lag behind other sectors in terms of cloud adoption. Now, however, banks are leading the way in Software as a Service (SaaS) and cloud infrastructure adoption, citing increased business agility, elasticity, and scalability as top drivers.
The bank of the future must embrace technology in order to survive. Integrating to the cloud will allow banks and financial institutions to remain competitive and flexible to meet the ever changing business and consumer needs, while also remaining secure.
Global Banking & Finance Review
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