Growing demand for addressing regulatory compliance, digital competitors, and ever-increasing customer expectations is changing the landscape in which banks pursue their survival. Digital entities and new entrants are flooding the market with new technology-driven solutions in hopes of tapping the rising demand for seamless, digital banking solutions from customers. In contrast, many long-established banking organizations are entrenched in aging technologies and legacy models.
Financial institutions are struggling just to stay in business
In the today’s intensely competitive environment, organizations that haven’t kept pace with competitors in adopting tech innovations will find their legacy processes become increasingly labor- and cost-intensive. And all of this extra effort will amount to little more than just keeping afloat— these organizations won’t be able to continue to respond quickly enough to new competition or changing customer needs.
When it comes to meeting revolving and increasingly stringent regulatory requirements, new players have the edge here, too. Established financial institutions must make changes to existing systems and processes and re-train employees. And, when you’re working with older legacy systems, this can be time-consuming. Whereas, new entrants can more easily build from scratch with new regulatory guidelines and ensure newly-built systems are easy to update.
Just like with any major investment, financial institutions must evaluate the ongoing costs and risks of continuing on with their existing systems, versus investing in emerging technologies to be more competitive in a changing market.
Perils of staying in the comfort zone
As new players join the game, traditional banks will inevitably struggle to keep up with onboarding demands. Customer acquisition and onboarding are great areas to start with upgrading and/or implementing new digital technologies and solutions. But when employees are consistently sidelined, handling issues in their legacy systems, there is little time to focus on customer acquisition, never mind execute a strategy for customer retention. A painful onboarding process can impact a customer’s experience long term, and may discourage new customers and push them to competitors.
Fintech creating a new window of possibility to drive transformation
In the backdrop of conflicting demands, banks must have to ability to effectively manage the costs of keeping pace with evolving and emerging technologies. The past decade saw the dramatic rise of financial technology, or fintech. Innovations in financial technology have introduced new capabilities and products such as mobile payments, digital currencies, blockchain and distributed ledger technology, peer-to-peer lending, and marketplace lending.
Overcoming the traditional barriers to lending
From its inception, fintech unleashed a wave of innovation that disrupted traditional ways of doing business. Alternate lending is one such disruption. Banks are should lend money to all customers, but, in reality, they don’t lend money to people when they assess that it won’t be profitable. Fintech lending, or online lending, refers to newer forms of non-bank lending that serve this category of borrowers, who might otherwise not be approved for loans. This service found fast success with investors and is poised to grow in emerging markets.
FinTech Innovation is Transforming Banks and the Financial System
The success achieved by non-bank lending driven through fintech innovation has compelled banks and other institutions to capitalize on the capabilities of cutting-edge technologies and adopt new fintech solutions, too. Banks and other financial organizations are making considerable investments in client services and customer reporting using digital channels and hire dedicated teams for digital change and innovation.
Banks are now leading the way by engaging tech incubators in the fintech industry For instance; blockchain technology is set to play a major role in transforming the banking sector in 2021. AI technology will also help organizations in increasing operational efficiency and reducing costs.
With growing pressure on financial organizations to operate at digital speed, fintech has emerged as an opportunity to more quickly transform. But making a smooth transition from traditional finance to fintech is not easy to achieve. In fact, it can be extremely difficult, costly, and time-consuming without expert help.
The right strategy can increase revenue, reduce cost over time, and allow a smooth transition to fintech. Discover how Prime’s expertise in implementing fintech is overcoming one of the biggest barriers to fintech adoption.