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What digital finance will look like in 2020 and beyond

By Robinson Njau | March 24th 2015
Man paying with NFC technology on credit card,at a pharmacy    PHOTO  ;   COURTESY

Kenya: Many of today’s banking customers expect more from financial services providers. Their expectations are shaped by their experiences outside the banking sector, where content, interactions and features may be much richer and more compelling.

They trust their peers more and rely on recommendations to make decisions on whether to buy one bank’s products and services or shop elsewhere.

Brand loyalty is increasingly influenced by peer reviews and social media influencers who are not necessarily financial experts. They are more informed and have access to information on competitors’ services.

With easy access to alternatives, barriers to defection are low. Banks, therefore, must make an extra effort to retain customers by giving them a unique value proposition.

As customer expectations shift, successful financial institutions must use ongoing technological innovations to re-define and refine the customer experience.

Future challenges

Financial institutions face rapid and irreversible changes across technology, customer behaviour and regulation. The effect is that the industry’s current shape and operating models are no longer sustainable into the future. The combined power of these three drivers of industry change (technology, customer behaviour and regulation) is increased by the fact that they are often interwoven.

Banks are facing new challenges, regulatory expectations remain high and attempts to raise fees for basic services are fuelling competition of a new kind. The solution? Retire old business models and focus on profitability that is aligned with the evolving marketplace.

Banks can achieve this by going digital. The inherently intangible nature of banking makes it almost uniquely suitable for digitisation and online delivery.

Last year, PwC conducted a digital banking survey with banking chief information officers across the globe. The survey findings concluded that banks need to make the following digital banking investments to be ready for 2020 and remain relevant to current and future customers:

1. Customer centricity — Entrench a customer-centric culture in customer strategies to ensure institutions move from “doing too much telling and not enough asking”.

2. Consumer knowledge — Boost knowledge of the customer through data analytics and the underlying data governance structures. Customers expect their financial institutions to re-use data in ways that save them time and eliminate duplicate conversations.

3. Multi-channel integration — Optimise all contact processes that enable customers to interact with their bank seamlessly across channels.

4. Social banking — Use social strategies and technologies that deepen relationships with customers, enhance product innovation efforts and reduce operating costs.

5. Mobile banking — Smart mobile wallets, mobile money movement, personal finance management tools and remote deposits will allow customers to transact and help banks cut costs and improve customer retention.

Core banking system challenges and the regulatory environment present the greatest impediments to achieving digital objectives.

Although new features and functionalities help banks meet customer needs, they require adjustments to deliver the digital experience that today’s consumers seek and tomorrow’s customers will demand.

As much as going digital seems to be a rather obvious choice, it does not necessarily mean abrupt disruptions in existing technology. The digital process can be implemented gradually.

The writer is a manager, PwC Kenya technology advisory practice

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