Digital financial services, already on a path of exponential growth, saw a huge boost as a result of the pandemic. With restrictions on movement and meeting in public spaces, going online – and especially using smartphone apps – really came into its own.
It would be easy to assume that the big players (banks like HSBC, Deutsche Bank, Wells Fargo, and Bank of America) have a monopoly on digitization in this field. After all, surely it’s expensive to create a smooth running digital environment?
Not so. One of the advantages of digital infrastructure is that many services can be bought in from third party fintech specialists at competitive prices. In fact, even the big banks do this to some extent, and it’s an ideal fix for smaller enterprises, credit unions and niche providers.
However, before considering costs, it’s worth looking at patterns and the advantages of digitization. This is also the subject of an article in the Digital Journal1, describing trends and insights from recent research.
Why digital matters in the marketplace
Trends and benefits in digitization should not be a surprise, but the speed of expansion should be taken seriously.
- Smartphones are popular and convenient. They enable complex transactions to be carried out securely where and when the consumer wants. Numbers are on the rise, with a projected increase to 7.3 billion units worldwide by 20252.
- Digital enables personalization, which means providers can focus on the customer experience.
- Digital technologies continue to develop, with aspects such as blockchain and AI offering real potential for better user experiences and greater security, plus improved efficiencies and cost effectiveness.
- Digital services are flexible: individual offerings can be monetized easily, without penalising the consumer – travel money is a good example.
- Digitization can solve problems previously associated with financial services, such as trust, compliance and infrastructure.
These factors have already driven a change in consumer expectations. And despite a residual hankering after “traditional” banking services, many consumers prefer the convenience of digital banking and easy online payments.
Opportunities with digital
The banking sector still struggles with legacy systems. But the beauty of digital is that fintech software can be designed to sit on existing networks rather than replace them. The cost, therefore, is modest in comparison to the benefits.
Additionally, some digital services can be adopted on a sliding scale of capacity, where investment depends on expected volumes of business. Costs can be controlled to reflect likely revenue.
Fundamental to the success of this model is the choice of fintech specialist. Working with the right partner will access expertise and sector specific experience. Digitization can be tailored to the service required and the relevant market. Digital services can complement in-branch customer service, and can be the entry point for selling other appropriate products too.
And none of this requires the bank or credit union to be in the “top ten.” The best fintech specialists are agile and responsive, with a passion for tech that solves problems and brings benefits – whatever the size of business.