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Banking innovations during inflation

IFM_ Emirates NBD
Emirates NBD's mobile app has become the preferred choice for financial and investment management for retail and private banking customers in the Middle East region

The year 2023 hasn’t been a kind one for the global economy as rising interest rates, persistent inflation (and the resultant cost-of-living crisis), and bank failures in prominent economies like the United States and Switzerland have emerged as key challenges for the financial sector.

Take British banking giant Barclays for example. Due to lower earnings and the resultant cut in its profitability forecasts, the venture is now mulling to make its operations more “cost-efficient and productive”, through structural changes in its business. On the other side of the Atlantic, we have PNC Financial Services, which has launched efforts to reduce its operational costs by $400 million by 2023 end.

United States-based Metro Bank too has launched a multi-million pound cost-cutting drive. The challenger bank will reportedly slash around £30 million in costs a year from 2025 as part of its restructuring efforts.

As per CNBC, The largest American banks are laying off workers right now, despite the country’s economy maintaining a resilient outlook. The only exception here has been the JPMorgan Chase.

“Pressured by the impact of higher interest rates on the mortgage business, Wall Street deal-making and funding costs, the next five largest U.S. banks have cut a combined 20,000 positions so far this year (in 2023),” the media outlet commented further.

While the financial industry may feel the urge to tighten their digital expansion efforts too amid the ongoing economic volatility, it may not be a desired move.

Why so?

As per the Forbes Advisor’s ‘US Consumer Banking Statistics 2023′, majority of the Americans have now embraced digital banking.

“As of 2022, 78% of adults in the U.S. prefer to bank via a mobile app or website. Only 29% of Americans prefer to bank in person,” the report commented further.

Also, one cannot simply deny the positive disruption digital banking has brought into the market, as customers can now perform account-related functions from their homes, while financial institutions, using elements like AI and Machine Learning, can understand their customers’ financial needs in a better manner than before, research market trends and then offer tailored solutions.

To cut the long story short, banks can’t afford to scale back their digital transformation goals. Millennials and Gen Z are preferring banks with sharp digital presences.

“Banks must develop a clear and cohesive strategy to differentiate their digital products and enhance customer experience and innovation. In today’s digital banking landscape, it’s even more crucial that banks find a way to set themselves apart from the pack,” says Peter-Jan Van De Venn, Vice President, Global Digital Banking, Mobiquity, in his article on Global Banking and Financial Review.

While the ongoing economic headwinds may prompt banks to reassess their business moves, halting digital initiatives should not be on that priority list.

“You may not be losing, but you’re not gaining any ground either. Meanwhile, your competitors are running laps around you. Banks indeed need to be extra diligent about spending, but cutting costs shouldn’t come at the expense of serving customers and providing engaging, personalised digital touchpoints,” Van De Venn remarked further, as he noted, “Customers today are more likely to switch banks than they were in the past and digital experiences play a crucial role in their decisions. In fact, four in 10 customers say they would consider switching banks based on digital features.”

Instead of scaling back digital investments, banks should allocate resources strategically. This will help the banks strike the right balance between short-term gains (saving costs during economic headwinds) and long-term growth.

How to do so?

Van De Venn believes that the competition in the digital era has become fierce, with disruptive entities like neobanking platforms and digital wallets challenging the legacy banks with an “abundance of financial options” to the 21st century tech-savvy crowd. The more disruptive solutions these digital ventures offer, the more they stand out from the rest in the domain of digital banking.

In addition to competing with other financial institutions, banks are also being compared to tech giants like Google and Facebook. Customers now expect the same level of service and convenience from their banks as they do from technology companies. But with a clear digital roadmap, banks can create unique and compelling experiences that attract new customers and retain current customers amid economic turmoil,” he stated further.

In fact, Mobiquity research shows that nearly 80% of digital banking features are virtually the same. Van De Venn’s advice to the banks is simple-instead of developing standard features and functionalities, these institutions can efficiently allocate resources by focusing on key areas of differentiation.

“As competition stiffens and the digital service offerings excel, pressure is on banks to provide bespoke value-added features for customers. The challenge for banks is to focus their digital transformation budgets on the 20% of value-added functionalities to enable differentiation from the competition,” the Mobiquity report noted further.

