Breaking away from incrementalism and embracing the Fintech ecosystem
Will McDonald, Banking Sector Director, UST UK
The good news is that it has never been easier to cast off sunk cost shackles by inflating future-oriented technologies and business platforms using fintech ecosystem participants.
Will McDonald, Banking Sector Director, UST UK
Technology and Commercial professional with 20 years of experience helping large enterprises drive change and transform their businesses. Will has worked in Asia, Europe, and North America and has held senior client-facing and leadership roles. He possesses extensive experience in Banking, Insurance, and Capital Markets.
The banking industry has reached a consensus on the direction of its digital transformation initiatives. Most agree that onboarding should be frictionless, customer experiences should be personalized and enriched, and analysis and action against data are crucial. They also agree that these initiatives should be supported by technology and cost structures that allow for competitive unit economics.
However, where the thinking diverges is how quickly banks should achieve these goals. Many have implemented incremental transformation programs, which often extend far into the future due to the complexity of their technology legacy, invested capital, or assessment of competitive market conditions.
Banks must break from incrementalism and embrace accelerated digital transformation programs because the competitive landscape has rapidly changed. Long-term incremental change programmes may not be sufficient in today's fast-paced digital era. Banks must embrace a more comprehensive and transformative approach to keep up. Existing transformation programs may already deal with obsolescence by the time they are completed.
The good news is that it has never been easier to cast off sunk cost shackles by inflating future-oriented technologies and business platforms using fintech ecosystem participants. Purpose-built solutions can be reliably deployed quickly, and the ROI for taking this approach is easy to define.
Emergent fintech platforms, mostly SaaS-based, have overcome the challenges of being too new, cloudy, risky, or non-compliant to be adopted by major banks. Many major banks have already put these into production, supporting major product lines. These Fintech platforms bring incredible productivity, time-to-market, and cost advantages that were not previously possible.
By embracing this next wave of cloud-native fintech technologies into their change programs, Banks can stay competitive, attract, and retain customers, or unlock new revenue streams. They will allow them to bring innovative products and services to market much more quickly, improve operational efficiency, reduce costs, and mitigate risks.
Digital banking transformation refers to adopting technologies and strategies to modernize operations and meet customers' evolving needs. It involves leveraging technological advancements such as mobile banking, artificial intelligence, cloud computing, and data analytics to enhance customer experiences, streamline operations, and drive innovation in banking services.
Statistics showcase the importance of Digital Banking Transformation:
- Mobile Banking Growth - Mobile banking is the accepted primary channel. In 2020, it was estimated that there would be around 2.6 billion mobile banking users worldwide.
- The rise in Digital Transactions - Digital transactions, including online payments and mobile banking transfers, have grown significantly. In 2020, global digital transactions reached over $730 billion, reflecting the increasing reliance on digital channels for financial transactions.
- Fintech Investments - Investment in fintech companies has been on the rise. In 2020, global fintech investment exceeded $44 billion*, indicating the growing interest and support for digital banking solutions.
- Customer Adoption - Customers are increasingly embracing digital banking services. According to a study, 55% of consumers prefer digital channels for banking, and 61% use mobile banking regularly.
The benefits of embracing the Fintech Ecosystem and end-to-end componentised digitisation are:
- Enhanced Customer Experience By offering intuitive digital interfaces, personalized services, and convenient self-service options, banks can meet their customers' evolving expectations and enhance their overall satisfaction.
- Improved Efficiency and Cost Savings - By streamlined internal processes and automation of manual tasks, delivering reduced operational costs. By leveraging automation, artificial intelligence, and data analytics, banks can achieve greater operational efficiency, reduce human errors, and optimize resource allocation.
- Expanded Market Reach - Digital banking enables banks to extend their market reach beyond traditional geographic boundaries. Banks can tap into new customer segments by offering digital banking services, including tech-savvy individuals, digital-native generations, and underserved populations. This can lead to increased customer acquisition and revenue growth.
- Innovation and Agility - Breaking from incrementalism and embracing digital transformations fosters a culture of innovation and agility within banks. Banks can develop and launch innovative products and services more rapidly by leveraging emerging technologies and collaborating with fintech partners. This allows them to stay competitive in a rapidly evolving financial landscape.
- Data-driven Insights - Digital banking transformations generate a wealth of data that can be leveraged to gain valuable insights into customer behavior, preferences, and trends. By harnessing data analytics, banks can make data-driven decisions, personalize their offerings, and proactively address customer needs. This can lead to improved risk management, targeted marketing campaigns, and better product development.
- Competitive Advantage - Accelerating digital banking transformations allows banks to gain a competitive edge in the market. By offering cutting-edge digital solutions, seamless omnichannel experiences, and innovative value-added services, banks can differentiate themselves from competitors and attract new customers. This can lead to increased market share and long-term sustainability.
Where UST can help:
At UST, our role is to enable accelerated access to the best of the fintech ecosystem for our clients. While we have a good pulse on the emergent market participants, we understand that each customer has unique preferences or circumstances shaping their technology roadmap. Flexibility to choose, add, or replace components is crucial, and the days of walled gardens and proprietary systems are gone.
Recently, we launched UST FinX, our solution to help our clients orchestrate leading market technologies into rapid product launches or expedited transformations. We continue to add to our over 500 pre-built banking components, including digital experiences, microservices, and integrations. With them, our clients are unlocking much greater time to market at much lower commercial entry points.
Accelerating digital banking transformation is imperative for banks to thrive in today's fast-paced digital landscape. By breaking away from incrementalism and embracing comprehensive digital strategies, banks can unlock numerous benefits, such as improved customer experiences, streamlined operations, and competitive advantages. While challenges exist, successful examples of banks leading the way demonstrate that with the right mindset, technology adoption, and organizational commitment, banks can navigate the complexities and realize the full potential of digital banking transformation.
Whether it's a speedboat, sidecar, or legacy transformation, there is an opportunity to re-examine the time horizons and potential barriers. It's time to break away from incrementalism and accelerate digital banking transformations.
Learn more about UST FinX and how it can transform the banking experience.