As innovation and financial technology are disrupting the traditional financial services industry, global financial institutions are increasingly transforming their business model to keep abreast of technology companies. Financial institutions offer new digital services to their customers, study customer experience, and automate their internal processes. This article explores key aspects of IT planning and development that should be considered when digitising your services.
Customer experience as a key driver
In providing their electronic services, financial institutions have historically held a certain monopoly, with customers able to choose between various financial service providers but unable to opt for receiving services in different electronic environments because financial institutions typically offer a single service portal, e.g. an online bank.
The rapid development of financial technology and recent legislative amendments are changing the game. A key aspect that affects financial services is the EU’s revised Payment Services Directive (PSD2), which forms the basis for the Open Banking concept. PSD2 provides that financial institutions should publish their application programming interfaces, a requirement that creates more competition in creating digital services. Fintech companies rank alongside financial institutions in the development of interfaces. A financial institution that would like its customers to use its own service portals should be focusing on research into customer experience and usability improvements.
When it comes to digitising services, we should focus on customer experience and look for answers to the following questions:
What services would the customer like to receive electronically?
What related services would the customer like to receive?
How can we help the customer receive our services easily and securely in a digital environment?
What does the customer think of the quality of our services? What improvements are needed?
More information on the challenges facing financial institutions after PSD2 adoption can be found here
Use of innovation and new financial technology
Financial services are affected by financial technology and innovation:
Artificial intelligence and robotic solutions are the types of innovative technology commonly used in providing financial services. Financial institutions widely use artificial intelligence at their service portals to receive information and personalise their services. Social robots (virtual assistants) who answer the customer’s questions are becoming increasingly popular. Virtual assistants come with integrated machine translation technology to help customers speaking various languages. Robotic solutions are primarily used for automating internal processes, such as payments, anti-money laundering, and financial product controls.
Financial institutions are beginning to use some innovative technology that has not been used in the financial sector so frequently in the past, such as augmented reality for analysing prices of finance-lease assets and related financial services.
More details of how innovative technology is used in providing financial services can be found in a PwC survey
Changes to system architecture
Service digitisation and technology development are affecting the system architecture model in financial institutions. To adapt to these changes easily and enhance customer experience, financial institutions are being forced to shift away from a robust system architecture based on commercial technology to a flexible hybrid architecture using open standards. An architecture featuring application programming interfaces integrates commercial products with freeware products and special developments. Local system installations are combined with cloud services.
Financial institutions are now embracing the principle “Changes to Front End Systems Only” as the simplest way of creating value for the customer without substantially changing their internal processes. This principle provides for focusing on the customer’s electronic interaction with the financial institution by creating easy-to-use mobile apps and service portals, while at the same time retaining historical internal procedures and workflows. Although this principle helps customers benefit faster, it limits the potential for realising the benefits of digitisation.
As a result of Open Banking adoption, system architecture in fact covers multiple legal entities.
Service digitisation, Open Banking adoption and changes to system architecture also cause higher security risks. Financial institutions should therefore be paying more attention to IT security aspects.
You can read more about financial institutions going digital in a PwC survey