Embedded finance: Provide your customers with the right financial product…
Vision, proper roadmap and delivery for the transformation of the digital and physical banking ecosystem
What does the next-generation banking automation look like and what potential does it hold?
We are not even done with basic automation I would say. Not talking about really well-composed challenger and neo-banks here, but traditional banks. The past decade was the witness of experimentation and convincing each other about having a much more strategic view of transformation. Everybody wanted to onboard end to end digitally and just sell the same things what the customers all will buy just because those are in the mobile app. Generally speaking there is no and there was no ROI on the digital transformation projects. Digital or not digital, banks and FI are pretty much still selling the same old products. Ok, till a certain extent each bank has come closer to the customers, built an app or more, but it is rare to find appealing and outstanding CVPs especially along with a 10 out of 10 customer experience. Banks are still isolated from their customer and ecosystem. Not only in their branches, but in their mobile apps. Banks are just not there where the customers are.
Now the situation is turning into a different direction due to the growing, complex and by far more innovative consumer finance and payments service providers presence which are literally linking financial services together with the shopping experience and even beyond. These providers are cheaper, having better customer experience and more efficient technology and they can do everything in a second. I would say the trust is still somewhat on the banks’ side, but how long? Apple is coming out with a fascinating solution what can beat banks easily, and Apple is not a little fintech to start having doubts about its financial power, security and stability. Big payment processors are building aggregated fintech empowered RTP ecosystem. Each of those solutions are better than what traditional banks may have in the next 5 years. RTP payments, wallets, micro lending is cannibalising credit cards. If banks do not wake up and turn their cards into an RTP-enabled super aggregated micro lending card type of instrument, their business will be gone by 2030. But doing something like this has nothing to do with traditional banks made dodgy-diggy transformation with the randomly prioritised bottoms up fixes. It needs vision, a proper roadmap and delivery in 6 months or weeks. All built in and around the digital and physical ecosystem.
I Give you an exact example how the next future-proof digitally transformed mobile banking app. Let’s visualize it as a mobile app, whatever the channel will be, the experience flow what matters for us now.
So, an expat arrives to the country. Gets its Emirates ID virtual card, which automatically will have the medical insurance card and a prepaid debit card linked to the same. The expat gets a WhatsApp message to link the card to any of the listed supporting banks to activate it. Expat clicks on one of the very few banks in the list and the account is there and active. No KYC, no document scanning, no furious questions about friends names and addresses. Government pushes the prepopulated KYC data to the selected bank and our expat next time will only interact with the bank directly if he needs to upgrade the card or do some other complicated financial maneuver. Our expat will choose an app matching to his lifestyle, where he/she will be able to find everything he needs for everyday life, links his card to the wallet in his favourite lifestyle app and just selecting day by day what he needs and seamlessly pushing the payments through while if he needs to pay bills, school, taxes and the app is sensing the spend is higher than usual giving advises, notifications, and tips how to cover the payment instead. Offers zero cost installments or to pay from another card etc. Embedded and responsible finance, there and then when you need it. Do you see now how the future mobile banking app look like? I guess no, because there is no mobile banking app here in this story. Banking is embedded in the ecosystem. This sounds too good to be true, right? But the technology is already available. Not hypothetically, but practically up and running. While we have to wait just a little more for governments, all the rest already exists in the ecosystem. Some banks and some fintechs already started to go down this road. Those banks that can puzzle these elements together, find the people with the vision and expertise to deliver their model, will thrive.
How do you see the process of adopting advanced technologies and working on new digital transformation strategies in a post-Covid world?
Technology adoption is harder than anyone thought. Not talking about here the back end RPA or simple cloud connected solution access or data management. The really efficient use cases are missing. Banks are struggling with applying profitable use cases or business model on most of the game changer new technology. On the other side fintechs are struggling to get business because they are equally struggling understanding the pain points of banks and unable to apply attractive complex use cases on their solutions to sell the case. One use case would not fit all, and the banks do not have skills, time, capacity to start digging down and develop use cases for any introduced vendor solution just for the sake of understanding if it is worth it or not. Fintech still speaks too techy, banks still do not think digital.
As I said, it’s all connected and the solution is hidden in the ecosystem. Time to start thinking about technology backwards. Why are we doing what we are doing? For whom we wanna do what we do? What should we give them to build a strong business? How will we give it to them and what technology, partners and value added services we need to do that?
As my old university professor used to say „technology works and delivers brilliantly, you just needs to take people out of the equation „.
Meaning, if your digital transformation is not selling or saving significantly more and your market share is still the same or shrinking, you need to get the team right, because you are just funding „lipstick on a pig“.
Barbara BIRO is a Head of Digital Ecosystem at RAKBANK. She is an Innovation Strategy, Fintech & Digital Transformation expert, Futurist, Speaker with broad experience in the MENA region through working with Citibank, Mashreq, Standard Chartered Bank and Rakbank heading the digital transformation. Barbara is an Advisory board member of Surefire Capital in Canada and Strategic advisor of Housing Finance Bank of Uganda. Publicist on the US #1 Digital Banking portal The Financial Brand.