5 advantages of digitalisation in the banking sector

24 september, 2019. – Digitalisation has created a new scenario full of opportunities for all industries, generating a radical impact in many sectors, as in the case of banking, which has been one of the first to initiate a profound process of digital transformation. In spite of this, according to Vector ITC, the Spanish technological and digital group, nearly 40% of the main global banking entities had not yet proposed a digital transformation strategy by the end of last year.

Digitalisation in the banking sector opens up a whole world full of possibilities both for the institutions themselves and for consumers. Until recently, it was almost impossible to obtain credit online or for there to be banks that only carry out transactions through their mobile platforms. Today, the trend towards digitalisation is increasing. So much so that digital banking is expected to generate about $8.646 billion by 2025, with a Compound Annual Growth Rate (CAGR) of about 3.8% between 2019 and 2025.

The digital transformation is a process of constant technological evolution, where companies must be up to date in the tools available for the improvement and efficiency of processes to achieve greater profitability, such as Big Data or Machine Learning. That is why it is essential to determine the benefits of digitalisation for banking institutions. In this sense, Vector ITC points out the following advantages:

1. User experience: The advance of digitalisation has enabled institutions to improve the user experience in a comprehensive manner and to improve omnicanal banking in its evolution towards a customer-centric model. This implies having analytical technology solutions to offer products and services tailored to users. To do this, it is necessary to take into account the knowledge of their preferences, purchasing behaviour and attitudes to risk and financial health.
2. Increase in the number of clients: Faced with the loss of confidence by traditional banking and the growth in the use of banking apps and online banking by consumers, financial institutions have recently increased the number of customers. With the emergence of Fintech in the sector, it is clear that banks will have to change the way they conduct their business in order to avoid losing customers.
3. Greater efficiency in processes: With the implementation of different cutting-edge technologies such as the electronic signature or the creation of banking applications for the smartphone, banks aim to improve the efficiency of their manual processes. In this way, they seek to reduce human errors in dealings with customers. According to the company, it is estimated that correcting this type of error is usually between three and four times more expensive than creating a digital process. Digitalisation in the processes grants very important improvements, since all the data and signatures are captured correctly the first time.
4. Cost reduction:Another advantage of digitisation in banks is cost savings, both for institutions and customers, through the use of new means of payment and cashless transactions. An example could be Challenger Banks, which are those Neobanks that have a banking licence to offer savings products, financing and cards in the same way as a traditional bank, but with a 100% digital operation.
5. Better decisions based on data: With the increasing digitalisation of banks, data becomes one of the most important assets when making dynamic decisions, based on large volumes of information available to institutions. Technologies such as Big Data allow banks to base their decisions or improve processes on the data available to their customers. In recent times, the arrival of large technology companies has been a great challenge for banks, as they have a greater amount of data and have a deep knowledge of the technological solutions they offer.

“We are living in very dynamic times in which the appearance of new technologies such as Big Data, Blockchain and Artificial Intelligence will drastically modify the relationship between banks and their clients. In this sense, digitalisation plays a vital role, being the necessary lever to achieve more efficient internal processes and to obtain and retain as many customers as possible. The financial entities that do not adapt to these times, will have a great challenge ahead,” says Rafael Conde del Pozo, Director of Digital & Innovation of Vector ITC.