• Sabrina Akramova, Managing Editor at Financial IT


• 09.06.2022 08:00 pm
#banking #bigtech #omnichannel

Tech giants do banking better than banks

With a turbulent period of time behind, financial ecosystems adapted to new requirements and became digital. As fintechs are developing rapidly, omnichannel digital banking and shopping surging, and consumers have more banking options than ever.

The main goals of fintechs today include the offline banking barrier elimination, improving customer experience, attracting leads, and reducing operational expenses. As a result, the need for personalized client care as a key to every retail banking strategy is growing on a daily basis. But the progress does not end here: financial institutions and fintechs must stay up with digital channels and client demands. 

What is omnichannel banking exactly?

One of the latest trends in digital banking industry is the rising demand for seamless omnichannel banking experiences, which means that customers want to do the same banking procedures online, by phone, through a call centre, or in a bank branch. 

Outstanding omnichannel platforms are expected to provide real-time data synchronisation and flexible banking services. As customers want to start their onboarding experience with one single channel and complete it with another, there should be no repeating information. 

Many banks have begun the digital revolution from in-branch, single-channel banking to apps, phones, and online. Though, they typically lack connectivity across channels: interruptions and obstacles in the customer journey are frustrating and may send leads elsewhere. 

Apple and other digital giants, on the other hand, offer straightforward, easy-to-use financial services. Moreover, in the digital age, customers take it for granted, so banks realise they must work harder to transform multichannel offerings into omnichannel banking.

Omnichannel vs multichannel 

The difference is integration. Multichannel means that financial services and banks must provide services through several channels, such as in-branch, ATMs, contact centre, online banking, and mobile, although they don't necessarily operate together. Each channel works independently and provides distinct services. 

Omnichannel emphasises interactions over transactions. Omnichannel puts the consumer first, giving a tailored, seamless experience. Connected channels allow customers to readily obtain information from any channel. 

Can banks still regain control over the market?

Well, sort of. As big techs have diversified in recent years, they overtook market leaders. With open banking, they're targeting the finance industry. BigTech's development into financial services began with payments and proprietary systems, then added firms and services. BigTechs' key services include payments. 

Digital payments are a development sector in financial services, and several BigTechs had existing platforms to offer digital payment services to a wide user base (for example, Facebook Pay). Amazon and Alibaba originated as e-commerce platforms, so expanding into payments was a natural step. In some jurisdictions, payments regulation has supported new entrants for years, allowing BigTechs to enter. 

In addition, they have developed proprietary banking systems and bought fintech startups. BigTechs spent over $2 billion in fintech businesses in 2020, with Google’s Alphabet making 23 investments. 

Big banks must adapt quickly to compete with new digital companies. Tech companies have more development capacity, are better positioned for innovation, and have enormous user populations, but banks have client trust.

Key benefits 

As omnichannel banking is about integration, the key requirement is the system’s ability to support several channels and switch between them without disruption. It does not necessarily mean that digitized banking channels should be deprived of provide face-to-face human interaction. The main benefits of omnichannel banking include:

• Problem-solving speed. By conversing online, issues can be resolved more efficiently and rapidly than in-branch. 
• Cheaper support. Digital solutions like chatbots can address simple customer support enquiries, allowing professionals to focus on more difficult issues. 
• Personalization. As one-size-fits-all banking no longer works, a hybrid customer journey alternating between digital and in-person enables flexibility and adjusts to client needs. 
• Increased customer satisfaction. Faster, more personalised service increases customer happiness and loyalty. Customers who obtain what they desire are more loyal.

Staying away from cybercriminals  

Omnichannel is the future, yet it has drawbacks. As long as staying ahead of cybercriminals is a full-time, complicated endeavor, banks must consider these security issues: 

1. As demand for digital services rises, banks must secure their mobile channels using biometric solutions like fingerprint, voice, or facial authentication, tokenization, or extra passwords and PINs. 
2. As cybercriminals create increasingly sophisticated devices, ATM skimming is still common and difficult to detect. Banks still face card and cash entrapment and ATM threats. 
3. Banks prioritise channel innovation. 61% of bank executives believe a customer-centric business model is vital, and banks are investing in this transition. To maintain security, they must monitor consumer activity, social media platforms, and future changes. 
4. Businesses can develop a comprehensive security defense with the proper solutions. This will assist balance robust security and easy customer transactions and interactions.

Final thoughts

BigTech enterprises are becoming key financial service providers, especially in emerging nations. BigTechs use platform-based technology to enable payments and have moved into lending, asset management, and insurance. They collect nonfinancial and financial data and customer data from across their organisation (such as via social media). BigTechs use big data for underwriting and machine learning for pricing and risk management across many financial industries. 

Financial firms rely more on BigTech to host core IT systems (for example, cloud-based services, which have the potential to improve efficiency and security). This rapid rise of BigTechs in financial services and their interconnection with financial corporations may create new systemic hazards. 

At this point, traditional banks are struggling to compete with BigTechs in terms of offering omnichannel banking experiences. Although the probability of traditional banks regaining full control over financial market seems impossible, they still can attract new customers if they digitize and offer diversified services.