Financial institutions have been forced to step up their game in order to keep up with consumer demand and push out several different products and services, leveraging emerging technologies, to provide customers with choice. Today, retail customers can deposit cheques, transfer funds and apply for loans from their mobile devices, signifying that we are in the age of the application.

Paper, time and cost will increasingly be eliminated, and financial services players will continue to have an increased focus on innovation. In conversation with Gary Lawrence, senior manager of digital transformation at TSB Bank, highlights that it is the combination of digital technology, modern development and delivery practices that has resulted in the advancement of innovation by challengers in the financial sector, who are able to develop new customer experiences at an increasingly rapid pace.

“The bar is now much higher, with customer expectations ever increasing. Traditional banks with legacy systems and, in some cases, an older way of thinking, have found it challenging to match this pace. However, with the advantage of a large existing customer base, market presence and strong capital, combined with the ability to also partner up with fintechs, incumbent banks are starting to rise to the challenge,” Lawrence says.

The end of the comfort zone

Alessandro Greco, leading the digital banking and open banking transformation at Cater Allen Private Bank, part of Santander UK, has a similar attitude and reveals that the “advancement in technology has a clear impact for the financial sector: the end of the comfort zone. It has been a big shake up for a sector with a small appetite for innovation.”

He went on to say that incumbent banks have already conducted work in the digital transformation space after the introduction of internet banking back in the 1990s, but the improvements that were made affected user experience and since then, little has been done to reinvent business models. “For challengers, it is much easier to create a new digital bank from scratch rather than digitising a mature one. The real challenge will be how banks position themselves towards open banking as it requires a fundamental reinvention. An obligation can become an opportunity,” Greco says.

However, if leveraged correctly, technology can be a driver for efficient customer service. Alexander Zwart, head of digital channels and CX at Rabobank states that technology “enables us to deliver better services for our customers; they gain more insight in their financial situation for example via their app on their smartphone.”

He goes on to examine that today, organisations that work together are the real winners and will be able to provide easy to integrate solutions for merchants that help them to create a smooth onboarding process for their clients. But how are banks leveraging these technologies?

According to Accenture’s 2019 ‘Key Banking Trends to Watch’ report, there are 10 significant market forces that will propel the industry forward and “banks’ responses will net either greater disruption or refreshing bliss-flavored, of course, by market-specific traits.”

Here’s a breakdown of Accenture’s senior managing director – banking Alan McIntyre’s predictions:

1. Unbundling and fragmentation due to open banking

2. Divergence of profit and value to avoid burst bubbles

3. Frequency of AI assistants and a digital advice evolution

4. Growth in the offerings of US community banks

5. Chinese payment providers shaping European markets

6. Attracting a clear share of business

7. Migrating new core banking system alternatives

8. Migrating to the cloud to give customers more value

9. PSD2 fueling payments options and pushing for app-based options

10. Considering becoming a platform and enabling business models without ambiguity

The crux of McIntyre’s argument is to not underestimate progression in digital transformation, but there is still a lot more to be done in order to serve the consumer and provide a good customer experience. 2019 is merely a drop in the ocean in the evolution of an industry.

Welcoming the app for everything

Dr Louise Beaumont explores in conversation with Finextra that digital transformation is a loaded term and one that “encompasses everything from transformation which transcends sector to the far more pedestrian ‘tarmacking of the goat track’. And it’s this latter reality that we see most often.“

Banks simply take a poor process and digitise it – the retail banking product is a perfect example. What we, the consumer, need are live-data-enabled services, not a digitised ‘fire-and-forget’ product which is in all ways pertinent a stolidly 18th century experience.”

And many fintechs, when boiled down to their essence, are simply point-solutions for today’s problems. Companies with ambition and scale, sweep, away not just problems, but points solutions and digitised products too. Just look at Tencent’s WeChat, for example, often described as ‘the app for everything’.

Read the full The Future of Payments report here.