In recent years, the financial services industry has undergone a significant and rapid digital transformation, driven by advancements in technology and changing customer expectations. To remain competitive in this evolving landscape, financial institutions need to be ready to embrace innovation and streamline their processes. However, integrating modern technology with legacy systems remains a challenge across the industry.
To ease the battle between innovation and modernization, a new solution has emerged – one with the potential to overcome any hurdle to change for both incumbents and the industry’s new arrivals. In other words, this solution creates a shorter path to financial services innovation.
Read on to uncover fintech’s potential to transform the financial services industry and how your financial institution can drive innovation in the industry.
In a recent study conducted by Arizent Research, 164 bank employees with knowledge of or involvement in their financial institution’s technology initiatives were surveyed to gain a better understanding of how banks are aligning their tech spending with their business goals.
The results?
Banks’ current technology is lagging when it comes to effectively tackling high-priority areas of transformation outside of cybersecurity and regulatory compliance. Improving product functionality, data-driven decision-making, and customer experiences all rank high among banks’ business priorities.
But, as shown in the chart below, these key opportunity areas are hovering around a 40% technology effectiveness rate.
This means two things.
First, banks are in dire need of a more flexible technology ecosystem to help them balance speed to market and integration. And second, financial institutions that can effectively modernize their core infrastructure while driving innovation in products, experiences, and services will gain a significant edge over their trailing counterparts.
While many financial institutions have a set list of priorities, they still struggle to understand which technology investments will best support their efforts to accelerate customer experience. And on top of this, banks face a considerable number of limitations when it comes to finding technologies that can be integrated with their existing core systems.
That’s why it’s so important for businesses to have a deep understanding of the technologies currently available and shaping the industry.
Mobile apps have transformed the way people manage their finances. Customers can now access their bank accounts, make payments, transfer funds, and track their expenses all from their phone. Mobile apps provide convenience, accessibility, and real-time information in a user-friendly and secure way that customers have grown used to – and expect.
APIs and the integration of APIs allow seamless communication to happen between different financial systems and services, including data sharing and third-party innovation. APIs have opened the door for collaboration, enhanced user experiences, and the creation of personalized financial solutions, which is especially important as banks team up with fintech solutions providers to accelerate innovation.
Real-time digital payment systems have single-handedly sped up the financial transaction process. They allow for instantaneous money transfers and eliminate the need for traditional batch processing, enhancing customer convenience and improving cash flow for many businesses.
Cloud computing has enabled banks to store, process, and analyze larger volumes of data, securely. Cloud-based applications offer scalability, flexibility, and cost-efficiency while facilitating collaborative work environments for back-office employees and the rapid deployment of new services.
Financial institutions have access to extensive amounts of data, including customer transaction information and market insights. Data analytics allows banks to extract valuable insights, identify trends, and make data-drive decisions. Even so, many banks have trouble integrating their vast stores of data into their experiences and solutions.
Used to automate processes, analyze data, and make predictions, AI and machine learning algorithms can help financial institutions identify fraud and other risks. They can also be used to personalize customer experiences through chatbots and virtual assistants.
The technologies named above are just a few of the many driving digital transformation in the financial services industry. Banks that embrace these enhancements into their products and services are in a better position to handle evolution in the industry and rising customer expectations.
Modernizing core systems has been a priority for banks for many years, constantly taking time, money, and resources away from innovation. Diverting resources to modernization efforts while foregoing innovation has become increasingly frustrating for the financial institutions forced to choose between the two.
To get new products and services to market quickly while dealing with outdated legacy systems, banks have started doing two things: developing a mobile-first strategy and working with fintech providers. But developing new products and services quickly is difficult, even with the availability of technology, tools, and partners.
Neither building new products and services in-house nor paying third-party vendors to create and expand offerings is ideal. Both have significant drawbacks. Building takes time and resources away from other initiatives and buying makes it more difficult to customize and integrate enhancements with existing systems.
The desire to create more personalized experiences for customers in a cost-effective way without existing systems making it difficult to develop, implement, and maintain them, has pushed financial institutions to look for an alternative solution.
Imagine a platform with pre-built accelerators for product definitions, data models, servicing, customer journeys, and ecosystem connectors that doesn’t require institutions to start from scratch. That’s exactly what a fintech enablement platform is. Using no-code/low-code tools, banks can quickly configure these modular parts to fit their unique needs.
Newly developed products and services can work alongside existing systems until the financial institution is ready and able to integrate them. This gives banks the flexibility to respond to fluctuating market conditions, meet customer expectations, or take advantage of rising opportunities.
Digitalizing customer journeys and opening new distribution channels with embedded finance is just the tip of what fintech enablement platforms can do. Financial product management platforms give financial institutions greater flexibility to introduce new products and services while migrating core systems, so they don’t have to choose between modernization and innovation.
The rapidly evolving financial services industry has created both challenges and opportunities for banks. While the industry recognizes the importance of balancing innovation with modernization, legacy systems aren’t going away anytime soon. Staying ahead of the competition and attracting new customers can be difficult, but emerging technology solutions like financial product management platforms are making it easier.
With the potential to transform the industry forever, these platforms are paving the way for a future of enhanced customer experiences, streamlined processes, and continued growth in the financial services sector.
Interested in learning more? Access our full report with American Banker here.
