FinTech adoption among banks is on the rise, a trend we have mentioned before. According to Mckinsey Global Banking Annual Review 2015, banks stand to lose up to 60 per cent of their retail profits to nimble fintech firms within the next decade. Generating a profit of 1 trillion USD globally, banks provide a powerful incentive for startups to grab even a thin slice of business with cheaper and more convenient services.
In our recent webinar, How Traditional Lenders Can Stay Competitive, we discussed that FinTech is transforming the borrowing experience in two ways –
1. By providing a superior, simplified and convenient borrower experience, closing loan applications in as little as six clicks. FinTechs deliver the “mobile first”, omnichannel promise by providing the digital experience that customers are demanding.
2. By leveraging new technologies and automation in the area of underwriting and fraud detection. Many online lenders use new data and offer highly targeted propositions to the borrowers. This enhanced degree of insight enables more innovative underwriting and credit risk models.
The solution for banks and traditional lenders is to embrace digital banking and innovation, providing an omnichannel experience to the consumers. Omnichannel focuses on providing a seamless customer experience that delivers focussed advice, products and service. Banks must also build a stronger connection with millennials, the next wave of banking customers, who are more inclined to trust technology-driven brands. They are already accustomed to targeted offerings from companies that make relevant purchasing suggestions regardless of the device in use, and expect a similar service from their bank as well.
From the bank’s perspective, 360 degree view of all of their customers’ activities offers clear benefits. They can see their existing lending products, spending and income patterns, their savings profiles and by leveraging this information they receive from the various channels, including social media and marketing campaigns, they can build up a detailed customer profile with actionable intelligence.
Banks typically offer several financial products with multiple systems of record, and are unable to provide a cohesive, real-time experience across several channels to the consumers making informed product recommendations impossible. As the number of customer touch-points increased, the IT systems became more complicated. Currently, banks can only digitize 7 percent of their products end-to-end1.
Creating an omnichannel customer engagement requires a fresh perspective from banks – wiping the established ‘offline’ board clean and asking, ‘how can we grow in a digital world?’ Here’s how we think banks can build the omnichannel experience in a 3 step process without impacting business operations.
1. Tactical Solutions: Banks can invest in workflow technology, embrace digital signature, compliance automation software and document management system to get away from manual processing.
2. Strategic Solutions: Banks can invest in the SMAC stack – social, mobile, analytics and cloud to take the borrower experience and actionable customer knowledge to the next level.
3. Transformational Solutions: This involves a complete transformation of the core processing platforms, replacing legacy core processing engine with a cloud-based core processing engine.
However, in order to create an omnichannel experience banks need to partner with FinTech to innovate new product offerings in a meaningful way. Thanks to highly accessible and versatile cloud models, banks can acquire cutting edge systems to get to market quickly that ensure innovative digital experiences for tech-savvy customers.
Cloud Lending Solutions offers meaningful, competitive innovation with measurable results to banks. The CLS Innovation Center was founded to partner with banks and credit unions to utilize the latest in Fintech and create an omnichannel experience in months, not years.
For more information on CLS Innovation Center, we invite you to
download a whitepaper to learn how banks can begin their journey to FinTech innovation. You can also visit the CLS Innovation website and participate in our early access program to leverage the rapidly emerging, industry-wide innovations.
1: Bain & Company: Retail banks wake up to digital lending, 2015