A perfect storm of customer expectations, competition and market pressure is driving digital adoption among transformer and native digital banks across the world.
In the EMEA space specifically, 2019 has been another strong year of digitalisation in banking.
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In 2018, Deloitte’s Digital Banking Maturity study said that EMEA was ‘highly diversified’ in digital maturity with some countries adopting digital technologies faster than others.
The study reported that ‘digital champions’ Poland, Russia, Spain, Switzerland and Turkey were leading the way, while ‘digital latecomers’, such as Israel and Slovakia, trailed behind. The difference was that the champions were having to react to high levels of market pressure.
Customers lead the digital banking revolution
Market pressure is clearly a key driver of digital adoption in banking and in 2019, customers have been demanding increasingly better experiences from the services they use.
For example, today’s customers expect ease and immediacy when dealing with their bank, as automation technologies – such as chatbots – become more sophisticated and more wide-spread. By 2022, Juniper expects 90% of bank interactions to be conducted by chatbots, rising from just 12% in 2017. This could be a cost-effective way for banks to improve customer experience (CX).
Consumers also expect transparency and clarity when dealing with their bank and when processing payments. They want to feel as informed as when they place an order with a company like Amazon, where you can track and receive updates on orders.
However, developing and implementing these kinds of innovations is more difficult for legacy banks than their smaller, more agile competitors that are inherently digital and less bound by red tape.
Transformer banks must try not to be left behind – particularly by younger consumers, who are more open to new ways of banking. In 2019, one in three Gen Z consumers used an online lender to take out a loan, which is more than double 2018’s numbers.
Jody Aldridge, EMEA Banking Lead at Currencycloud, believes that collaboration offers a potential way forward. “By working together,” he says, “transformer banks can bring their credibility to the table, while digital native challengers offer much needed agility and new ideas.”
Initiatives like Open Banking Europe, which went live this year, could be a springboard for these kinds of relationships.
Challenges ahead in 2020
For what is already one of the world’s most heavily regulated industries, the implementation of GDPR in 2019 proved to be even more weight on the shoulders of legacy banks trying to keep pace with innovation and change.
Despite 78% of respondents to a 2018 study saying their firm was ready for GDPR, the same study this year revealed only 28% were actually compliant. This will undoubtedly continue to be a challenge for FIs in the next year.
However, arguably the most important challenge facing the financial industry next year, and beyond, is trust. PwC says that the evolution of banking ‘remains rooted in trust and relationships’.
Aldridge says: “People need to be able to establish trust before they can make a commitment and maintain it in the long term. It’s absolutely no different in banking, digital or not.
“Being able to maintain that trust is particularly important given that consumers have more choice than ever before. It’s much easier for someone to switch to another provider if they feel like their FI is not operating in their best interest, or if they feel let down in some way”
Again, appealing to younger consumers is key to success in this area. Only 53% of Gen Z say they trust their primary FI the most with their money, compared to 72% of baby boomers.
Trust goes hand-in-hand with keeping a customer’s assets safe, and across EMEA, security is high on the agenda in 2020. More than a fifth of internal auditors across Europe say it is the single biggest risk to their organization.
However, it becomes tricky when balancing safety measures with CX. Kate Hughes, Money Editor of the Independent, says that British consumers like convenience in banking to the point of making themselves more vulnerable to fraudsters, writing: ‘we want our money to be safe, but we also want to be able to get to it easily…’
Well placed for a stellar 2020
Currencycloud has also enjoyed a strong 2019, with several initiatives that will help the EMEA banking space move further into digital maturity.
By partnering with SWIFT gpi in June 2019, Currencycloud is helping to change the game in cross-border payments where visibility, transparency and control have traditionally been limited. This initiative – described as the payment world’s equivalent of Amazon’s tracking capability – will help to give users greater confidence in cross-border payments, while improving CX along the way.
Currencycloud Spark, also launched in 2019, is an example of how legacy banks can partner with start-up platforms to meet future demands around payments and collections.
Meanwhile, updates throughout the year have also made the Currencycloud platform more secure, as well as more scalable. As a result, record breaking numbers of payments have been processed, with each month outperforming the last.
To find out how Currencycloud can improve your global payments offering in 2020 and beyond, get in touch now.
