The banking industry has been completely crossed over by technology bringing the dilemma of “staying in line” or “staying online”.
Future banking will be driven by analytics and improved data visualization which will be used to predict customer lifestyle and suggest tailor made banking solutions.
Digitalization vs Digitization
- Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities. In other words, it is the process of moving to a digital business.
- Digitizationmeans process of converting data or information into digital format.
The story of digitization cannot be left out without Artificial Intelligence which has proven to be an effective way of automation in the industry. For example, AI is able to handle regulatory processes like AML and KYC as well as design exclusive products for the various customer segments.
KYC and Account Opening
The service delivery implication is that customers will feel comfortable and delighted to bank with their banks at any time. There will be goodbye to tedious account opening processes and onboarding steps.
Ghanaian banks go through the stress of completing head-aching account opening forms and even draw diagrammatic paths to locate their homes whiles sitting at the branch or wherever the account is being opened from. They have fail to leverage on already existing tools like Google GPS and Ghana Post GPS. We cannot compete with Artificial Intelligence. Exponential Algorithm, Block Chain Technologies and Artificial Intelligence are already available and making life easier and better, especially in banking – from account opening to advisory services.
The future of branches
Banks will go virtual with less than 20% physical locations. The few physical branches will have zero (0) staff or a maximum of two (2) staff to provide advisory services. Banking services and products will be more customer centered with extra emphasis on convenience. This is possible through improved data visualization and analytics.
75% of millennials will prefer to see the dentist than visit a branch and hear about regulatory requirement, because visiting a bank hurts than seeing the dentist”.
The future of banks will have a facial recognition that welcomes users immediately they enter any digital branch. A personalized message will be sent to your phone for you to appreciate how personalized your bank can be. ATMS will be interoperable for all banks with variety of financial services including Augmented Reality (AR). Augmented Reality will be used to schedule appointment between a customer and a branch manager or relationship manager where financial advice can be given in real-time irrespective of the customer’s location. At the moment, Google has a voice search functionality in most phones, banks will leverage on this technology to introduce a talk transfer where you only have to mention the name of the person to transfer money to and how much should be transferred and using pin code, facial recognition, thumb print or other biometric functionalities of your phone, you can authenticate transactions. Most bank apps will advise on customer spending once you scan the item you would want to buy and suggest alternatives. The future of banking will be more convenient for the customer, it will be moment of endless keys.
Some colonial banks in Ghana have pilot a full digital branch. “Breeze@EastLegon” (BEL) is a first ever “next generation” digital branch in Ghana with no physical cash management or tellers launched in October 2013 by StanChart.
The millennial is not lazy, but creative. The millennial wants convenience and not confusion. They get annoyed when they’re forced by a bank’s policies and processes to use non-digital channels for everyday banking business.
Traditional banks cannot rely on balance enquiry and disbursing loans only. Balance enquiry to loan application can be done conveniently by the customer anywhere, anytime.
In Ghana, branches are core and e-banking services are termed as alternative channels. The bank of 2030 will make branches alternative channels and digital platforms, the core.
Fintech and Techfin
There will be an innovative use of technology in the design and delivery of financial services. One of which will be Fintech and the other, Techfin
“There are two big opportunities in the future financial industry. One is online banking, where all the financial institutions go online; the other is internet finance, which is purely led by outsiders.” – Jack Ma
Fintech is how companies/bank provide a cheaper and faster service with technology (they are the faster horses). Eg Slidepay, Paypal, UMB speed app, Zeepay
Techfin is how Tech companies provide commerce, trade and convenient financial services by leveraging on its already established infrastructure (they are the airplanes). egWhatsApp, WeChat, Amazon, Google, Telcoms (momo).
Most people know Fintech and how they can be game changers in financial delivery to both the banked and non-banked population neglecting TechFin and how they will smash banks through trade and commerce by leveraging on the elite and businessmen. The good news is that, the regulatory requirement of some countries ensures that both Techfin and Fintechs monies sits with a bank. Sadly, they also decides which bank holds their virtual cash. This thus disadvantage young banks.
E-commerce are now choosing the part of bank they want; the most profitable part. Fintech controls the front end and the interactive part of banking, which is of course the most profitable part leaving the boring part to bankers.
IT and Bank relationship
Today, banks see IT providers as service providers.
- In the next 5 years, IT and digital technology will not be for efficiency but rather for business growth.
- Digital tools will not be seen as a cost to control but rather as an investment to manage.
- The future will not address digital personnel as experts or specialist but as business problem solvers.
- Today’s banks see IT as separable from business but banks in 2030 will see IT and Digital tools as inseparable
In 2017, The Bank of Nigeria licensed its first fully digital bank without a physical location. ALAT by WEMA is a fully digital bank in Nigeria, designed to help you save more. Open a savings account 5 minutes and have your debit card delivered to you. “No long talks”
The Local Competition
An indigenous bank in Ghana has galloped ahead of its Ghanaian competitors with fully automated operations department; a department that held over 20 staff. This has led to a complete shutdown of their Operations Department and part of their Treasury Department with re-assigned roles; mostly into sales and IT.
