The Digitalisation of Banking: Opportunities and Challenges for Banks and Financial Service Providers

17. June 2020 / in technology

Mobile banking is becoming mainstream, Open Banking has become a global phenomenon in just a few years and PSD2 is already driving innovation in the financial sector. All of this has only been possible in the context of a digitalised financial world. Do we even have to talk about digitalisation in banking anymore? Our answer is simple: absolutely! But why so?

Many of the digital developments reflect a rapid response to customer demand for digital offerings. However, they have little to do with sustainable development, genuine availability and the necessary quality of digitalisation in banking. Nevertheless, this is not a lecture about digital transformation in banking. Using real challenges as examples, this blog post will show how banking can meet customer demands for digitalisation and embrace digital transformation both internally and externally.

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1. Challenge: Digital Frontend, Analogue Backend

Meeting customer expectations is important, but even in banking it’s not just a matter of adding a “digital” coat to the business model. Although many services look digital at the moment, they are actually processed manually in the background. As a result, there is a deep gulf between what the customer sees and the actual goal of digitalisation initiatives.

To ensure long-term success in a digital world, financial institutions must introduce digitalised business models. Those that do not will incur mounting costs as all processes with low levels of digitalisation have to be handled by employees. A lack of end-to-end digitalisation ends up affecting customers and leads to negative customer experiences and higher operating costs.

Solution: Fully Digital Solutions for Bank Customers and Employees

It is not possible to switch from non-digital or partially digital services to a fully digital range of services overnight. This is why companies across all industries like to use plug & play solutions that can be introduced quickly and easily. The comparatively low effort required enables digital solutions to be implemented in all departments across the entire organisation.

The big difference: Suitable plug & play solutions for the financial sector not only make the frontends of applications appear digital; they also digitalise and automate far-reaching processes. This digitalises the complete customer experience, minimises costs as well as simplifies and improves internal processes for employees.

Get to know a fully digital example from the real world here: The digital loan application process!

Digitalisation of Banking

2. Challenge: Digital Services Available, But Are Too Slow and Monotonous

In 2020, practically every bank already has a repertoire of digital banking offerings online. However, few offer their customers a truly comprehensive range of products and services. In fact, particularly complex products are rarely available online. Innovative banking services such as digital contract managers or tailor-made loans are only offered by institutions with the highest digital banking index across the EU.

Digitally savvy customers expect more: 63 percent of the customers surveyed in the ING New Technologies Survey 2019 want financial service providers to offer a comprehensive online service and the latest technologies for finance management. They want to purchase their products online and on their mobiles, seamlessly and in real time.

Solution: Increased Customer Focus with White-Label Banking

Instead of investing lots of time and money into developing a wide range of products, an increasing number of financial institutions are turning to third-party solutions. However, this often results in a loss of customer confidence and brand value - the major advantages of established providers.

Sophisticated white-label banking products can help here! Developed by experienced technology and digitalisation experts, they are fully functional and use the latest technologies. What’s more, they appear in the name and design of the provider. The customer’s desire for innovative, digital banking products is thus fulfilled, without the need for in-house development and yet with a lot of added value for the respective brand.

Not a financial institution? White-label products make insurance companies, for example, look more professional and improve their relationship with customers. Learn more here!

3. Challenge: Digital Competition Is Always One Step Ahead

Digitalisation, PSD2 and Open Banking have long had one thing in common among established market players in the financial world: they stoked fears that their business world would be stolen by FinTechs. 

It’s true that established financial institutions have a big head start thanks to their wealth of data and trustworthiness. It is also true, however, that many third-party providers are better at meeting the customer needs of digital Millennials and Gen Z and do so in a cost-effective manner.

Whether as comparison portals, online payment methods, innovative banking apps or in the form of innovative house banks, neobanks, FinTechs, Google or Facebook: established providers certainly have to deal with serious competition in the realm of banking!

Find out here how cooperation with other providers creates completely new business models and value chains.


Solution: Cooperate Instead of Competing

The idea of making an enemy your friend is not novel, but that doesn’t mean it’s any less effective. In order to differentiate yourself from the competition, strategic cooperation with third-party providers remains the simplest, cheapest and most effective way of doing so. How are you best making use of your competition?

CTA Whitepaper Open Banking

For some financial institutions, it makes sense to offer the widest possible range of services. A complete digital ecosystem about money-related topics can be built up with various forms of cooperation. This will delight customers as they really appreciate convenient processes on one single platform.

On the other hand, smaller companies can choose to specialise with selected partners and only occupy the interface to the customer at certain points, which means they will be able to provide higher-quality services.

In addition, FinTechs specialising in data create the basis for better understanding customer needs. They also ensure a targeted approach to customers and a data-driven, individually tailored range of services. For customers, this eliminates the need to switch to other providers.

How about digital bookkeeping for your customers, as well as a business account? Perfect! Here’s how it works…

4. Challenge: The Digital Bank Manager

People in the financial world like to talk about technical processes. However, digitalisation also involves a change in corporate culture. It’s true that most financial companies’ software is outdated, but digitalisation also fundamentally changes internal processes. What’s more, new digital products often don’t work intuitively, which quickly leads to widespread rejection across departments.

Solution: Not Only Digital, but Simple and Agile

To help shape digitalisation, employees must not be overburdened and should be allowed to experiment. Jürgen Allerkamp, Chairman of the Board of Investitionsbank Berlin, states that “employees must be allowed to make mistakes.” The internal digitalisation process is made easier for employees through agile cooperation models and products that are easy to implement.

By the way, simple, digital and agile is no longer completely new territory in the world of finance: SKG Bank, a subsidiary of DKB, already offers a seamlessly digital, simple loan application developed by FinTecSystems. Inspired by Spotify, the Dutch group ING now reacts faster to customer requests thanks to agile organisation models. The Frankfurt-based Commerzbank is already following this example. And Allianz offers user-friendly online bank transfers in real time as part of its abracar product.

The success of these rather small changes is down to the fact that they are simple but effective. Customers and employees alike really appreciate this.

Agile, as simple as possible or fast – what is the recipe for success for your digital transformation? We would be happy to support you on your journey towards digital banking. Get in touch!


Schlagworte: technology

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