Did you know that the organization with the largest mobile payments user base is not a financial institution but a cafe? According to data the Starbucks mobile application accounts for 15% of the transactions made in its stores. There is disruption afoot in banking and digital is becoming the new banking paradigm.
In the US,Moven has created a mobile-only offering that provides instant feedback on spending in order to help consumers with their finances. Similarly, Bank Simple provides its customers smarter ways to set goals and track budgets. There is nothing new about online and mobile banking. So, what has changed between the traditional and neobanks?
For traditional banks, online and mobile banking was an "add on" channel. But neobanks such as Moven and Simple have built digital businesses from the ground up. Their point of delivery is digital - online and mobile - and social engagement is integrated into their processes.
Neobanks have re-imagined the entire customer journey, taking cues from fields as diverse as social media, airlines, retailers and ecommerce implementations. They have used technology to simplify their products, services, processes and touch points. With digital in their DNA, Neobanks - unlike their traditional counterparts - are architected to withstand cyber-attacks and can therefore manage the online/ mobile security better.
These aspects - the astute use of technology, product simplification and fee transparency - are presenting major challenges to traditional banks. It is only a matter of time before traditional laggards discover that the gap between them and the new banks has become a threat to sustainability. To stay in the race, traditional banks will have to re-calibrate operating models, products, services and IT infrastructure and applications.
The digital offerings of traditional banks depend on their current legacy systems and processes for fulfillment limiting flexibility. According to an IBID report 52% of respondents are concerned that legacy business models are inhibiting innovation. How then are they to keep pace with the new entrants? This article highlights some innovative strategies that can be adopted. Meanwhile, research shows that traditional banks are better off going outside to power their innovation with 72% of survey respondents feeling that new market entrants are driving innovation.
The promise of digital is not limited to new entrants. Traditional banks must become customer focused, map their customer journeys and begin to build products and services that can be distributed, sold and managed in a market that is dominated by digital.
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