By Jelena Galić, President of the Executive Board, AIK Banka
The fourth industrial revolution, bringing with it rapid development of new technologies, inevitably requires innovation in the business operations of the financial sector. A successful bank must follow the needs of its clients. At present, this involves comprehensive digitalization, enabling the availability of 24-hour banking services seven days a week throughout the year. Today’s clients are modern and tech-savvy, receive their information almost exclusively online and are active on social networks. Such clients require cash transactions to be within arm’s reach, “now and always”, with answers to all of their questions immediately available; they expect to be able to open an account online, if possible in one minute, and that all of their transfers and payments will be facilitated through a smartphone in the shortest possible time.
We all agree that digital transformation is an inevitable process permeating all business spheres. The transition toward a digital society and an electronic administration on which the whole economy of a country can be located is also reflected in the banking sector. Banks must organise their businesses for such a transition period, when laws and those prescribing them are heading with giant strides toward modernisationand complete digitisationof all processes, along with the practices and awareness of bank consumers and users—whether entrepreneurs or citizens—pursuing this direction incrementally and occasionally pausing, evaluating and in some cases even returning to previous waypoints on the journey.
Jelena Galić, CEO and President of the Executive Board, AIK Banka
Digital banking represents an evolutionary process in which the development of technology improves business models, while banking solutions are aimed at addressing real customer needs. Important factors of digital transformation involve the speed, innovation andflexibility of services. In the technical-technological sense, the realization of this process is facilitated by cooperation between banks and fintechstartup companies, which are growing in number rapidly.
Banks should not consider these companies as competition but realize that by cooperating with them, they positively affect customer satisfaction in terms of providing more flexible, advanced and secure services and products.
Let us now imagine a young man or woman born in the year 2000, at the beginning of the new millennium. That young man or woman in the year 2018 is already 18 years old. He or she is a member of one of the 100-percent digital generations who do not remember the time before the internet and have already grown up creating new needs, habits and expectations that will significantly impact new banking strategies. After all, so-called Millennials, the generation born from 1981 to 2000, claim that “they would rather visit their dentist than listen to what their banks are saying” (71 percent of more than 10,000 surveyed Millennials in a three-year Scratch study, 2014).
What does a bank tailored to suit new clients look like?
World trends in contemporary banking are clear: we are headed toward using chatbots, internet of things (IoT), blockchain technology, customer relationship management (CRM)—giving extraordinary attention to cybersecurity at the same time.
Deloitte in its “Banking Outlook – Accelerating the transformation” for 2018 explores which risks may threaten banks’ long-term, viable growth. Six macro areas have been identified that may be critical in this regard: customer-centricity, regulatory recalibration, technology management, mitigating cyber-risks, fintechs andbig techs, and reimagining the workforce.
Long-term sustainable growth in the banking industry today is possible only with a radical shift from a sales-and-product-obsessed mindset to a strategy aimed at customer-centricity, which implies understanding of customers’ individual needs and desires in order to provide the best possible services to users.
The major challenge of modern banking today is regulation—especially with regard to the second Payment Services Directive (PSD2) and General Data Protection Regulation (GDPR), which require constant adjustments from banks—with the simultaneous introduction of new players on a market that was once reserved for banks.
Information-technology (IT) systems and other modern technologies, along with the obligation of ongoing readjustment, represent another significant challenge for the banking sector: this time, financial. It is necessary to find the right balance between maximizing value and minimizing disturbance within the bank, thus ensuring cost efficiency. Deloitte’s banking outlook is reminiscent of the assessment of one of the world’s largest research companies, Gartner, revealing that the banking sector at the global level will this year spend $519 billion on IT, which is a growth of 4.1 percent relative to the previous year when banks invested $499 billion in IT systems and modern technologies.
Such rapid modernization with the ever faster adoption of new technologies and the increasing connectivity of banks at a global level brings with it increased cyber-risk. This is especially true in the case of the robotization of processes or the use of the internet of things (IoT), which necessarily entail the obligation of additional investment in cybersecurity.
PwC (PricewaterhouseCoopers), in its paper “Digital Banking Consumer Survey: Mobile users set the agenda”, states that the habits of banking consumers have continued to develop and improve, and that users have many choices in the banking market. This study also shows that, if we can say so, “banking on the move” is a quality of today’s consumer at a time when users want everything to be available to them in the shortest possible time.
In another study by the same company, “Retail Banking 2020 – Evolution or Revolution? Willyou be ready to serve this customer?”, PwC estimates that less than 20 percent of bank managers feel well prepared for the future, but the vast majority agree that it is very important to predict how the banking market will look in 2020 in order to prepare in time and be able to formulate appropriate strategies.
AIK Banka eWallet, a smartphone application for contactless payment using virtual MasterCard via phone
Indisputably, the banking sector in Serbia is probably the most developed and competitive segment of the national economy, in terms of business aspects but also in the area of regulatory harmonization with Basel standards and European Central Bank (ECB) guidelines. It will remain one of the key generators of further development. In 2017, total balance-sheet assets of the Serbia banking sector amounted to approximately 28 billion euros, of which two-thirds is foreign-owned. The past period was marked by the consolidation of the banking sector and withdrawal of Greek banks, which resulted in a total of 29 active banks. Expectations are that the consolidation process will continue, with competition remaining at a satisfactory level, ultimately benefiting clients. Furthermore, the application of new technologies and the process of digitalization should enhance the implementation of lean processes benefiting productivity and ultimately the satisfaction of clients as well as the business results of banks.
Modern banks are facing great challenges. Apart from the biggest challenge of adapting according to regulations and technological innovations, the increasingly stronger market game and growing number of different competitors—extending far beyond the system of traditional banking—must also be taken into consideration. There are also specifics regarding particular local markets, in which demographic factors must be accounted for. In the epicentre of the whole story, more than ever,should be the individual. The specific user. The client. With all of his or her expectations, needs, opportunities and desires, a bank focused on sustainable business and development must carefully listen as never before.