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Digital transaction banking
Opportunities and challenges
Digital adaptation started off as an option but has evolved into a necessity in every bank’s agenda around the globe as end-clients – consumers, businesses, and governments – are quickly adopting trends cascading from the technology sector in their IT capabilities, business operations, and business models.
The transaction banking space is evolving at an intense pace as a result of digital disruption, increased customer expectations and the profusion of new digitised products and offerings. While banks may take comfort in their incumbent advantage, technologically-enabled non-bank challengers have been ramping up their capabilities and are notably stronger today, challenging the privileged access and relationships transaction banks have historically enjoyed with their customers.
Recent research suggests that banks in the region have been largely focused on developing innovations and improving existing solutions internally. This internal focus may not suffice in addressing rapidly increasing end–customers’ demand for digital functionality and cost-efficiency. Sensing the growing demand for technological capabilities, emerging alternative non-bank players – more commonly known as Fintechs – are beginning to transform the financial sector. They are doing this by revamping offerings and solutions across the digital landscape creating disruptive products or services, and enabling customers to do more with less.
This presents both opportunity and challenges for banks. Can they rely on traditional, inside-out innovation practices to sustain them? Or should they partner with Fintechs to build new digital capabilities? Or will Fintechs disrupt the banking industry, addressing end-customers more effectively and overcoming the banks’ incumbent advantage? It is inevitable that banks will need to ramp up investments in their digital agenda, but many alternatives exist that may be more effective than approaches used in the past.