How Can FIs Fulfill Changing Consumer Needs Through Modernization?

In today’s fast-paced and digitally-driven world, consumers’ expectations are evolving at an unprecedented rate across a variety of spheres. Even financial institutions (FIs) face the pressing challenge of matching the shifting needs of their clients to remain competitive in the market as technology continues to advance.

Due to the fact that traditional banking practices are being disrupted by innovative FinTech solutions, we are seeing more and more institutions actively reevaluating their strategies. This article explains which actions can help FIs enhance their relevance, attract and retain customers, and ultimately drive sustainable growth by embracing modernization - read on for all the insights!

How Are Client Needs in the Financial Sector Evolving?

A growing number of consumers worldwide are embracing the Indian model of mobile-centric transactions, relying on their smartphones to directly access their current accounts.

For instance, this trend is evident in China, where individuals often prefer utilizing “digital cash” stored in platforms like WeChatPay. Although this digital currency does not physically exist as liquid funds, it serves as a medium of exchange for goods and services between users.

Besides, in Europe, there are early indications of a similar shift toward mobile financial operations. In fact, mobile wallet transactions, including those conducted using both card-based and alternative payment methods, are projected to experience a 10% growth in the coming years. Additionally, instant payments are expected to grow by 14%.

However, it’s worth noting that debit and credit card transactions maintain relevance and also continue to witness significant growth, increasing by around 7% across Europe.

On top of that, modern clients expect highly personalized financial services that cater to their specific needs and circumstances. They seek tailored advice, customized investment strategies, and personalized product offerings.

Finally, customers nowadays are interested in having access to a broader range of financial products and services that feature robust security measures.

Is There an Evident Demand for Modern FinTech Solutions?

It is clear to see that the global banking landscape is undergoing substantial transformation. Yet, many of the world’s largest financial institutions still operate payment systems that are 20 or 30 years old and were designed in the previous century to address business challenges of the past.

The fact that such legacy systems are still in operation today, often forming crucial national infrastructures processing millions of transactions daily at thousands per second, is a testament to their robustness, well-thought-out design, and effective maintenance.

However, they also often possess heavy customization, relying on proprietary hardware stacks, written in older programming languages, and structured within functional silos. Due to this, the costs associated with maintaining these systems are escalating, and their risk profile is increasing as the market encounters challenges in finding the necessary resources and skills to support them.

While there are often multiple location-specific challenges preventing FIs from allocating enough funds to modernization practices, such as regulatory requirements and economic factors, it is crucial to recognize the potential benefits and value that can be unlocked through strategic investments in optimization efforts in the FinTech sphere.

How Can Financial Institutions Adjust Their Operations?

First and foremost, it is crucial for FIs to adopt a digital-first mindset and invest in technologies that enable them to deliver seamless online experiences to customers. This should extend to all aspects of the organization, from customer-facing processes to back-end operations, including developing user-friendly mobile apps, online banking platforms, and self-service portals.

In addition to that, FIs can take several other strategic actions to fulfill changing consumer needs through modernization, namely:

• Enhance personalization. Modern FIs can leverage data analytics and AI to gain insights into customer preferences and behavior. With their help, FIs can offer personalized recommendations, tailored products, and targeted marketing campaigns for more engaging and relevant customer experiences.
• Improve accessibility. FIs nowadays should be able to provide multiple channels for customers to interact with their services. This includes offering online and mobile banking options, self-service kiosks, and support through chatbots or virtual assistants. With such convenient and accessible channels, FIs can cater to the diverse preferences of their clients.
• Streamline processes. The FI’s modernization agenda should involve streamlining and automating internal processes to improve efficiency and reduce costs. This can include optimizing account openings, loan applications, and client onboarding. By reducing manual work and bureaucracy, FIs can deliver faster and more efficient services to their customers.
• Enhance security. With the increasing frequency and sophistication of cyber threats, FIs must prioritize their security efforts. This includes implementing robust security measures like encryption, multi-factor authentication, and advanced fraud detection systems. FIs should also educate customers about cybersecurity best practices to protect their funds and data.
• Embrace collaboration. FIs can partner with innovative service providers in the financial sphere to accelerate their modernization efforts. Collaborations with forward-looking FinTech companies will allow them to leverage the partners’ expertise and creative approach while maintaining their established regulatory compliance and customer trust.
• Develop a data-driven work culture. Modern financial institutions should establish corporate cultures where data is viewed as a strategic asset. By investing in data management and analytics capabilities, FIs can make informed business decisions and uncover new insights that drive customer-centric strategies.

By focusing on these key areas, financial institutions can adjust their operations to meet the evolving needs of their customers and the changing landscape of the industry.

Final Thoughts: Flexibility Is Key to Thriving in the Digital Age

Now you have a solid understanding of the reasons why the need for modernization is inevitable for financial institutions that wish to meet the evolving expectations of their customers and have an idea of which actions can be undertaken in this regard.

However, there are a few more nuances that are crucial to remember to remain successful in the highly competitive financial field. First, it is important to keep location and target audience peculiarities in mind to adequately prioritize system optimization efforts.

This means that cultural and demographic factors, infrastructure, connectivity, regulatory environment, and local costs must be taken into account when developing a modernization approach for any financial institution.

Second, it is critical to stay agile and adaptable in today’s digital age and be ready to adjust both short and long-term strategies in response to further changes in consumer behavior, preferences, and needs.

Finally, it is essential to continuously invest in employee training and upskilling to empower them with the necessary skills and knowledge to embrace new technologies, adapt to changing roles, and contribute to the organization’s growth.