Home Banking Preventing Digital Headwinds from Blowing Away Consumer Confidence

Preventing Digital Headwinds from Blowing Away Consumer Confidence

by internationalbanker

By Prakash Pattni, Managing Director, Financial Services Digital Transformation, IBM





The financial-services sector is undergoing root and branch remodelling. Old, fixed analogue certitudes are being replaced by agile, flexible digital alternatives. Unfortunately, the unavoidable companion of change is uncertainty, which, in turn, can dislodge trust, the foundation stone upon which the financial-services sector rests. So, how can the industry implement a wide-ranging digital transformation without damaging its relationships with its customers and the regulators?

At the start of the digital journey, there was an understandable fear of the unknown; from a consumer perspective, we don’t hear much about that anymore from the digital-native generation. They are willing to give things a try—versus older customers, who are still a little wary about some of the new banking services.

We’re all becoming digital natives

Of course, from the banks’ points of view, they want everyone to go and act like a digital native as this would make everything so much easier for them, but many people still like to pick up the phone.

However, for the time being, delivering a range of channels—from fully automated smartphone apps to brick-and-mortar high street branches—is still required, although the resulting transactions are all being processed in the same way behind the scenes. It’s about banks developing and delivering services that can evolve to best suit the needs of their customers; over time, this will doubtless move away from personal interactions for all but the most complex financial transactions.

We’re not there yet—I think we’re still many years out from that—but the point will come when the older interaction models finally fade away. Not everyone is an early adopter, but people are already modifying their behaviours, and that direction will continue. For banks, managing that process will be essential for maintaining trust during the transition.

Embracing a hybrid cloud approach

From the perspective of the banks, it all looks quite different. They realise that things are getting much more complicated than many had first assumed. The “everything into the cloud” approach is becoming more balanced, and we, therefore, see a more hybrid approach emerging.

Regulators are also gaining new insights, and as a result, they are asking much harder questions; they’ve seen what can happen when things go wrong, adding to the shift to hybrid solutions. While consumers may be more trusting, banks and regulators are increasingly vigilant about the rollout of next-generation digital services.

Reaping the digital benefits

At the core of the digital transformation of the financial-services sector are two drivers: a growing customer demand for new types of service provisions and a push to maximise the revenue opportunities this provides. The bigger institutions already see a reduction in some of their traditional revenue streams because new market entrants implement embedded finance as part of their offerings.

The banks are, therefore, turning to the fintech (financial technology) community to help them enhance their agility in delivering next-gen services. They’re also coming to established partners, such as IBM, asking for help with automation and ways to safely and efficiently push back against some of the new market entrants. It’s no longer just questions about the cost of infrastructure; it’s about how tools such as AI (artificial intelligence) can be successfully rolled out to enhance customer relationships and increase trust during a time of accelerated change.

During the COVID-19 pandemic, many physical channels went completely online as banks had to scale up their mobile and online channels massively. Banks saw success with this approach, and this momentum can be carried forward if the right approaches and technologies are adopted.

This migration was largely enabled by wireless internet, which is about to get a major boost with the rollout of 5G infrastructure. Its faster internet speeds, lower latency and greater bandwidth empower a rich set of self-service capabilities, such as sensors in homes, vehicles and offices, which can create highly personalised, real-time insurance offerings. However, harnessing the potential of 5G will require careful thought, as users can delete an unpopular app as easily as any other download type.

Another technology that banks will need to adopt is quantum computing—not just for the exponential processing power it can deliver but also for its ability to enhance security. In a digital-banking world, quantum’s ability to detect and deflect cyberattacks before they cause harm will be essential to maintaining trust.

The importance of relationships

For all the talking about technology, people still value relationships—some will stay with their banks for 30 to 40 years. While these relationships build trust over time, it’s something that could be damaged or lost during the current evolution in financial services if mistakes are made.

IBM has been around for 100-plus years, and our technologies have been embedded into banks for around half that period. But the same fundamentals around trust apply; we’re a responsible partner with proven and reliable solutions. And importantly, we’re not after the same data as the banks: Our sole role is to deliver the solution needed by the financial-services sector to compete in an ever more fragmented digital environment.

Even then, things don’t always run to plan. At IBM, we focus on the technology—partnering with us gives the financial-services sector access to the best-in-class. That all combines to create peace of mind. For example, we’re also at the cutting edge of initiatives such as quantum-safe technologies. The US National Institute of Standards and Technology (NIST) recently announced the first quantum-safe cryptography protocol standards for cybersecurity. IBM was involved in the development of three of the four encryption methods that were selected from a pool of 69.

Building an environment that everyone can trust

The skills and expertise required to bring everything together seamlessly in a hybrid environment exist, but in a constantly evolving environment, there’s always more to come; people keep building and creating new solutions, which can create vulnerabilities. However, the financial-services sector must stay ahead of the bad actors to ensure confidence is maintained for both the banks and their customers.

Fortunately, by working with a trusted partner with a proven track record in developing and delivering reliable, scalable solutions, it is possible to meet the varying needs of the overall financial-services ecosystem. Confidence is easily lost as well as costly and tricky to regain. The right investment today will help ensure that there is no disadvantageous trust deficit tomorrow.



Prakash Pattni is the Managing Director of Financial Services Digital Transformation at IBM EMEA. Prakash brings financial-services experience gained across technology and finance fields and has led numerous initiatives, including public-cloud transformation and agile product-model implementation.


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