By Ritam Gandhi, Founder and Director, Studio Graphene
COVID-19 has undoubtedly cemented our reliance on technology. With the unexpected shift to online working, shopping and entertaining, digital solutions have largely been the only means to overcome disruptions to our daily routines.
We cannot wholly accredit the pandemic with incentivising the switch to digital, but it has no doubt catalysed existing trends. Take digital banking, for instance. Research from finder indicates that almost a quarter (23%) of UK adults have opened an account with a digital-only bank in 2020. This is compared with just 1 in 10 Brits who had a digital-only account in 2019. In just one year, there has been a significant 165% increase in the number of people with a digital account.
In the coming months and years, the consequences of COVID-19 look set to push the financial technology (fintech) sector’s growth even further. But it has also brought into sharp focus the need for better financial technologies. While certain innovators have been able to showcase the advantage of their unique value propositions in this new digital landscape – sleek apps and seamless user experiences, for instance – some businesses within the financial services space have struggled with the transition to digital. Indeed, many are guilty of having been reliant on legacy computer systems and outdated software to conduct business.
For this reason, business leaders should seize this opportunity to make digital transformation a long-term priority, thereby ensuring that they can adjust as necessary to the evolving landscape. We must remember that the future of finance isn’t just limited to banks, however. Firms operating within sectors like insurance, payments, alternative lending and wealth management amongst others must also take heed of these changes.
So, with all this in mind, what lessons have we learned from the pandemic, and how can these be used to bolster the sector going forward?
Adopting tech as part of a long-term digital transformation strategy
While COVID restrictions will not last forever, we must accept that the pandemic is an enduring reality, and consumer behaviour is likely to have changed for good.
As a prime example, the crisis has enabled digital-first banks to demonstrate the benefits of their platforms compared with the digital offerings of their more traditional counterparts. Consumers have certainly taken note: indeed, convenience, ease and customisation were amongst the chief reasons cited for opening a digital account in the aforementioned finder survey. Evidently, consumers now expect a positive online experience, alongside high-quality service.
As the pandemic continues to accelerate digital transformations, whether this be at the consumer-facing or enterprise level, the race is on to reinforce existing infrastructure and leverage new technology that can offer a competitive advantage. Manual processes, which until this year were inefficient but could still be relied upon, are clearly no longer fit for purpose.
Take the mortgage application process for example, which is long overdue an upgrade. Even before the pandemic took hold, almost eight in ten (78%) mortgage brokers working in the specialist lending market admitted that their clients had expressed dissatisfaction with the manual, paper-based mortgage process.
This needn’t be the case going forward. With the right motivation, digital tools, and technical support, there is no reason why businesses cannot rapidly improve their internal operations and external processes to meet modern demands.
Where to begin?
Adapting to the new digital era requires looking inwards and replacing the rigid structure of legacy applications which no longer serve their purpose – a mammoth task, no doubt, which will not take place overnight.
Finance companies that have yet to make the leap from legacy IT systems to progressive technologies would therefore do well to start putting in place long-term digital transformation strategies. The challenge begins not only with considerable foresight and planning, but also the need to break down cultural barriers to innovation, shed old habits, and ensure that employees have the skills needed to adapt to these changes.
Being able to safely and effectively leverage data is one priority that should be on the minds of all business leaders. For those who are struggling to cater to changing demands, getting on board with the cloud revolution is an ideal place to start the digital transformation journey.
Big financial institutions have famously been reluctant to make this move. Last year, a Bank of England report estimated that only a quarter of the activities of the largest global banks were cloud-based, before highlighting the need to embrace cloud technologies as a priority for financial services.
As more and more businesses migrate to the cloud, those in the financial sector must recognise the importance of taking a cloud-native approach and recognise how it can work in their favour. Indeed, outsourcing data storage and moving critical operations to a new environment offers agility, scalability, and improved analytics. This in turn will work to reduce overhead costs, boost performance, and most importantly, better serve the needs of the customer.
As firms work to shape tomorrow’s payment systems and deliver modern financial infrastructure, I would encourage them to explore the powerful tools at their disposal, and consider how new and emerging technologies could help them reach their goals.
Businesses should consider investments into innovative digital capabilities powered by the likes of artificial intelligence (AI), the internet of things (IoT) and automation. Increasingly important functions such as seamless mobile payments and effective financial planning are two key sectors where these technologies are already revolutionising the way financial affairs are conducted. The key advantage of technology in this space is its inherent ability to deliver efficiency gains: the aforementioned Bank of England report highlights that machine learning (ML) could deliver a 20% uplift in firms’ financial performance.
The benefits of having real-time data on clients, the ability to curate personalised user experiences and the relief of automating time-consuming processes are all factors to keep in mind when exploring which technologies would best suit a business’ needs.
Changing expectations, increasing competition, and the growing pressure to streamline operations in the wake of economic uncertainty means that no business should risk becoming complacent – not even the disruptors of the day. Businesses across the financial services landscape must continue to drive reinvention and innovation, whether that is by consistently improving their mobile apps and online platforms, or integrating new technologies to bolster their bottom line.
An opportunity for new partnerships
Cloud providers and fintech companies that provide critical software to banks and businesses will play a central role in creating the future of finance. Indeed, there is a growing opportunity for smaller software vendors to assist larger institutions with their shift to digital.
Integrating new technologies into operations that once relied on legacy applications will be a daunting task for many. Thankfully, there are plenty of specialised fintech companies that can help businesses successfully meet the demands of the modern-day world and utilise digital solutions that will stay relevant post-COVID.
Mintago, for instance, has been helping businesses to support their employees’ financial goals through a sophisticated and easy-to-use online platform. Its ability to forecast an individual’s wealth over their lifetime, alongside providing access to insights powered by a unified view of the user’s bank accounts, investments, debts and pensions, means that the financial system is able to act as a personal assistant to its users.
Ensuring a flawless user experience and robust data security were two key priorities in the development of this solution, with Studio Graphene called upon to help design and build the platform. Having created a user-friendly mobile application and secure data management portal, Mintago provides a technology-led approach to make businesses and employees financially healthier.
Smaller fintechs are perhaps the key to successful digital transformation, particularly for those businesses that do not have the skills in-house to build and integrate cutting-edge technologies. As such, I would encourage businesses to consider them as valuable partners as they work to reach new goals and improve engagement with their customers, clients and employees alike.
Innovation is already transforming the way we earn, bank, invest and pay for goods and services. It is promising to see so many businesses making inroads on digital transformation, and I hope to see this accelerate far into the future. Indeed, it will no doubt play huge dividends for those willing to embrace new ideas.