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The digital banking genie is out of the bottle

For millions of people, banking today is leaps and bounds better than it was even a decade ago, when payments took days instead of minutes to clear. This was before the era of smartphones and mobile banking or the idea of bringing smarter banking capabilities to their fingertips, no matter where you were. Beyond the fintech revolution, banks still relied on high-street branches; fraud mitigation was manual; and data was heavily siloed in departments, slowing down decision making and its ability to help reduce risk.

So, who is benefiting from this digital banking movement? Acting as the backbone of any economy, SMEs are seeing the biggest rewards from this new world of open banking and digital financial services. Making up 99% of all UK businesses (UK Parliament 2020), it’s about time SMEs were given the same level of support that they’ve provided for our economy. 

In the past, smaller companies that didn’t have a fully-fledged finance department often had to jump through obstacles to find out what bank products were best for them. Not having the same access or resources to financial services that a much larger company or enterprise had, SMEs were operating in a huge blind spot when it came to financial services. Thankfully, that is rapidly changing. 

Thanks to leaps and bounds in technology, advances in banking are now made possible. These developments are bringing banking into the digital age, allowing fintechs to offer commoditised, affordable services for SMEs. Digital banks such as OakNorth and New10 specifically target SMEs by offering services that add value – such as cash flow analysis and timely instant loans.

Beyond this, digital banks are providing a variety of offerings from payment services and customer identity verification, to point-of-sale credit and business intelligence solutions. Catering to the demanding needs of today’s customers, these types of solutions are constantly being developed with the aim of making banking better for SMEs.

Keeping pace with the customer

As time goes on, new services become available and the definition of “better banking” becomes even more of a moving target. If other industries – like media, telecoms and retail – that are much further down the road in their digital journey are anything to go by, change in banking is only going to continue gathering momentum. 

Following customer demand, we’re seeing a shift in banking being treated more as a utility rather than a specified service only provided by financial institutions. Down the line it won’t matter whether financial services are provided by a telco, retailer, bank or another kind of company. Instead it will matter how banking and banking-like services are integrated into our daily lives or businesses.

Already, companies without banking licenses that offer useful banking-type services like digital wallets are cropping up. If we look at supermarket loyalty schemes, where the customer can spend the points in store or with partners; or air miles, which can be spent buying flights or access to airport lounges; there is a huge opportunity for businesses to adapt to consumer needs by providing more tailored products and services, as well as a better customer experience. This is made possible through innovation in banking and technology. In turn, this also helps the national economy. A dynamic banking sector with carefully focused regulation and many players is a much more balanced environment. By having more choice within the market, it evenly distributes any potential distress from banks and decreases the risk of systemic failure.

Smarter banking for billions

The evolution of economies, society and technology never sleeps. Banks must be set up to run at the pace of digital change or else they will be left behind. Being agile – with the ability to change according to need – is a prerequisite to survival. This is the philosophy that supports the technical and business decisions banks make when they implement a composable strategy.

As an industry, we need to be better at enabling smarter banking, to allow banks to be agile and flexible as a digital mindset and approach takes a firmer hold. If banks can’t adapt to change, they won’t be equipped to respond to the market competition, the macro environment – such as the impact of Covid-19 – or new technology bred by fintechs.

The evidence to date is that change is making banking better for millions. There’s no reason why that is going to stop, so let’s make it better for billions in the years to come. The responsibility is on the players to make sure they can run with it.

Whether you’re an incumbent bank with a digital strategy or a challenger bank starting with a clean sheet, agility and adaptability are key ingredients when building a digital technology platform. And that means a platform that is open for collaboration. By commoditising the basics, together we can create an environment that enables the next wave of innovation.




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