We only need to look at the growth of the fintech market to get an idea of just how big an impact tech innovation is having on financial services.
Developments in technology have made it possible for small firms and start-ups to challenge traditional business models and methods of service delivery in the industry. This is forcing some financial institutions (FIs) to reconsider how they function and engage with their customers.
This raises a question: will the bank of the future bear much resemblance to the established FIs we know today, or will it have more in common with a tech firm?
One company that appears to have taken the latter view is DNB, Norway’s largest financial services group, which is in the process of scaling down its branch network in favor of digital development.
Group CEO Rune Bjerke pointed out that, in Norway, the number of customers visiting branches has declined while use of digital services has “exploded“.
Halvor Lande, head of digitalization and business development at DNB, said: “We already regard DNB as a technology company with a banking license. In order to conquer the competition, our ambition is to become one of Europe’s leading technology companies.”
There are many incentives for banks to get onboard with digital transformation, from enhancing efficiency and reducing costs to ensuring that customers get the same level of technological sophistication from their banks that they are used to in other areas of life.
Then there is the issue of security. A recent study by Cast Research Labs warned that financial services firms open themselves up to cyberattacks if they continue to rely on legacy systems with weak security architecture and “porous code”.
For most FIs, the key question relates not to the wisdom of tech reinvention, but how the process can be managed in terms of cost and practicality. This is a challenge that more businesses will have to overcome during the next decade or so, as technology plays an increasingly crucial role in the industry.