How digital transformation is shaping modern banking experiences
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Long before the COVID-19 pandemic and its consequences, it was already clear that the future of banking was without a doubt digital. However, in the past year the number of people moving to alternative online solutions has been increasing with unprecedented speed.
In other words, while the destination and the route have remained the same, the speed with which customers move and adapt has accelerated tremendously.
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Mobile banking as the 2nd most important factor in bank selection
A quick look at 2021
Reporting on the state of Fintech at Q1 of 2021, CBinsights called the quarter “one of the largest on record across deals, funding, exits, and mega-rounds”. Indeed, the $22.8B funding boom at the Fintech scene in Q1’21 is a clear indication of what is to come. As a reminder, in 2018 (all 4 quarters combined) Fintech companies raised $39.6B globally.
This $22.8B is a result of 614 individual deals, setting a new record in Fintech history. Additionally, this growth was shared in all continents with the exception of Africa. In Europe specifically, the deal activity surpassed Asia, with a whopping 180% QoQ growth (source). More importantly, By mid-2020, 25% of all banking app downloads were digital banks, up from 1% in 2017. (source) Looking at the current numbers available, Revolut is a prime example of a new-comer taking a huge percentage of the market share (see UK, Europe, and global examples). According to Nikolay Storosky CEO and founder of Revolut, the number grew exponentially in 2020/2021 (In June 2020, Revolut registered 12 million users), mentioning a noticeable increase in the number of users belonging to the older demographics (video interview given at this event). It is important to note that this is despite the fact that according to Storosky, initially during the pandemics transactions dropped 40%, as a consequence of travel restrictions, low cross-border payments, and unsure financial stability.
What makes the difference between thriving and not?
This is certainly a complicated question to answer, with multiple perspectives offering different possible explanations. The aim here is not to dive in every perspective, but to point out the factors that are shared, no matter which point of view you ascribe to. Also, obvious answers such as “cheaper solutions” or “better customer service” which usually just mean “by being better” are not considered here.
“The digital revolution is disrupting the relationship between banks and their clients and new features continuously appear to enhance customer experience” This is what Deloitte wrote in a 2017 report examining the digital banking scene. The most important part of the sentence comse at the very end: “enhance customer experience”.
The report continues: “In an environment composed of fully-digital banks, FinTechs, and non-traditional competitors, banks struggle to deliver innovative functionalities and are still hesitating about the key priorities to pursue.”
While banks certainly have been offering online capabilities for years now, what seems to be holding them back is the overall experience they create for their customers. This is infact shared with many other industries, as the general trend seems to be “catering to experience-centered users”. In the same report by Deloitte, the authors claim “A new experience-centered generation, with higher expectations and lower royalty appears, pressuring banks to review their online services.”
This sentiment was shared by Revolut’s CEO Storosky, who during the aforementioned interview called their biggest endeavour “adapting to the new way people behave”. Speaking of the new way people behave, it is important to remember that by 2020, the average user already had 2.5 finance apps installed, with the global payments reaching USD $1.390 billion (source). Almost every interaction between banks and their customers is “transactional” (in a broad sense of the term, and not limited to monetary transactions). This means, there is not much of a “conversation” between the platform and the users, as they only use the service when they need a specific action to be done. In these mostly-transactional relationships, what can make or break the relationship is the experience of the user while trying to perform the desired action(s). Furthermore in these cases, user journeys are key factors in defining the overall experience - as there is not much “conversation” between the users and the platform.
Creating seamless user journeys and better experiences
In June 2020, World Economic Forum claimed “New technologies will drive banking transformation over the next 5 years.” This was based on a survey conducted by Temenos and Economist Intelligence Unit (EIU), where 66% of participants cited new technologies as having the biggest impact in banking over the next 5 years.
More specifically, the World Economic Forum writes “One technology which has seen increased demand both from new entrants and established banks is Cloud and Software as a Service (SaaS). It has low infrastructure costs, lets products be created and changed quickly, and offers resilience, scalability and security.” While these benefits are great on their own, their real value is in enabling banks to offer better user experiences.
Before going into more detail, this is a complete list of the trends that according to the World Economic Forum will shape the future of banking digitalization:
- New SaaS and cloud-based technologies
- AI and IoT capabilities
- Digital ecosystems model - achieved through SaaS and API-first solutions
What can we learn from this list? The key here seems to be creating seamless user experiences through SaaS solutions.
