Increasing capital and improving the customer experience have been the focus of banks and credit unions' efforts to catch up with their competitors. Advanced analytics, innovation and modern technology, as well as a new approach to the workforce, have been the focus points. 

Due to the rapid development of technology, the competitive landscape continues to expand, offering simple engagements and seamless experiences, causing existing relationships with banks and credit unions to crumble. For any organisation, there are a variety of options available for partnering with third-party providers to quickly deploy solutions to meet customer demand instead of developing them internally. Institutions can proactively modernise their existing systems and processes alongside partnering with fintech and big tech competitors.

In this digital age, it is more important than ever to ensure that financial institutions are digitally future-ready. As the supply of technology increases, the demand for innovation grows. The more technology is available to consumers, the more they expect that technology to be used to serve them. For instance, APIs, especially faster payments, and easier unbundling have enhanced APIs, services and payments. APIs have improved service delivery, especially payments, and have simplified unbundling. Originally regarded as high-tech, they are now becoming the standard for Digital Disruption in Banking and its Impact on Competition for data sharing in open banking applications. 

Each organisation must make the decisions in light of their existing and desired business models. If a traditional financial institution decides to follow a certain path, there will definitely be pressure to act quickly and decisively. As leaders in the finance and lending space with our digital lending platform, Luna Connect has put together predictions of five trends that will strongly influence 2022.

Quick Wins Are Top Priority

Solutions are Quick Wins if they are easy, fast, economical, and can be easily reversed. A quick win is a visible change and is expected to have immediate effects.

In order to ensure a positive customer experience, banks and credit unions should invest heavily in digital banking transformation. Investing in the right areas depends on each institution's maturity level of digital transformation.

Success in digital banking transformation hasn't changed fundamentally; however, strategies and tactics have shifted to focus on 'quick wins' that can set the stage for future improvements.

A reimagined back office, combined with process automation, is part of the toolkit to improve customer acquisition and retention. Making account opening and loan applications more user-friendly is part of the effort, with the goal to reduce the time from 10-12 minutes to under three minutes, Professional Bank launches new digital account opening.

Additionally, a focus will be on introducing innovative products, improving financial management tools, expanding access to relevant and compelling content, and increasing proactive recommendations using data and artificial intelligence to improve customer engagement overall.

Developing a digital banking strategy is an ambitious long-term endeavour that can present some challenges on the way. Much of the time, it takes at least twice as long and costs twice as much to transform an organisation as originally anticipated, in part because of challenges in cultural readiness, as mentioned Gartners IT Roadmap for Digital Business Transformation. In many organisations, digital transformation is not yet tested, so their ability to transform is uncertain.

Winners And Losers Will Be Determined By Data And Artificial Intelligence

Data and analytics are the backbones of digital banking transformation. By 2022, artificial intelligence and data will be the main differentiators in the banking industry according to McKinsey, Next-gen Technology transformation in Financial Services. Microsoft outline The top five things a customer needs from their bank, including customers expect their financial institutions to understand them, reward them, and know their daily lives and financial profiles in real-time. Many consumers have become accustomed to intelligent experiences during the pandemic, such as those offered by Netflix, Google, and Amazon. Financial institutions can replicate this by leveraging their internal resources and partnering with third-party providers.

With AI-powered virtual assistants, many basic banking interactions will become even more human-like with conversational AI. Bank of America has a substantial lead in this area with their AI-powered virtual assistant, Erica. These interactive enhancements go beyond simple functions like checking balances to also perform more involved tasks like acting as a financial concierge. The latest financial reports from Bank of America show that more and more customers are using its virtual assistant, Erica, more frequently than ever before. Erica's presence and the AI's capabilities have greatly improved in the last year and the last quarter, so that now they are a key part of the bank's digital strategies.

Many organisations are already using artificial intelligence to simplify back-end operations, and banking is set to follow suit. The innovation process will improve as more employees get involved. Achieving real-time insights into product performance, service levels, and customer needs will add significant internal and external value.

Mobile-First Design with Cross-Device Support

Most financial institutions are transforming their digital banking operations to start with mobile-first methods. Mobile-first transformation includes improving products, services and experiences through a mobile lens, while other channels benefit as well. This requires a rethinking of everything, both internal and external, that has an impact on the customer, including business models to more accurately reflect consumer and business mobile banking trends.

In a world where more consumers access the internet using their smartphones rather than their desktops, mobile shouldn't be considered as a channel to add to digital transformation strategy. Rather it should be a driving force behind customer-centric applications and future development.

Taking a mobile-first perspective opens doors to innovative new solutions for increasing customer acquisition, engagement, relationships, and loyalty. A mobile-first approach will also contribute to increased efficiencies through the integration of artificial intelligence, robotic process automation, and biometrics. These enhancements are not so much about the device as they are about how to make the most of the device's capabilities.

Taking a mobile-first approach to digital banking means that you can align your business model around your customers’ needs as well as support digital banking solutions in the future. Financial institutions are increasingly bypassing legacy branch processes, deploying digital devices to staff for improved internal and external experiences. Generally, applying a transformation to both online and physical channels is relatively easy.

A New Approach To Back-Office Processes

Despite increased consumer demand for experiences powered by digital devices, many financial institutions still use outdated back-office processes and processes based on people and paper that impede the implementation of fast, simple and seamless solutions. 

To increase efficiency and improve customer experiences, financial institutions should not simply digitise their existing back-office processes but rather start from scratch, using new technologies and automation.

Financial institutions could employ much smaller departments to run value-added tasks, such as deal origination, KYC validation, data collection, and distribution.

Robotic process automation results in cost reduction, increased efficiency, improved accuracy, and improved customer experiences. 

A New Workforce Model

Many jobs have seen their skills change from 2016 to 2019. While new technologies and the shift to digital banking are driving the demand for new skills, many new jobs require soft skills, not just hard skills. Employees of financial institutions should have the ability to thrive in the face of a disruptive business environment through collaboration, innovation, adaptability, and perseverance.

Many workers are abandoning the traditional work environment in favour of either hybrid options or the gig economy or abandoning the active workforce altogether, as shown by the term "The Great Resignation".

To be competitive in the digital banking era, financial institutions will need to recognise that many of their employees will consider flexible working arrangements when selecting an employer. The shift will require many banks and credit unions to rethink their existing workforce models.