Market insights by Kaiser Naseem, Banking and Digital Transformation Advisory Services for the International Finance Corporation (IFC). We’ve asked him to share with us his views for the banking and financial services industries transformation happening now.

note: opinion below is a personal opinion and does not represent nor reflect an official IFC view

Everyone talks these days about digital transformation and technological innovation for the banking and the financial services industry. But, to what extent are banks willing to change? 

Depends on the bank and the country. However, the willingness to change has evolved over the past five years or so. Initially, banks were not doing anything, as they perceived financial technology to be a fad that would go away with time. This perception was held by them even though they could see digital disruption happening all around them in other industries (transport, hospitality, manufacturing, etc.). However, when non-traditional players started to eat into their business (starting with retail segment) almost all banks “scrambled” to do something about it.

That’s when it was obvious that the question is not “willingness” to change but more of the “ability” to change and transform. And this is still an issue faced by many banks globally. Where to start the digitization journey from and how? Today, the unwillingness to change stems more from this inability or lack of capacity than from the fact that they do not want to.

Given there is change, what changes do you see more vibrant these days? (technologies or applications)

Just like the willingness to change has evolved, so has the way in which technology is being leveraged. Today, with the presence of fintechs in almost all areas of finance, and the advent of open banking, it has become easier for banks to leverage platforms. However, the issue here is that this too needs to be done based on some digital strategy. And this is the area where banks falter – they embark upon the digitization journey without a proper strategy. The strategy should determine whether they will innovate their own platforms/apps, leverage existing ones or acquire them. At present, it is a mix. The easiest thing to do is develop an app for client engagement – and that is what many banks are doing (including chatbots, mobile apps, etc.). But the question is, whether that is the pain-point that needs to be addressed? Or is it something else, such as digitizing the credit process for quicker turn-around time or better risk assessment. Therefore, it is important to first have a digital strategy that is aligned with the business strategy.

What banks look to achieve by adapting to these new technologies?  What is the primary motive behind the change? 

There are four primary reasons for banks wanting to (or should) leverage technology : (1) Increase outreach, (2) enhance customer experience, (3) Reduce costs, and (4) Better manage risks. Depending on the bank (its target market, its size, its location, etc.) it must be clear on why it wants to digitize and in what order of priority. And all this should be stated in its digital strategy.

How you foresee the future? Any projections you’d like to make?

One thing is for certain – this digital disruption within the financial sector is something that will continue long into the future. There are still several pain-points that still need to be remedied in the way financial and banking services are offered and delivered. We will see AI (augmented intelligence OR IA – intelligence augmented) playing a bigger role in enabling data processing for gaining insights, and customer engagement.