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Currently, we are facing a revolutionary change within the banking industry, mainly due to competitive measures taken by FinTechs, changing business models, intensifying regulations, compliance burdens and also due to technologies. disruptive.
The arrival of FinTech start-ups has changed the competitive structure within financial services. This sounded the alarm bells for traditional banks and forced them to change the way they do business. As privacy concerns intensify, regulatory and compliance parameters have become more stringent.
Taking into account that customer demands are constantly changing as customers seek more personalized services. Technology can be the solution to many of the challenges mentioned, but it is not that easy to move from existing systems to more innovative frameworks. Banks must embrace this digital change in order to be successful.
Below is a detailed overview of the difficult current challenges that affect the day-to-day operations of banks:
FinTechs are now seen as a threat to traditional banks as they target some of the most profitable areas of the financial services industry and thereby gain more market share. Financial institutions are now forced to merge or acquire other opportunities in order to be able to compete with these new entrants on the market.
In our culture, technology has been given such prominence that it has also affected the banking industry and banks are embracing a more digital process, while eliminating manual processes. Technology-based resolutions should be taken into consideration. Financial institutions should place more emphasis on an innovative culture where technology should be used to drive existing processes and procedures to achieve maximum efficiency. That’s what we call
Cultural change towards a more
technological sphere is reflected in a wider acceptance of digital transformation.
Another challenge within the banking industry is
regulatory conformity. This was the result of a staggering increase in regulatory fees compared to the current gains and losses from the 2008 financial crisis and the current burden of Covid-19. Banks must comply with the number of
new regulations, which currently forces them to make an unusual effort and provide basic resources.
Compliance management which is one of the many challenges imposed within the banking industry leading to a
cash within the The economic models of banks. Bank profits are under pressure from rising cost of capital, falling interest rates and falling return on equity.
On the other hand, the expectations of their shareholders have not changed and are always looking for more profits. This has led the Banks to find or bring into existence new competitive services, to be more efficient by seeking lasting improvements, but also to reorganize the businesses to increase revenues and reduce costs.
Nowadays, consumers are more informed than ever and have all the means to find out where they want to go. expectations are higher. In fact, they would expect a high degree of personalization and convenience from their banking experience. Banks should adopt more to customer demographics because these play an important role in these increased expectations.
Different generations use banking services. New generations have more expectations digitized experiences. In fact, Millennials use mobile banking more while older members prefer human interactions and prefer to visit a physical branch. Banks should look after two generations and they should adapt to hybrid banking model in order to integrate digital experiences in traditional bank branches.
Banks should also keep the expectations of their investors in mind. Their expectation would always be to receive a return on their investment, therefore banks should do everything possible to increase annual profits. It would also be related to customer expectations as a happy customer would lead to business success which means investors would be happy too.
Another challenge within the banking industry is
loyalty of the clientele. Customer loyalty is now considered an important asset for banks. They would need to know their customers and their expectations better and should also set up a continuous customer-centric approach. By knowing their customers and also working with them, banks or financial institutions can optimize interactions that will increase customer satisfaction and market share leading to decreased customer turnover.
Nowadays, the majority of banks have their own mobile application. Having a m-banking strategy does not mean that the bank is getting the maximum benefit possible or providing the best service.
A mobile app needs to be fast, user-friendly, comprehensive (like live chat or digital voice assistance), secure, and needs to be updated frequently to keep customers happy. Therefore have a
updated mobile experience is also a significant challenge for banks to keep their customers satisfied and this can also be seen as a competitive advantage.
Over the past few years we have all heard of a number of security breaches. Security must be given great importance by banks, which is another challenge within the banking sector. Banks need to invest in the latest technology-based security measures to keep sensitive customer information safe.
the uncertainty surrounding the
Coronavirus pandemic is another struggle for the banks. They have become more exposed to potential credit losses as the economic cost of the virus, including any measures that have been taken, can cause a number of borrowers to default on their loans.
In general, the banking sector has a lot to think about, its road to recovery and such challenges are sure to remain active beyond 2021. However, taking into consideration the challenges mentioned above, even during difficult times such as pandemic and by reflecting on the best way to solve operational and regulatory problems, the banking sector can still get a good start in this adventure.
Uncertainty over the effects of the pandemic will likely remain for the foreseeable future, but that shouldn’t stop banks from tackling other challenges that may not allow them to keep pace with such an evolving industry. They should always keep in mind that lasting success in business requires insight, agility, rich customer relationships, and continuous innovation.
Originally posted 10/20/2021
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