More than almost any other sector, the financial industry has been confronted with enormous, almost disruptive change in recent years. The main driver of this change is digitization, which is shaking the long-established business model of many banks and savings banks.
Banks and savings banks are currently fighting a battle on all fronts. They are not only confronted with permanently low interest rates and ever stricter regulatory requirements, but also with changing customer behavior and the introduction of a wide range of new information technologies. Against this background, all established financial service providers are facing major challenges, which may go as far as a complete rethink of their current business model.
In addition, the difficult situation of many financial services companies is exacerbated by the fact that many of them have largely missed the digitalization of their business model in recent years. But digital trends in particular are ideal for increasing efficiency and personalizing financial services. Numerous young, innovative start-ups (so-called "fintechs") have taken advantage of the opportunities arising from the digitization of the financial sector and have developed into new, very serious competitors for the established players in the financial sector.
Traditional banks and savings banks no longer have time to see digitization as a risk. Instead, they must not lose a second to see digitization as an opportunity. We present the five most important digital trends for financial services companies and explain how you can benefit from them.
Mobile banking is, if you will, the archetype of digital trends in the financial industry. Mobile banking refers to the processing of banking transactions via mobile devices. It is, so to speak, the transformation of online banking to mobile devices.
Many banks and savings banks were late in recognizing and taking up the trend towards mobile use of the Internet. While in some areas of the retail trade a significant proportion of purchases were made via mobile devices early on, banks have long struggled with the "mobility" of their business models out of convenience and security concerns.
Not least under the pressure of many Fintechs, who from the very beginning consistently thought and designed their business models to be purely digital and mobile, established financial service providers had to follow suit. In the meantime, a large number of financial services companies have established themselves that offer exclusively mobile banking and do without all other forms of banking.
In contrast to its early days, the functionality of mobile banking is no longer limited to sending and receiving money. Modern mobile banking now includes all the functions that are also available via online banking or a bank branch. In addition to the complete management of their own account, customers can also invest their money via a securities account and have access to all options via a banking app. Even the opening of an account is now completely digitalized with mobile banking. Customers can open a new account within a few minutes using the video ID procedure.
The term "Big Data" is generally understood to mean technologies for processing and evaluating huge amounts of data. The analysis and utilization of large amounts of data is one of the most important drivers of digital transformation. However, while Big Data has played a major role in many industries for years, the systematic analysis of data in the financial services sector is still in its infancy.
This need not and must not be the case, because financial service providers are sitting on a mountain of "digital gold". Hardly any other industry has as much personal and detailed information as banking. Banks and savings banks not only know the monthly income of their customers. They also know what their customers spend their money on, which payment methods they use and how they invest their money.
This wealth of data is a veritable goldmine for the industry, which many banks and savings banks have not yet begun to exploit to the full. Moreover, the amount of data available to credit institutions will continue to grow in the coming years. New (digital) payment and investment options and the ever-increasing use of mobile devices for banking purposes (see the section on mobile banking) will ensure that banks have ever greater access to financial data.
However, in order to fully exploit the potential of Big Data, financial service providers must invest in the right tools. Fortunately, technology for analyzing large amounts of data has made great strides in recent years. Today, banks are spoilt for choice from a wide range of Big Data analysis tools.
These tools allow for the analysis of time series, the identification of trends, finding correlations and segmentation of information. All of these features enable financial services companies to identify new business opportunities, personalize their services and develop targeted marketing strategies.
The personalization of services in particular holds great potential for banks and savings banks. Based on the analysis of millions of customer data and interactions, banks can filter out which services particularly appeal to which customer group in which region. Scattering losses in marketing can thus be significantly reduced. In addition, customers can be directed to the digital offers most suitable for them, enabling banks to significantly reduce costs for locations and personnel.
Robo Advisors are among the latest technological innovations that the digitalization of the financial industry has brought about. A Robo Advisor is an algorithm-based system for the automation of asset management. A Robo Advisor is therefore the digital form of a bank or investment advisor.
Background of the emergence of Robo Advisors are two long-known findings. First: Bank advisors cost money. Especially if they do not use their time efficiently and profitably for their bank. And secondly: Very few bank or investment advisors manage to generate an above-average return for their clients in the long run.
Based on these findings, Fintech start-ups in particular have massively pushed the development and marketing of Robo Advisors in recent years. In the meantime, there are a large number of online banks on the market that have specialized in this field.
Based on the client's risk appetite and investment horizon, Robo Advisor suggests one or more forms of investment that maximize his return. When investing through Robo Advisors, customers benefit from very low costs and an equally low administrative overhead. They can invest and manage their money quickly and easily via banking apps.
