Source: businessdailyafrica.com
Imagine a bank whose customers can tap on a wearable device to make a payment and receive updates on investments through AI-generated insights. A bank that enables its customer to own their data through the application of blockchain technology and share it with lenders as a validated credit history when applying for a loan; that bank is likely to operate for the long-term.
According to a PwC global CEO survey, 70 percent of financial services leaders stated that the speed of technological change is one of their biggest concerns.
Clients demand more convenience and customisation from their banks, delivered through technology-driven innovation.
This trend will accelerate as other industries digitise, allowing microservices to be monetised. New technologies are tooling up non-traditional players such as Neobanks, mobile network operators, e-commerce platforms, and supermarkets with the means to tokenise exchange and intermediate supply chains exclusive of traditional banks.
These new entrants in the financial sector are a competitive threat to conventional regulated players. For banks to survive and win in this new paradigm, they will need to adopt technology-driven business models; they must develop an internal culture that is tech-minded, encourage idea generation and execution across departments.
But change doesn’t happen in a vacuum. For impactful transformation, banks will need to involve their clients, employees, and communities to build solutions that meet evolving needs across a broad social spectrum.
Digital transformation can only be optimal through collaboration with the clients, the Fintech community, regulators, service providers, and others applying digital tools to meet their financial goals.
Hence, we see traditional banks partnering with FinTechs, MNOs, and digital marketplaces by design or necessary survival.
These alliances are symbiotic in that the Fintechs see three evolving challenges.
First, as they build new digital business models, their activities are becoming economically significant; hence the central bank, other regulators, and governments are getting concerned about potential downside credit and systemic risks.
Their days of minimal or no regulatory oversight are coming to an end.
Secondly, traditional banks are not sitting back and are beginning to incorporate digital solutions.
Thirdly, at scale, traditional banks still dominate the sovereign, corporate finance, and long-term lending markets.
TALENT SHORTAGE
On the other hand, while banks lack agility and sufficient qualified and digitally literate managers, they have trusted compliance capabilities.
They are accustomed to the regulatory minefield and can help FinTechs navigate that space. Partnerships with banks lend credibility to the ventures they participate, and in so doing, there is a reverse transfer of skills from the banks to FinTechs.
Banks can “stand in the gap” between regulators and FinTechs interpreting the use of new technologies to address regulatory concerns.
For instance, Financial institutions can address authentication of human identity when opening an account through the internet of things (IoT) and artificial intelligence (AI). These technologies use various metrics, including location services, user image movement, facial recognition, and temperature checks, to determine whether the person operating the device is an actual human.
Partnerships can facilitate the resolution of challenges facing various sectors. For example, SMEs require access to finance, markets, and simple digital business efficiency tools.
The community of stakeholders in financial services sectors and other industry verticals enabled by the Third and Fourth Industrial Revolution technologies creates a global data lake that will be a massive enabler of innovation in the financial services sector.
By gaining API access to various data sources, banks can create customised solutions for different clients across the region.
Digital access will minimise direct contact with banks. Soon, data portability, possibly using distributed ledger technology will allow customers to use their data as an asset by being part of a community or use it to receive bespoke services.
The future of finance is commoditised services on a network of data connected to value.