The study suggested the financial sector focus on three key pillars in the form of ‘Customer Experience Strategy’, ‘Digital Products & Services’ and ‘Digital Branding & Marketing’, to make their digital solutions instant hit.

“Truly successful digital products are rooted in human behaviour, emotions and needs. Product building evolves with the product itself, keeping investments under control and focusing on the value the solution brings to customers and businesses themselves. Great products need to be matched with great data-driven marketing,” the report added further.

While features like online and mobile account management, transaction overviews, and card management are integral to a digital banking app, Van De Venn doesn’t advocate banks to build these features in-house, at a time when the market has solutions in the form of ‘Open Banking’, where third-party service providers are getting access to customer data and transactions via APIs, thereby allowing them to offer personalised services and expand their range of financial products. Van De Venn believes this will free up a bank’s operational budget to some extent, which can be used to focus on fine-tuning its flagship products and features.

We already have the United State Bank example, which in the first half of 2023, partnered with digital banking provider, Bankjoy to deliver online and mobile banking experiences for its account holders. The customers now have access to Bankjoy’s end-to-end digital banking platform, which includes a robust suite of mobile and online banking features, integrated loan applications, and other advanced functionalities.

“One size does not fit all in the banking world. What works for one institution may not necessarily work for another. That’s why it’s vital to understand your brand promise — and build digital offerings that align with your unique value proposition,” Van De Venn gave another important tip to the industry, while talking about one of Mobiquity’s neobank customers successfully targeting tech-savvy millennials with innovative offerings, including an augmented reality feature that allows users to project their future bank cards using their iPhones. This unique customisation option has helped the venture carve a distinct identity as a leading digital innovator.

The Vice President of Mobiquity’s Global Digital Banking also asked the banks to align their digital innovations with their business goals. These innovations should be result-oriented, which apart from contributing to a financial institution’s overall brand vision should differentiate it from its rivals. Before banks undertake digital innovation, it’s important for them to define the moves’ goals clearly, apart from determining the Key Performance Indicators (KPIs) of the digital innovations, for monitoring their progress and market challenges.

“By considering your organization’s business goals and objectives — and the technology necessary to support that endeavour — you can create a digital strategy that strikes the right balance between innovation, viability, and profitability,” Van De Venn stated further, while adding that these innovations should give top priority to enhance customer experiences. Successful digital banking projects are those which understand the customer moods and their financial needs in a proactive manner, before charting out the tailored products through leveraging the predictive data analysis method.

21st century customers blend digital banking with in-person experiences. Whether they are banking on the app, online, over the phone, or at a branch, or combining any number of these touchpoints, banks need to provide seamless, intuitive, and personalised customer experiences across channels.

“You can offer options for customers to initiate the account opening process online, upload necessary documents, and then schedule an appointment at a branch to finalise the process,” mentioned De Venn, while advising the banks to set the stage for long-term growth and resilience by maximising the Return on Investment (ROI) on digital initiatives.

“Smart, strategic digital roadmaps focus on areas where differentiation makes a difference and provides greater value for your customers and your organisation,” he commented, while adding, “By identifying and enhancing points of differentiation features, you can create a distinct and compelling digital experience that resonates with customers, strengthens your brand, and captures new business — no matter what’s around the corner.”

Some perfect examples

Let’s talk about Emirates NBD, a leading Middle Eastern bank which serves 17 million customers across 13 countries, which, despite the ongoing global economic headwinds, has been elevating its app into a cutting-edge digital banking service provider. The innovation is consolidating various other solutions like retail banking and deals, under one unified app.

Additionally, the venture has transformed its wealth management services from an offline affair to a fully online one by integrating it into the same app.

Emirates NBD’s mobile app has become the preferred choice for financial and investment management for retail and private banking customers in the Middle East region.

The app, named ENBD X, is a cloud-native one offering seamless performance, user-friendly experiences, and top-notch digital security, apart from emerging as one of the largest array of products and services in the market, where apart from performing routine transactional functions related to accounts and payment cards, downloading account statements, and viewing images of cheques deposited in their accounts, the customers are getting tailored financial products as per their needs.

