Moving From Traditional Banking to a Digital Banking Ecosystem

Digital Banking Ecosystem

The use of information and communication technologies in the banking sector has increased significantly over the last decades. The banking industry has spent significant funds to improve the financial services provided, introducing new technological tools and services available to its customers. As a result, this sharp shift toward the use of technology and evolving fields like fintech in digital banking transactions has dragged the traditional business models of banks into a radical overhaul, especially in the financial services sector which has been significantly digitized.

Digital banking can be extremely competitive as the internet market includes providers from all over the world. This means that a bank needs to target the customers that are the best fit for it and offer them clear benefits. Customer segmentation can help her identify the best audience to target so she can better customize her products. In fact, leading businesses develop customer segmentation that goes beyond demographics and product interest. These businesses often look at common beliefs, goals, behaviors, and buying drivers for each industry. Such factors can evolve over time, so active segmentation is essential as banks develop unique targeting strategies and services that coordinate with them.

The rapid transition to digital payments varies between countries and depends on the rate of decline in cash usage. It is also affected by the adoption of e-commerce and how active Big Tech companies are in providing payment services. In China, mobile wallets are rapidly replacing cash payments. 76% of transactions in 2019 came from digital wallets, up 12% from 2014. Consumers in China are already accustomed to using mobile apps and QR codes to pay in restaurants and shops for many years.

The advent of new players and the impact on the financial ecosystem

New business players, whether financial or non-financial companies have already entered the markets of established banking companies. They offer more efficient services with ever-increasing quality. What has been observed is that customer relationships with banks and employee workloads have changed with the use of digital technology. This is constantly affecting customer service performance. In addition, the digital mobile banking ecosystem has enabled banks to do business without physical stores, structures, and technical resources. This is directly related to the application of effective digital media in digital banking. This shift seems to be creating a new era in the banking sector, which has an impact on the labor future of the industry.

Despite the huge investments in IT infrastructure, there are no clear indications of an increase in the productivity of banking employees. The new digital banking ecosystem is an easy and efficient way of handling users’ affairs. This has a significant influence between this variable and the acceptance of digital banking. On the other hand, the electronic experience of people who are not familiar with the use of technological means. Thus this has a negative impact on the acceptance of digital banking. On top of perceived usefulness and ease of use, there is a number of other variables that need to be considered for accepting digital banking. (Hakim Suhaimi & Bin Abu Hassan, 2019)

digital banking competition
Transforming internal and external procedures

Based on the above, there are two main points that help a credit institution to transform its processes and services. These two main shifts help the institution achieve a complete digital transformation. The first is the technology and its application in a wider range of internal and external processes. The second is the constant update and search for innovative solutions. They are drawn either from the rest of the market or from the space work of the banks. It is achieved through consultations and research of its employees and executives.

Transformation into a credit institution is recorded as follows (Brunnermeier, 2019):

  • Internal procedures: These are the processes used for collaborating sectors of the business with each other or independently 
  • External procedures: They concern processes, products, and services that they involve third parties outside the company.

Despite the fact that digital transformation has become a necessity nowadays, there is a strict pattern in which digital transformation is implemented in practice. All in all, this digital transformation has much to offer. There is a lot to be developed and expected from this revolutionary transformation system.

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