There is a new generation of people who are used to Robo Advisor from the beginning of their savings activities. With the exception of asset management for very wealthy private clients, it can be assumed that the veteran bank advisor in his function as an investment and wealth advisor will probably soon be obsolete. For most banks and savings banks, the high costs of personalized investment advice can no longer be justified.
The software-supported method of automating marketing processes (known in the trade as "Marketing Automation") is one of the most important digital trends for financial service providers. The goal of marketing automation is to set up automated marketing campaigns for the most individualized communication with customers and potential customers possible.
The basis for marketing automation is the collection, networking and analysis of large volumes of data (see also the section entitled "Big Data"). Based on this data, you can segment customers and prospects and program targeted advertising measures for individual segments. In addition, Marketing Automation allows you to control and evaluate the marketing measures taken.
Such a to-do list would be almost impossible for your employees to manage. In addition, the wastage caused by manual compilation and implementation of marketing measures would be far too great. Since wastage in marketing can be extremely costly, marketing automation is one of the digital trends with the highest efficiency gains and the greatest savings potential for financial institutions.
A typical example of the enormous opportunities marketing automation offers banks and savings banks is the acquisition of new customers. Ideally, you should acquire a new customer at a young age so that you can accompany them through their (financial) life as long as possible. Probably the easiest and best way to acquire new customers is to win the customer for your bank directly on his 18th birthday. If the parents are already customers of yours, the Marketing Automation Tools in your bank should be able to find the best way to contact the parents of the potential new customer and, ideally, to address their child directly.
However, you can use Marketing Automation not only to acquire new customers, but also to increase the loyalty of existing customers to your bank and sell additional products. Marketing Automation is ideal for delivering personalized value-added content to customers. For example, you can provide customers who are currently looking for a property with a personalized loan offer or draw the attention of customers who have a consistently high account balance to certain investment products.
The world of financial services is becoming more complex every year. While a few years ago, all banking services were still handled through a branch network, the Internet led to the establishment of online banking. The availability of mobile devices finally lifted banking to the next technological level, mobile banking.
These three forms of banking now exist more or less in parallel. Each customer group has a different preference in terms of banking. While many older people still appreciate personal contact in a branch, adults are generally familiar with online banking. The younger generation, on the other hand, increasingly conducts its banking transactions exclusively via mobile banking.
In addition, the fact that customers today carry out their banking transactions in any environment, whether at home, at work or during leisure time, increases the complexity of banking. What's more, most customers expect to be able to communicate with their financial services provider at any time of the day or night through a variety of channels, such as e-mail, chatbots or by telephone.
Against this background, the Customer Journey of bank customers has gained a multitude of access points (touchpoints), which can be both an opportunity and a risk for banks. To be able to offer customers the right information and the right products at all times of the day and in all situations, financial services companies today have to operate what is known as "omnichannel banking". Omnichannel banking means nothing more than the provision of offers and services via different media and touchpoints.
Established banks in particular often have the problem that although they pursue an omnichannel banking strategy, the offers in the individual channels are designed and operated separately from each other in terms of technology and processes. It is not uncommon for customer information to be stored and processed in different databases and systems at banks and savings banks. The logical consequence of this system confusion is that important information is lost at interfaces, causing annoyance for your customers and overtime for your employees.
In order to shape their future successfully, all credit institutions must offer their customers smooth omnichannel banking in the coming years. In the future, customers will forgive their financial services companies fewer mistakes than in the past. Competition in the industry is too great and switching to another service provider is too easy.
Um ihre Zukunft erfolgreich zu gestalten, müssen alle Kreditinstitute ihren Kunden in den kommenden Jahren ein reibungsloses Omnichannel Banking anbieten. Kunden werden ihren Finanzdienstleistungsunternehmen in Zukunft weniger Fehler als in der Vergangenheit verzeihen. Zu gross ist der Wettbewerb in der Branche und zu einfach ist der Wechsel zu einem anderen Dienstleister.
On the one hand, digitization poses many risks for financial service providers, but on the other hand it also offers them many opportunities. Digital trends such as Big Data, Robo Advisors, Marketing Automation and Omnichannel Banking present banks with major technological and process challenges.
Properly applied, however, they can massively increase the efficiency of financial services companies, drastically reduce costs and, above all, significantly improve the banking experience of customers. Established banks and savings banks have no more time to lose, to see digitalization as an opportunity and to make it a reality as quickly as possible. Whoever oversleeps the digital trends of today will be overrun by a wave of innovative Fintechs tomorrow.