Increasing digitization of financial services is a major trend in FinTech. Changing demographics and the emergence of new digital technologies used by European banks and powered by innovations like Robo-advisors, will increase digitization of financial services in 2017.
Digital Banking Innovations from Spain and Turkey
Both the advances in data analytics and cloud computing, as well as the demographic shift to a more technology-focused customer, are bringing about innovations in FinTech. Digital financial services innovations can offer significant competitive advantages for those organizations that evolve accordingly, leading to deeper customer relationships and continuous opportunities for ideation.
One way digitization of financial services will lead to improvements is through client profiling. The Spanish bank CaixaBank, an innovator in digital banking that has won numerous global awards, is using new technologies to deepen customer relationships.
“The depth and quality of our customer relationships are what differentiates us,” said Benjamí Puigdevall, Head of Electronic Channels for CaixaBank in Forbes. “So our tech innovation is focused on making those relationships closer.”
By implementing a digital strategy to financial services, CaixaBank reported $1.13 billion USD in 2016. Furthermore, they have plans to expand into Portugal in 2017 with an offer to acquire major Portuguese bank BPI in January.
Additionally, data-driven analytics are an increasingly important source of competitive advantage that will enable firms to customize their product, marketing and service strategies for specific clients. Turkish bank, DenizBank, has managed to win several banking innovation awards globally over the course of the past 3 years, by addressing these needs directly. For example, it became the first bank in the world to allow its customers access to their deposit and credit card accounts through Facebook. It also allows customers to apply for credit via SMS.
The Rise of the Robo-Advisor
The financial literacy of the average customer is decreasing, leading to a need for investment products that are simpler, more transparent, and less expensive. Furthermore, banks are especially building digital services for Millennials, who are just starting to make important financial decisions, like buying their first house. One way to achieve this goal is through, robo-advisors, an online wealth management service that provides automated, algorithm-based portfolio management advice without the interaction of human financial planners. Many financial service firms are developing or acquiring their own robo-advisors. Betterment, the world’s largest independent robo-advisor, already has more than $5 billion in assets under management.
This digital shift will force many players to transform their organizations. Traditional banks digitizing their services and investment management firms incorporating robo-advisors as a core offering are just a few ways that financial institutions are innovating.
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