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Navigating Digital Disruption: How Banks are Adapting and Innovating in the Changing Landscape

Digital disruption has revolutionized the banking industry across the globe. Driven by advances in fintech enabled by automation, it is changing the way banks interact with their customers, process their transactions and make decisions.

The banking industry has seen a surge in the use of digital solutions such as mobile banking, online banking and automated customer service. Mobile banking has allowed customers to access their accounts and transfer money anytime, anywhere. Online banking has enabled customers to manage their accounts more easily and securely. Automated customer service has reduced the need for customer support staff, allowing banks to save time and money. Furthermore, digital disruption has allowed banks to offer new services such as online payments, digital wallets, mobile payments and cryptocurrency.

With the advent of new technologies such as blockchain, machine learning, and artificial intelligence, banks are now able to better protect their customers’ personal and financial information. Blockchain, for example, allows for secure and transparent transactions, reducing the risk of fraud and hacking. Machine learning and artificial intelligence, on the other hand, can be used to identify and prevent cyber threats in real-time, providing an additional layer of security.

Beyond the Banking Ecosystem

One strategy for banks to remain competitive in the digital era is to expand beyond their core business and into relevant ecosystems through partnerships with fintechs, other banks, and non-banking entities. These partnerships can provide access to new technologies, products, and services, which can help improve the customer experience and drive growth.

For example, partnering with fintechs can offer access to cutting-edge technologies such as digital wallets, mobile payments, and blockchain. This can help banks to improve the customer experience and increase efficiency. Partnering with other banks can leverage the other bank’s strengths and expertise to expand product offerings or gain access to new markets.

As of 2021, the US alone had over 10,000 registered fintech startups, with a global total of over 26,000.

Source: Statista

Furthermore, partnering with non-banking entities such as retailers, airlines, or even governments can provide access to new customers and revenue streams by offering innovative financial services. This can be achieved through joint ventures, partnerships, or collaborations. By strategically forming these partnerships, banks can stay ahead of the digital disruption and remain competitive in the market.

Organizational Adaptation

As customers have become more accustomed to digital services and the banking sector has increasingly shifted online, the traditional banking structure has had to be rethought and restructured in order to stay competitive in the digital era.

A driving force behind digital disruption in the banking industry is the automation of processes. Automation has allowed banks and other financial institutions to eliminate many manual processes, such as document processing and data entry, enabling reduced operational costs and improved efficiency, resulting in faster and better customer service. Furthermore, automation has enabled banks to offer customers more personalized services, such as the ability to access accounts, transfer money, and view account balances through mobile devices.

In Q3 2022, the global banking and payments industry saw a 6% increase in job postings related to artificial intelligence compared to the previous quarter.

Source: GlobalData

One of the most obvious changes to the banking organizational structure has been an increase in the number of digital-focused roles. As banks have grown their digital offerings, they have needed to employ more people with specialized knowledge and skills in the area. This has seen the creation of roles such as Chief Digital Officer, Digital Transformation Manager, and Digital Banking Analyst, all of which are vital to ensure that banks are keeping up with the latest digital trends and developments.

In addition to creating digital-focused roles, banks have had to rethink their existing organizational structures in order to make them more agile and responsive to customer needs. This has included introducing agile project management methods and introducing new digital technologies. Banks have also had to become more data-driven, making use of data analytics to gain valuable insights into customer behaviour in order to better meet their needs.

In Q3 2022, the leading companies in terms of the number of new job postings tracked by GlobalData were JPMorgan Chase, Citigroup, US Bank and Erste Group Bank. Together, these companies accounted for 30% of all artificial intelligence-related active jobs in the banking and payments industry. Specifically, JPMorgan Chase posted 2,240 new AI-related jobs, Citigroup had 1,491 jobs, US Bank had 1,443 jobs, and Erste Group Bank had 994 jobs, as reported by GlobalData’s Job Analytics.

Staying Ahead of the Curve Through Innovation

To make significant changes to organizational structures, banks can begin by identifying and evaluating current gaps in operations and processes. This includes analyzing the current business model and identifying areas in need of improvement in terms of efficiency, scalability, and cost-effectiveness.

Fostering a culture of innovation and customer-centricity can be achieved by investing in technology, tools, and infrastructure that allow for experimentation and testing of new ideas. This can include the implementation of agile methodologies, design thinking, and hackathons. Investing in employee training and development programs that focus on innovation and digital skills can also help to build a workforce that is equipped to drive change.

Asian Development Bank aims to increase education operations from current 5% of investments to around 10% by 2024.

Source: ADB

Encouraging a culture of innovation and customer-centricity also requires establishing a clear and transparent decision-making process with a strong emphasis on data-driven decision making. This ensures that the bank’s product and service offerings are tailored to meet the needs and expectations of customers.

Furthermore, banks can establish dedicated teams and structures to focus on innovation and customer-centricity. These can include the creation of a chief innovation officer position and the establishment of innovation labs or digital hubs. These teams and structures should be given autonomy and resources to experiment, test new ideas and bring them to market quickly. By implementing these strategies, banks can make significant changes to their organizational structures and remain competitive in the digital era.

Conclusion

In conclusion, banks must adapt their organizational structures to stay competitive in the digital age. This involves creating a culture of innovation and customer-centricity, restructuring customer support teams, investing in data-driven decision-making and customer segmentation, and developing digital talent. By doing so, banks will be well-positioned to take advantage of the opportunities offered by digital disruption and remain relevant in the future.

References:

https://www.ing.jobs/global/careers/international-talent-programme.htm

https://www.insiderintelligence.com/insights/digital-banking-trends/

https://www.forbes.com/sites/forbesbusinesscouncil/2021/06/23/trends-in-blockchain-why-big-banks-are-adopting-this-technology/?sh=7d95c22551e2

https://www.siegemedia.com/strategy/fintech-statistics

https://www.retailbankerinternational.com/dashboards/jobs/artificial-intelligence-hiring-banking-and-payments-industry-q3-2022/

https://www.mordorintelligence.com/industry-reports/big-data-in-banking-industry

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