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Digital bank is the bank of the future? 09 June 2021

Marcelo Frontini, senior consultant with experience in innovation, payments and digital transformation for financial services, outlines the core elements that will continue to drive digital banking far in to the future. 
In recent years, consumers have been able to access diverse digital service experiences through very easy-to-use mobile apps that are personalized and in real-time context.

Internet companies and native-digital businesses are increasingly redefining customer expectations which are all about shifting from a product mindset to customer centricity, influencing behaviors in all economic sectors. For example, streaming services have developed consistent multi-channel experiences (TV, mobile and desktop), created an easy way to access comprehensive content and make recommendations based on artificial intelligence. As consumers enjoy these journeys, their expectations for all other services increase, both in the physical (point of sale) and digital (mobile) world.

Traditional retail banks (incumbent banks) pioneered many innovations for customers to access digital channels (internet banking and mobile) and created mobile applications (Apps) that were branded as “your bank in your hands”. Customers who were used to the physical world (branches and ATMs) perceived security and convenience in using digital.

However, the complexity for banks to integrate the physical world (branch legacy systems) to the digital one usually generates inconsistencies in the journeys and reduces the degree of convenience and personalization. The customer compares with other services and becomes more demanding.

Thus, digital financial services companies (fintechs) emerged and adopted the customer-centric model, specialized in solving specific problems (payments, investments, loans, etc.).

Digital banks, without physical branches, were created to integrate various financial and non-financial services (the super App) based on the same customer-centric model, with the ambition of solving multiple customer problems in a single interface. But are they effective?

The digital bank, to be the bank of the future, needs to go further:

1) Services and experiences in the customer's real-time context

The integration of artificial intelligence, internet of things (IoT) and biometrics can make the customer's life easier and more efficient. The use of voice will become even more frequent, and digital assistants will take over the super App concept. The digital bank of the future, for example, will be connected to a smart home or car and will be able to be the customer's preferred service.

2) Smart recommendations

Music and video streaming services already predict which music or films users may wish to listen and watch. Dating sites suggest partners in the neighborhood or anywhere in the world that might suit him or her best. Financial recommendations will also be automated, personalized, and transparent. Artificial intelligence-based tools such as digital assistants and PFMs (personal financial management) simplify tasks, like fee reduction recommendations, product price comparisons (including non-banking), liquidity management or planning to reach a customer’s life goals. Mobile or home devices will become an increasing part of the personal ecosystem, listening, anticipating needs, and helping customers when required – even if not asked. What will customers do? Trust the advice provided by the bank or that offered by family, friends, or colleagues?

3) Strategic partnership in ecosystems and operating systems

Customers access various ecosystems through operating systems (Android, ios, linux or Windows) for information, content, navigation, shopping, banking or any kind of transactions or experiences for digital services. In general, the interaction and relationship are led by a non-financial brand and the digital bank of the future will need to be embedded in the customer journey in distinct non-banking services.

For retail banks with a physical presence, there is the example of the DBS digital transformation strategy, the largest bank in Southeast Asia. Winner of Efma´s 2019 Global Innovator awards, their strategy focuses on “making joyful banking” through three principles: (1) being digital to the core, building digital native journeys; (2) embedding the bank’s services into customers’ everyday lives, through industry partnerships; (3) encouraging a start-up culture.

And for fintechs, digital banks and retail banks, the success of the bank of the future will also be related to establishing partnerships that connects with partner ecosystems to support the instant exchange of data and make recommendations in real time, respecting privacy and making sense to the client.

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