This bank has changed its strategies from generating CASA (Current Account and Savings Account) to transactional activities and complex financial transactions like government bonds. Staff financial targets are measured based on transactional activities a customer performs. Staff of this bank has the option of bringing CASA or increase clients’ transactional activities or do both.
The future of the banking industry will be more exciting and satisfying if only banks will leverage on the power of customer insight, advanced analytics and digital technology to provide services that help today’s tech-savvy customers manage their finances and better manage their daily lives.
Challenges
Everyone wants to hear a good news but digitization come with a whole lots of challenges. Some of these challenges are listed below
Security and threats (The mystery of the dark web)
The Dark Web is an economy that is fast growing in the world. It is a place for financing terrorism, money laundering and hashing of credit and debit cards; where buyers and sellers meet and they are rated for their services. This economy has been fueled due to online payment and use of bitcoin which is hardly regulated. This is an economy that will take the banking industry and the world by surprise. A lot of hacked debit/credit cards are readily available for sale in the dark web. This can however be mitigated through strengthening IT infrastructure and security. Most banks will try cloud technologies and move away from server blades and other physical infrastructure since that is more scalable and cost effective in the long run. Whichever your style may be do not compromise on security with the excuse of cost cutting.
Social Engineering
The increasing demand and implementation of technology will give breed to hackers. As secure as systems may be, hackers will use social engineering techniques to siphon huge sums of money from clients.
Social engineering is the use of deception to manipulate individuals into divulging confidential or personal information that may be used for fraudulent purposes.
Social engineering is currently on the rise in Ghana. People receive strange calls and text messages every day and their electronic cash including mobile money account are being wiped out.
So as IT systems are strengthened, there is the need for constant engagement and education to both the client and staff on how to stay alert for this security breeze.
The 4P’s of digital transformation
- People:
Whether a bank will succeed with digital digitization or digitalization it all depends on people. Some colonial banks in Ghana have pilot a full digital branch.
“Breeze@EastLegon” (BEL) is a first ever “next generation” digital branch in Ghana with no physical cash management or tellers launched in October 2013 by StanChart.
People are affected positively or negatively with digital transformation.
Challenges
Digitization will results in change of roles whereas Digitalization (Process Re-engineering) results in loss of jobs.
Opportunities
There will more specialized jobs like IT Business Professional (IBP), Process Engineer, Mixed Experience Reality Design, Digital Marketers, Systems Analyst, System Auditors (CISA/ISACA), Data Scientist, Universal service advisors, Algorithm Mechanic etc.
Every industry is being digitalized and banking sector is no exception.
Banking in the next 5 years will require more of data scientist and data analysts for improved reporting and data visualization.
- Process
Digitalization will results in improved process. This will ensure better delivery of customer service. The process must align with business strategies.
Challenges
If the process fail to align with business objectives, the entire transformation will be useless. This will result in the closure of digital brand.
There is therefore the need to involve the Business Team, Risk Team, Together with 2 high profile clients to complete the process. Banks must have Lean Six Sigma expects to help with the process.
Opportunities
Better delivery of service to the elite.
- Platform
Most banks are trying cloud computing because of its agility and scalability that enable today’s business to compete.
Challenges
Migration loss. There is the likelihood of data loss which can cause banks huge sums of money.
The way to avoid this is through good IT Governance.
Opportunities
Flexible and agile system which is scalable and cost effective. Improved security features and bandwidth. Better service delivery.
- Product
Banks will have targeted products and services for the customers through data analysis and improved digital visualization.
Challenges
Specialized skillset is required for such roles.
Opportunity
Customer loyalty and retention.
Through data analytics and customer relationship management solutions, banks will come to learn a lot about their customers to the extent of predicting their financial services needs. These predictions can be made accurate through data mining and collaborations with other institutions within and outside of the financial services industry such as credit reference bureaus, telecoms companies, social media and e-commerce institutions and other big technology companies such Google.
IT Governance vs. Corporate Governance
If we all agree that bad corporate governance can lead to misappropriation and embezzlement of funds, then bad IT governance can do worse.
There is the need for African Banks to improve I.T engagement and structured IT governance processes. At the moment, most banks synergize business with I.T though computers and servers. There is therefore the need to have a structured IT governance to be a mediator between systems and Business. The banks of 2025 will require experts with good I.T governance background to have policies and procedures to govern IT and business in financial operations.
The Bank of Ghana and other bank regulators in Africa will need to put in place strong technology supervision team that will keep and stay ahead of developing trends within the industry. IT Governance will become paramount and various directives and guidelines will be introduced to ensure its effectiveness. There is therefore the need for IT governance committees and IT steering teams among banks in Ghana.
Conclusion
The future of the banking industry will be more exciting and satisfying if only banks will leverage on the power of customer insight, advanced analytics and digital technology to provide services that help today’s tech-savvy customers manage their finances and better manage their daily lives.