There is no doubt fintech has disrupted the financial services industry and fundamentally changed the way people transact with retail banks today, so much so, that traditional banks are looking at ways to stay ahead of the pack. After all, consumers want everything quicker than ever before, and that includes their money. While fintech takes the financial services industry by storm, retail banks can still stay on top as long as they keep up with the technologies that matter most to consumers.
We recently came across Mastercard Future View, a series of reports researched and written by Mastercard Labs, each focusing on the evolution of technological and consumer trends and the implication of these evolutions on payments and commerce. In the first report, Ken Moore, Executive Vice President and Head of Mastercard Labs covers the top five ways retail banks can keep an edge in the industry:
- Diversify Your Channels. Embrace new tech to be where your customers are. Imagine paying without ever having to leave an app or social channel, and avoiding multiple login processes which are often burdensome. Such a scenario is being made possible by banks who adopt an API-led approach and make digital integration easier.
- Pursue Fintech Partnerships. Rather than swimming against the rising Fintech tide, a better idea is to join forces with them. Fintech has the edge when it comes to user experience, technology and innovation, whereas banks have scale, money, trust and customer reach. Well-chosen alliances will be mutually beneficial for all stakeholders, including banking customers.
- Connect Commerce with Security. Banks face large security risks given the proliferation of connected devices, digital services and increasing ecommerce activity. According to Forbes, 80 billion devices will be connected by 2025i, increasing the need for dynamic, layered security systems that protect data without hindering the user experience.
- Personalize, via AI. The maturation of artificial intelligence (AI) opens worlds of opportunity for banks. Already, 70 percent of consumers indicate that they would welcome computer-generated banking advice and servicesii. Banks have the opportunity to pair vast amounts of data with AI-enabled services to drive increasingly personalized, interface-less customer experiences and simplify their current customer service models
- Engage with RegTech. Major banks spend, on average, $1 billion each annually on cumbersome regulatory requirements that rely heavily on manual intervention and legacy systems iii. Demands for quicker, more robust and quicker service mean banks are under pressure to deliver without compromising regulatory requirements. Banks and regulators need to work together to explore opportunities in new sandbox environments and to pursue creation of industry utilities for non-differentiated services such as know-your-customer regulations.
i Forbes March 2016, 152k Smart Devices Every Minute in 2025
ii Accenture Newsroom January 2017
iii Financial Times October 2016 Market Grows for Regtech, or AI for regulation