Will banking survive a digital disruption

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The financial sector is not facing major upheavals. He's in the thick of it. The world of banks, as we knew it until about ten years ago, is being turned completely inside out due to the digital transformation. Also thanks to FinTechs and blockchain. But the 2008 financial crisis, with its dramatic upheavals for the global financial world, as well as the resultant, significantly stricter national and international regulations for both banks and trading venues, have contributed to the current complex situation in the financial sector.

Threat to the top dogs

All industries affected by digitization are confronted with the same hardships: The respective top dogs are no longer only put under pressure by competitors in their own segment, but suddenly have to defend themselves against the force and dynamism of providers from completely outside the industry. Daimler, Volkswagen and Co. are experiencing this with tech giants like Tesla, and banks like Deutsche Bank, Bank of America or Unicredit are feeling this with global players like PayPal or Google Pay.

However, the industry association Bitkom sees this new category of competition for the financial world as an opportunity to gain new cooperation partners with unexpected lessons. This would give companies the chance to jointly develop modular services and to flange these to their own existing offerings - with enormous potential. Whether in the back end of the bank IT or in the front end of payment transactions.

The professional world speaks of open banking, API banking, platform banking or banking as a service. In this context in particular, many traditional banks and financial service providers have a lot of catching up to do with their digital competitors.

Online banking and mobile banking

At least when it comes to online banking, which is widely accepted in Germany, the finance houses have obviously done their homework properly. According to Bitkom, 70 percent of all German citizens use online banking, and 93 percent of the 30 to 49 year olds. That too Mobile banking Is becoming more and more popular - 52 percent conduct their financial transactions via smartphone.

With far-reaching consequences for the bank branches: For 67 percent, personal advice at the counter is no longer more important than digital offers. The bank advisor is currently only the most trustworthy financial advisor for 34 percent of customers. In the course of this development, more and more bank customers are willing to put their finances in the hands of a pure online bank. Almost 50 percent believe that there will be no more branch banks in Germany in 2040. This alarming statement alone should be an incentive for banks and financial service providers to raise their own businesses and, above all, their services to a new and sustainable level with the help of digitization.

What the banks do well

In terms of IT infrastructure and cybersecurity in particular, finance is superior to other industries, as Peter Burrows explains in a post on industry transformation for the ServiceNow blog. This is the result of huge, billion-dollar investments in IT budgets, but also the extremely strict data protection and compliance requirements that have been in force in the financial sector since the financial crisis. Financial service providers are also in the front row when it comes to AI: "55 percent use AI to automate financial and accounting tasks such as reporting and fraud detection," says Burrows.

Where there is a problem

The major challenge that banks and financial service providers now have to tackle with high priority lies directly in the Interface to the end customer. The key question: How do I create a better customer experience? According to a US survey, bank customers would use financial services from global players such as Amazon or Apple if they offered a better customer experience.

It's no secret in the industry: the key to long-term success lies in Optimizing the user experience through better digital services. Because positive user experience leads to lasting trust and loyalty. As early as 2018, 74 percent of bank executives in North America stated that the "customer experience" was their top strategic priority. The very apt title of the Accenture survey: "Back Office, it's time to meet the customers".

Innovation through a system of action

Part of the solution for this is already in the hand, or rather, on the servers of banks and financial service providers: the customer data. The problem, however, is that the providers have not yet had full control over their customer data and therefore cannot use it profitably. At least not yet.

A first step towards a better customer experience is the better use of data and, as a direct consequence, the automation of different levels of customer service. According to Forrester Research, many banks receive up to 80 percent of all incoming customer inquiries by telephone via their own call centers, which then call up a large number of separate, non-interconnected IT systems. But the key to an outstanding customer experience lies in the connection between the front office and the entire organization. Separate systems cost money and are inefficient.

Melanie Abt, Senior Sales Director Financial Services at ServiceNow, puts it in a nutshell: "Banks have invested a lot in their front-end. In the back-end, however, a lot has stayed the same. The elegant front-end is superficial make-up, the existing systems only marginal connects. A holistic view of the customer: Nothing. " The digitization and subsequent automation of these time-consuming and costly workflows would save billions of dollars. Important for an industry in which a phase of low interest rates eats up margins and increases cost pressure.

How the customer experience becomes seamless

A comprehensive workflow platform such as the Now Platform from ServiceNow can help without having to touch or edit the bank's customer data from the current inventory systems. They remain in this "System of Record", but are connected to one another via the Now Platform level, a "System of Action". And then the action can begin.

In practice, for example, the platform provides the bank employee with precisely tailored information on customer concerns at a glance. Not only can customer communication be made more fluid and more targeted. The customer also gets a more comprehensive service with significantly less effort on his part. The platform proactively initiates further activities and service topics via AI processes. The result: The customer is delighted with a confident user experience.

This is increased by the "Finance Operations Management" product specially developed by ServiceNow for the financial sector. It sometimes has a framework for banking services and an industry data model, as well as Card Operations, an application that optimizes customer inquiries, for example when it comes to ordering replacement cards, issuing a new credit card or increasing account limits. This reduces unnecessary loss of time on the customer side to a minimum. The high degree of automation delights employees and customers alike. Melanie Abt sums up with a wink: "Seen in this way, the Now Platform is kind of a make-up - but with a depth effect."