Could digital transformation break the banking industry?
Consumer behaviour and expectations are ever-evolving, forcing not just banks, but the financial services industry, to redefine their priorities. Whilst the industry is well-known for being conservative when it comes to change and the implementation of new technologies, it’s time for the industry to increase their speed of innovation, focusing instead on out-of-the-box thinking, and disruptive technology in order to guarantee a near-flawless execution.
Jamie Hinton, CEO at Razor Ltd, takes us through his thoughts on Digital Transformation in the financial sector.
“With digital technologies now impacting every aspect of financial services, and digital platforms becoming a crucial mechanism for engaging with existing and potential customers, institutions need to embrace the technologies and leverage the changes to nurture and strengthen a customer-centric approach.
41%* of financial institution executives state that digital transformation initiatives have only been partially deployed, whilst 27% have managed to execute limited deployment, 11% are still in the design phase and 4% of financial institution executives have no digital transformation strategy in place at all.
But what’s the issue here? Is it the leadership that lacks experience? Whilst there are several factors at play here, the primary issue is understanding customer needs. Financial institutions have been focused on digital transformation since the creation of fintech, but they still have a long way to go before they are truly digital. Essentially, these institutions must face the growing competition from fintech start-ups and tech giants through continued innovation.
This is where we come in, as we have foresight on the future of digital transformation. At Razor, we understand that everyone has a different vision, and without a shared understanding we’ll never get the best results. That’s why when we set out to work with clients, our first step is a Discovery process that drives out solutions. It brings our technical experts together with business stakeholders so we can capture, validate and refine ideas to steer us towards the most appropriate solution in-line with the wider business objectives.
Success in digital transformation requires a unique blend of people, technology and data, and we have now reached a point where digital technologies are building on those which have come before them - it’s ‘technology stacking’, creating an exponential increase in the speed of technological advancement.
Implementing digital technologies has the ability to increase customer confidence and engagement, which will enable banks to understand their customers better and develop services which are best suited to them. They also have the ability to reduce operational costs, whilst still complying with increasingly complex and ever-evolving regulations.
We understand the conservative attitude traditional financial institutions have to adopting new technologies in the form of transformation, and as such, we developed The Razor Sprint - designed for people who believe that technology can enhance their business. It’s focused on making change and taking action by getting the right people in the room, without distractions and producing meaningful prototypes, tested on real data, to help you decide what to do next. It’s a sprint through a single project. A proof of concept, developed in isolation, where you can take risks with a clear and singular focus. We find this helps you gain clarity on what is possible.
The Razor Sprint creates sustaining innovations - incremental innovations that enable the evolution of an existing product. Think of it like this: all businesses are walking up an escalator that is going in the opposite direction. Each innovation is a step forward. The ones that innovate faster slowly pull ahead, whilst the ones that don’t fall behind. Then there are the ones that leap forward, with their bigger innovations, but the reality is, they need to keep innovating just to maintain that lead.
Digital transformation needs to be focused on satisfying the evolving consumer landscape and fast-changing customer needs. Banks and financial institutions need to accelerate now, in order to not only protect but also expand their market share in this era of digital transformation. Speed is aligned with innovation, and both banks and financial institutions need to embrace this.
About Jamie Hinton
Jamie Hinton, originally founded technology firm, Razor Ltd, as a side project in 2009 alongside Co-Founder Steve Trotter. The business venture became so successful that in 2014, it became a full-time occupation. Jamie is first and foremost a technology enthusiast, but also hosts the unique ability to translate the complex world of software development into a language that everyone can understand.
Since 2014, Jamie has grown the business significantly. Razor now boasts a team of 24 and is a Microsoft Gold Partner. It has gone from strength to strength, growing its client base and establishing a reputation for out of the box thinking and delivering impressive results for clients.
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FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.