The banking ecosystem is in a continuous state of disruption. Traditional banks are trying to navigate the reality with legacy systems and hoping to switch to digital banking. Banking institutions are facing pressure due to rising customer demands for better customer experience.
For so long, banks and fintech companies stood on either side, competing against each other. However, they are fast learning that collaboration might be the key to their success. A joint venture between banking and fintech is the path to long-term growth, increased revenue, and satisfied customers.
Collaboration is the Key for Banks and Fintech Startups
Challenges for Banks on the Offline Road and the need for digital banking
The banking sector has traditionally relied on paper-based processes. Here are a few challenges banks face due to lack of innovation and digital banking:
- Improving customer loyalty — Without a tech-enabled experience, it is challenging to provide convenience to the customer. When banks fail to innovate, they compromise with the services they offer. This, in turn, negatively impacts the loyalty of the customer.
- Resource optimization — Without efficiency in operations, it is difficult to optimize resource usage. Both time and money are assets to any financial organization and a lack of technology hampers a bank’s ability to optimize its resources.
- Personalization — Without data and analytics, personalization is hard to achieve. Therefore, banks face the constant challenge of learning about their customers’ varied interests and behavior when they don’t leverage technology.
- Transparency — Trust and transparency get lost under piles of paper forms and applications. Therefore, banks that don’t opt for digital banking, fail to achieve process transparency and compromise with both employees and customers on the trust front.
- Omni-channel — When customers want to make fewer visits to the branch, it is critical that their interactions with the bank be seamless across other channels. Digital banking can create an omnichannel experience through social media, website and mobile app platforms.
These challenges are not recent events, but banks have been facing them since forever. There was no way to resolve these issues, except by taking the help of fin-tech companies.
Why Legacy Financial Institutions are Under Urgent Pressure
The World Fintech Report 2018 by Capgemini outlines the following reasons why even the biggest banks face pressure today:
- New business models — New trends such as Peer-to-Peer payments and lending, social network scoring solutions, and crowdsourced solutions are pushing legacy financial institutions to innovate.
- Speed and efficiency — As customers demand better experiences, banks are forced to rethink their processes. Fintech startups are making digital banking accessible and convenient. Banks are expected to follow suit. Real-time updates, proactive notifications, alerts, and agile innovation are a part of the enhanced customer experience.
- Transparency — That is something banks cannot achieve with traditional systems. Digital banking is needed to bring in transparency into the various processes. Fintech firms are leading the way by showing cost upfront and offering services at lower costs.
- Personalization — Digital banking is better positioned to offer a personalized experience to their customers by leveraging data and analytics. If banks want to retain customers, they will have to level up their personalization.
- Operational efficiency — Streamlines delivery and product development provide a significant competitive advantage. With a digitally-enabled solution, fintech firms are improving operational efficiency and pushing legacy organizations to innovate and reinvent.
Opportunities for Banks and Fintech Companies
According to a survey by PwC , 82 percent of insurers, asset managers, and banks plan to increase the number of collaborations they have with fintech startups over the next three to five years. And we see various ongoing acceptance from banks to collaborate with new innovation offered by fintech startup players.
Taking example from our own journey, presenting here case in point, Signzy, a platform that helps financial institutions:
- Onboard customers through a seamless process that reduces hassle and friction.
- Scale faster with an AI and ML-based regulatory engine.
- Reduce costs.
- Cut turnaround time.
- Use advanced cryptography to create robust security and data protection infrastructure.
- Leverage a range of white-labeled solutions to drive faster digital transformation.
Signzy is trusted by several large banking corporations such as ICICI Bank, SBI, Aditya Birla Financial Services, Mahindra Finance, Edelweiss, and so on.
Here are a few challenges Signzy’s fintech solutions help banks solve:
- KYC — Banks need their customers to fill out KYC forms with their details. Traditionally, the process used to be paper-based. This meant that any mistake in one form would compel customers to start all over again. Signzy enables bank-grade digital KYC in real-time. An API matches the biometrics of the customer, checks the data in government records, and warns the user of potential document forgery as the customer fills in details.
- Background check — Traditionally, the bank staff usually gather all identity documents from each customer and manually does a background check of the customer information. Signzy offers a simple and digital way to accomplish this. Algorithmic Risk Intelligence allows banks to do a holistic background check, discovering any court cases and legal lists, fetching anti-money laundering related data, checking the UN CFT List and NIA Most Wanted list.
- Contracts — Signzy is replacing physical contracts with digital ones. These come with video and voice verification, blockchain implementation, biometrics, and high performance. Smart contracts are the way to go.
- SME Onboarding — Merchant onboarding is a seamless task with Signzy’s offering that helps clients cut down onboarding time from 2 weeks to a few hours. Features include a mobile link with in-built regulatory rules, real-time document verification, Aadhar-backed contract signing, and AML background check.
- Transaction Banking with Corporates — Signzy’s offerings can help banks automate complex regulatory procedures with AI and robotics to significantly reduce TAT and enhance the customer experience. Comprehensive risk and regulatory checks can help banks mitigate risk in dealing with large enterprises on both liability and asset products.
- Insurance — The insurance process can be simplified and digitized with Signzy’s individual onboarding system. It simplifies the onboarding journey using advanced biometrics and fraud detection capabilities reducing risk and enhancing user experience.
There’s an entire list of solutions that Signzy offers to bank institutions to catalyze their digital transformation journey.
Roadblocks in Banking and Fintech Collaboration
Understanding the opportunity might not be equal to taking action for banks and fintech start-ups. Between varying cultures, different infrastructures, and ever-changing compliances, a collaboration between banking institutions and fintech companies is far from simple. Many opportunities and proposed deals get derailed as a result.
Here are top three things both sides must consider before finalizing a proposed partnership:
- Consider any cultural gap — Make sure that the cultural match is not too challenging. There must be a willingness to adapt by both sides in a partnership.
- Understand challenges — Collaboration with fintech startups can help financial institutions alleviate the major challenges they face.
- Leverage data and innovation — The massive data that financial institutions have by their side is by far their most underused and critical asset. Fintech startups should leverage this data and innovate around it.
The success of collaboration rests with the organizations that can understand each other’s pain points and strengths, and work to improve the customer experience while reducing operational costs.
However, few fintech startups can offer the level of personalization, contextuality, speed, and seamless delivery to help financial institutions achieve digital transformation.
Signzy is capable of doing that. Want to collaborate with a forward-thinking fintech startup that can help you leverage digital processes?
Signzy is an AI-powered RPA platform for financial services. No matter how complex your workflow or operational complexity, Signzy is able to completely automate your back-operations decision-making process into a real-time API. This is possible due to a combination of Nebula — Our no-code AI model builder and our Fintech API Marketplace of over 200+ APIs. Today we work with over 90+ FIs globally including the 4 largest banks in India and a Top 3 acquiring Bank in US. Globally we have a strong partnership with MasterCard and offices in New York and Dubai to serve our customers in the 2 geographies. Our Product team of 120+ people is building a global AI product out of Bangalore.
Reach out to our team: email@example.com
For sales queries: Swati Saxena
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Author: Moni Gupta