This is a reprint of an article and podcast that originally appeared onBusiness Reporteron January 31, 2023.
Adding to the rapid digitization and intense fintech competition spurred on by the pandemic, the past year's increasing regulations and changing macroeconomic conditions have forever altered the banking landscape – and consumer expectations.
The bar has been raised, and it's not coming back down.
Yet while technological solutions are aplenty, from artificial intelligence (AI) to buy now, pay later (BNPL), many banks have been slow to take advantage, leaving them at risk of falling behind the new challengers.
Of course, many banks have a technology infrastructure that can, at times, hold them back from being truly innovative. Which is why strategic partnerships between financial institutions and financial technology providers will be pivotal. As banks tighten their belts and federal oversight into bank/fintech partnerships increases, it will be imperative for banks to re-evaluate their offerings, their options and determine where they can add real value. Key areas of focus will be omnichannel innovation that truly enables customers to bank where, when and how they want, and embedded finance options, offered from banks and non-bank institutions alike.
Even for banks that have made significant strides to up their digital offerings in recent years, there are plenty of opportunities for further growth, including those that address the needs in today's economic environment. In a softening economy, banks have tended to focus on increasing efficiency in the back office, such as eliminating a variety of manual processes that support product delivery and service in favor of more digital automation and systems that operate in a much smarter capacity, improving the customer experience and driving down costs. This is where the combination of new automation must be paired with increased effectiveness of both fraud identification and customer verification capabilities to fully realize the benefits of these initiatives.
The stakes are as high as they've ever been for banks to remain relevant and competitive. Those that know how to navigate through changing market dynamics will be able to weather the current economic environment. They need to assess necessary changes, focus on efficient growth, remain nimble and, equally important, continue to be opportunistic.