Digitization of financial services is a trend that is growing at an exponential rate all over the world and is
more profound in some countries of the EU due to a combination of established financial expertise, regulatory support for open banking and the growing number of customers opting for digital banking as opposed to traditional financial services. In the UK, the fintech sector has shown a booming trend and according to Innovate Finance, the UK fintech sector has had an investment of $4.9 billion in 2019, which is considerably higher than the $3.6 billion in 2018. This upward trend is attracting the attention of specialist providers and challenger banks, which are making use of digital technology to facilitate better financial services to the customers. Innovative trends in finance, from
open banking to the rise of fintech startups, are causing disruptions in the industry and putting customers at the heart of the future of banking. As Matthias Kröner, the founder and former chief executive officer of the Fidor Group, has very aptly put it,
“Consumer demand for innovation has not changed a market as much as changes in regulation, like we’ve had with open banking. PSD2 is finally forcing the banks to become customer-centric. It will result in an easier and much better life for customers. If we combine successes of data with AI and machine-learning – then the sky is the limit.”
Customization via Technology
Fintech companies are taking advantage of technological change, focusing on specific products and segments. The strength of these fintech companies is their ability to
leverage technological solutions on data analysis to build data driven operating models, promoting fast decisions. They are proactively targeting new markets and channels through a focused business strategy. They aim to streamline the consumer financial journey through customization and flexibility by offering speedy, convenient and digital services.
Despite the emergence of the fintech startups, financial institutions (FIs) have indisputable advantages in both the range and the complexity of the products they offer. If they put their customer first, they already have a strong base to work on. Afterall, the customer is the king and very hard to acquire. The underlying realization for financial institutions is that the customer expectations have evolved over the past years. Services and products need to be tailored to these expectations through digitization and innovation. If financial institutions can look after their customers, they will be greatly rewarded.
According to a study conducted by Oracle, on the emergence of a new era where enterprises are able to deliver content, experience and technology to customer as per their demands, financial institutions were estimated to earn an additional 14% in annual revenue in case they were able to offer successful individualized experiences to their customers.
Financial AI solutions
Some FIs are able to leverage new digital applications and advances in predictive analytics to use data they already have and to transform insights into solutions that are predictive, personally relevant and useful. Sadly, this is not the norm. While institutions realize the importance of providing real-time, customized guidance, the majority of the organizations are not prepared to deliver. There is a substantial gap in the capacity to provide contextual insights and solutions. A key-missing component is the ability to provide these insights in real time over digital channels. The main reason is that the data is too distributed and there is a shortage of talent or solutions to analyze them.
The role of artificial intelligence cannot be undermined here. One technique used by marketers across industries is to employ personalized experience to their customers with the use of machine learning. Financial institutions can implement AI solutions with a view to reduce costs and provide differentiated services. Many banking executives consider partnering with third parties as the best way to access machine learning capabilities. As the cost of technology and advanced analytical tools drop, financial institutions are in the perfect position to leverage these tools and to provide contextual solutions to their clientele.
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