Digital experience management through SaaS solutions
Managing digital experiences requires a host of tools and strategies. However, the backbone is always your content management system, or your CMS.
Let’s take a quick look at how a SaaS CMS, and more specifically a headless CMS, addresses those 3 major points introduced before:
1. New SaaS and cloud-based technologies
Modern “headless” systems are by definition API-first, and are categorized as SaaS. These systems function by getting rid of the constraints of traditional CMSs, and prioritizing customized user journeys, omnichannel distribution, advocating a best-of-breed approach, and working towards shorter load times and better security.
A headless CMS allows you to integrate any new technology to your current stack immediately. This is in stark contrast to many traditional solutions which come as an all-in-one suite and heavily restrict your choices. This is why World Economic Forum sees the API-first solutions as the leaders in the future of banking digitalization.
2. AI and IoT capabilities
In the survey conducted by the Economist Intelligence Unit, 66% of respondents picked out AI, machine learning, and IoT as the “Trends with the biggest impact on banks by 2025”.
Looking at IoT, an API-first CMS easily outperforms its traditional counterpart. These modern CMSs offer simultaneous publication of content on any number of devices and platforms (including smart watches, AR/VR headsets, IoT, and more). By getting rid of multiple content silos and switching to a centralized content hub, managing content for IoT is as simple as any other device. By taking advantage of APIs, these modern solutions treat every single frontend (computers, phones, tablets, IoT, etc.) in the same way, resulting in a true omnichannel experience.
Likewise, taking advantage of AI capabilities can be much simpler when using an API-first CMS as the foundational building block of your technology stack. One perfect example is how these systems take advantage of AI to make Intelligent Content possible. Intelligent Content is used to describe multi-purposed, adaptable, and streamlined content which has a profoundly different approach from its traditional counterpart. As a general rule, it includes moving away from tedious micro-managing that requires individual human input, into a data-driven and automated form of content creation that takes advantage of the recent advancements in artificial intelligence and machine learning, while incorporating individualized human perspective.
By using APIs to deliver content back and forth, modern headless CMSs can be easily integrated with other tools that can help you take the most out of AI technologies.
3. Digital ecosystem model
On this point, the World Economic Forum writes “While mobile brought banking into everyday lives, ecosystems integrate our everyday lives with banking. They bring many key elements of modern banking technology – such as cloud, explainable AI, and open APIs – together into one seamless user journey.”
The heart of any ecosystem is its ability to create and publish content across different platforms, while keeping the user data in a centralized place (avoiding data scatter). While this 3rd point is more about strategy and philosophy than a tangible matter, it is still heavily dependent on the CMS and its abilities.
Just as in a technology stack, a digital ecosystem is heavily dependent on its CMS as the binding force between every branch. Employing a CMS that can be easily integrated with other tools, and also advocates an omnichannel-friendly approach to content, is an incredibly important step.
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User experience: The problem, the solution
As reported by the sources mentioned throughout this article, a seamless user experience is one of the major reasons why alternative financial solutions such as Revolut have been so successful in growing so quickly, and taking a portion of the traditional banks’ revenue.
Perhaps due to their already-established foundation and seniority in the scene, many traditional banks have not yet made the change to a modern CMS solution that pushes for a best-of-breed architecture, prioritizes omnichannel user journeys across platforms, and takes advantage of AI capabilities. Interestingly, these modern solutions also have the potential to help with tighter cyber security and shorter loading times, 2 major factors in customer satisfaction.
The good news is that unlike traditional CMSs, a migration to a headless CMS is surprisingly quick and light. This of course depends on the size of your operations and your resources too, however in general there is a clear distinction.
Fundbox initially migrated from a traditional CMS to another traditional CMS. The process took 4.5 months. After realizing that a modern Headless solution was needed to create better user experiences, they migrated from their traditional CMS to an API-first CMS. This time, the migration only took 5 weeks! Read more about their story here.
If you are interested in learning more about API-first headless systems, download our free whitepaper Headless CMS - How Does it Solve the Content Problem? - you can find all of our free resources here.
If you have any questions, or are wondering if an API-first solution is the right choice for you, feel free to contact us here.