The digital wealth platform allows Emirates NBD’s customers to trade securities and exchange-traded funds on local and global exchanges, apart from granting investors access to over 11,000 global and 150 regional equities, with the ability to trade on bourses including the Dubai Financial Market, Abu Dhabi Securities Exchange and Nasdaq Dubai, New York Stock Exchange, Nasdaq and London Stock Exchange.

The wealth platform is embedded in the ENBD X. Emirates NBD’s goal is straightforward here, to become a digital-first bank, which will pay attention to its customers’ financial needs and then draft the tailored solutions on a proactive basis. The revamped ENBD X perfectly sits on the blueprint, thereby confirming Van De Venn’s crucial success mantra, “By considering your organization’s business goals and objectives — and the technology necessary to support that endeavour — you can create a digital strategy that strikes the right balance between innovation, viability, and profitability.”

CRDB, a Tanzanian bank, has revolutionised the banking experience in the African country through its digital services. The revamped SimBanking app is now using Artificial Intelligence (AI), integrated with other advanced technologies that accumulate user memories and identify customers’ financial needs.

The app has bagged a number of awards in recent years, for the ability to predict and suggest in advance whether the customers want upfront to simply do transactions.

The app allows customers to choose service arrangements as per their financial needs. The in-built AI also helps the innovation to recognise services the customer prefers the most and direct the latter there, thereby increasing the range of digital services that can be provided at top speed and simplifying transactions. SimBanking app also offers various investment opportunities through its platform, including opening a fixed deposit account, apart from improving the transaction information pattern where customers can easily retrieve the receipt for all dealings at any given time.

The application has also been permitting payments through one-time passcodes. The users can also buy insurance coverage from the platform. As of October 2023, 96% of the lender’s transactions are carried through digital platforms, with the SimBanking app taking the flagbearer’s role.

CRDB is now eyeing to empower Tanzania’s 3.2 million small and medium-sized enterprises, businesses which contribute 27% to the nation’s GDP. Since 2020, CRDB has loaned Sh3.4 trillion to over 50,000 SMEs and raised Sh500 billion through international partnerships.

CRDB is also supporting youth and women entrepreneurs via its ‘IMBEJU’ programme, apart from financing green projects. The bank also launched the $200 million Tanzania Agriculture Climate Adaptation Technology Deployment Programme (TACATDP) at the Africa Food Systems Forum (AGRF) meeting.

United States-based ‘Private Wealth Systems’, a provider of advanced investment reporting and analytics for high-net-worth individuals and financial advisors, has been revamping its digital platform.

The existing user interface and experience reportedly fell short of delivering the sophistication and service quality that the venture’s HNWI customers demanded. Private Wealth Systems addressed the concern by revamping its investment reporting and analytics platform, thereby aiming to create a “more intuitive, visually appealing and functionally efficient system” that resonates well with the venture’s customers’ high expectations.

“Private Wealth Systems is a unique gem in the industry that smoothens friction and makes managing complex wealth delightful. This is a one-of-a-kind wealth management system that is a must-have for any ultra-high-net-worth individual. This transformation has redefined how affluent individuals and their financial advisors interact with investment data, elevating the platform to an essential tool for ultra-high-net-worth individuals seeking sophisticated wealth management solutions,” stated Finextra.

The digital platform is now offering services like account aggregating, portfolio accounting, performance reporting, portfolio management and investor portal, basically covering the A-Z of the financial needs of their core clientele (HNWI customers).

In February 2023, PWS was awarded with ‘Best Reporting Solution’ by Private Asset Management, where the venture was termed as a leader in solving the complexities of managing and reporting on public and private asset classes for family offices. PWS was also shortlisted for ‘Best Multi-Asset Class Portfolio Management System’ and ‘Best Technology Platform for Family Offices’.

During an interaction with the media, Private Wealth Systems CEO Craig Pearson said, “The platform’s capabilities are being recognised more and more as a disrupter in the market. What sets us apart from our peers around the world is our innovation where – in side-by-side comparisons to other platforms – we continue to prove materially greater data accuracy with better processing efficiency than even the largest tech providers.”

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