How will the bank of the future win the game?

by Fleming. Team

Miodrag Mirčetić, director, member of the Asseco Group Board for the Retail Banking Forum.

Nowadays, why is digital banking an absolute must?

Classic forms of business are being replaced with digital, and there is the same trend in the banking industry. Digital transformations allow banks to have a comprehensive view of the client as well as access to all client information and needs, based on which they establish a more efficient and mutually profitable relationship.

It affects every business and it affects people’s everyday life. People want banks to offer them a tailor-made loan when they want to purchase something. They are not satisfied nowadays to go to a separate e-banking application to ask the bank for a loan after they finish searching for a new car, for example. If a bank is aware that a customer is looking for a car, it must offer him an individual loan adjusted to his balance and credit ability at once.

This is just an example, and there are a lot of such examples, testifying that today we can get almost everything easily, like an overview of the bank’s account statement which we get via the Internet without having to go to the bank branch for it.

What is the next step in digital banking?

Digitalization in the banking sector started over 10 years ago, and the next step in the development of banking technologies is the creation of opportunities to help users get what they want by using any of the available channels: electronic banking, mobile banking and self-service terminals. New technologies should not be more complicated to use than the level of technology that clients currently use, or they will not be interested in them.

Banks need to offer customers simple, fast and secure solutions with the emphasis on unification and equal access to all channels of digital banking. In this way, we see a dramatic increase in the speed of introduction of new technologies as well as in demand. The acceptance period for new methods in business and for implementation of new technologies is getting shorter and shorter. Therefore, banks are under pressure to innovate and change their work.

It is very interesting that 30 years ago, trends from the USA and Europe came into our region with a delay of more than 10 years; now Serbia is keeping up with global trends and is even pulling ahead when it comes to chip transactions.

How should banks change in the future?

Customers want to have banking services and products online, non-stop and therefore banks have to put them in their focus in order to increase their participation in the decision making and self-management of their money, independently of the bank branches’ working hours. Banks need to go even further and offer customers services suited to their needs. All the banks in the world are in the same boat, but there are differences regarding banks’ readiness, capability and size. It depends on the market share, the industries serviced by the bank and the type of clients.

If a bank is focused on individuals or a specific sector, for example, agriculture, investment in full digitalization will not bring much value and those banks should wait for two or three years until technological solutions are cheaper. On the contrary, banks massively involved in retail, which have young professionals as clients who are mostly dependent on mobility, should adopt new technologies right away.

In line with the current trends, Asseco SEE software solutions enable banks to recognize a client and offer him, besides classic transactions, other bank services tailored precisely to his needs or emergency authorization of some banking services without going to the bank branch.

Also, there is a huge difference between market environments worldwide. From a legal perspective, the US is different from Europe because the European financial market is more regulated than the US financial market. In our region, some legislation needs to be changed. When we are talking about the situation in Serbia, it is very good news that the relevant bodies are ready to make legal changes which are crucial for the introduction of direct banking, but in order to achieve that goal, it is necessary to organize consultations with various banks and inventors which have experience in this field.

Will digitalization reduce employment?

People think that digitalization will decrease employment. On the contrary, digitalized economies are creating an environment for new jobs, because the overall economy and services are growing. According to the current statistics, each euro invested in the digital economy increases GDP by almost 10 euro.
Investment in digitalization also reduces costs and increases efficiency of business processes.

Is digitalization worth it?

When deciding on digitalization, banks have to think about the budget at their disposal, internal resources and partnerships with digital companies such as Asseco or other vendors which offer digital solutions. Technology cannot be obtained for free; banks must make heavy investments in the development and implementation of new technologies.

Taking into account the profitability of the banking industry, we see that some banks have higher profits and higher budgets, so they can introduce new technology more quickly. Smaller banks are in a more difficult situation, but they have to invest in digitalization as soon as possible in order to keep pace with industry trends.

Competition is always good for business. We can expect that competition will push banks to be more proactive, which is very good for clients because it means better services for them. Some banks will gain advantages from investment in digitalization and some will lose because they did not adapt to the trends, but the banking sector will gain as a whole and even get a new powerful impetus to invest in full digitalization.

How will digital banking develop in the future?

Things will change in the future even faster than now. Projects that were previously realized in two to three years will be workable in two or three quarters. Agility to adopt changes will be crucial in the years to come. Besides size and capital, the ability to change business processes, products and the way of communicating with customers will be crucial for the banks. If they do not transform and adapt to new processes and new clients’ needs, they will lose clients.

Recent studies show that customer loyalty is dramatically reduced and that now customers very quickly leave a bank which does not fulfil their needs and go to a competitor. This is the current situation in more developed countries. This is not the case in our region yet because just 10-20 percent of clients communicate with the banks strictly on an electronic basis. This situation will change very quickly and only the banks which offer clients everything they need in one place will be successful in the future.

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