Have you ever thought about how much technology has transformed our lives? Think about it - from smartphones that can do practically anything to those handy little gadgets that control our homes with just a voice command. It's pretty wild, isn't it?

And one industry that's been at the forefront of this technological revolution is banking. Banks aren't just those bland old buildings you visit to deposit your paycheck anymore. Oh no, they've jumped headfirst into the tech revolution.

No more waiting in line for ages to deposit a check or transfer money. Now, with just a few taps on your smartphone, you can do all that and more. And that's just the beginning.

In this article, we’ll talk about how banks are re-embracing all this fancy new technology and using it to revolutionize how we manage our money.

Why Banks Should Adapt to Technological Advancements

• Enhanced Customer Experience: Technological advancements allow banks to offer their customers more convenient and personalized services, improving overall satisfaction.
• Increased Efficiency: Automation and digitalization streamline banking processes, reducing operational costs, dealing with banking problems and solutions, and improving efficiency.
• Competitive Advantage: Banks that embrace technology stay ahead of the curve, attracting tech-savvy customers and staying competitive.
• Improved Security: Advanced cybersecurity measures protect sensitive customer data and transactions, safeguarding against cyber threats and fraud.
• Access to New Markets: Technology enables banks to reach new customer segments and expand their market reach through digital channels and innovative products/services.

9 Ways Banks Are Adapting to the Tech Revolution

By embracing innovative solutions and leveraging technological advancements, banks use advanced technology to revolutionize how financial services are delivered to customers. Here are eight key strategies banks are using to stay ahead of the tech revolution and meet the evolving needs of their customers:

1. Embracing Mobile Banking

With the widespread adoption of smartphones, banks are investing heavily in mobile banking apps to offer customers a convenient and accessible way to manage their finances.

These apps allow users to perform various banking transactions, including checking account balances, transferring funds, paying bills, depositing checks remotely, and even applying for loans or credit cards, all from the palm of their hand.

By embracing mobile banking, banks are empowering customers with greater control over their finances and providing a seamless digital banking experience that meets the demands of today's tech-savvy consumers.

2. Enhancing Online Banking Platforms

In tandem with the rise of mobile banking, banks are also enhancing their online banking platforms to offer customers a comprehensive and seamless digital banking experience.

These platforms are being upgraded with advanced features and functionalities, such as real-time account monitoring, bill payments, fund transfers, and budgeting tools.

By providing customers with easy access to their accounts and empowering them to manage their finances conveniently from any internet-connected device, banks are meeting the evolving needs of digital consumers and staying competitive in the ever-changing financial landscape.

3. Implementing Contactless Payments

With the increasing preference for cashless transactions, banks are implementing contactless payment methods to offer customers fast, secure, and convenient payment options.

Contactless payments utilize near-field communication (NFC) technology, allowing customers to simply tap their cards or mobile devices on a contactless-enabled terminal to complete transactions.

This technology reduces the need for physical contact during transactions and speeds up the payment process, making it ideal for busy consumers on the go.

4. Leveraging Artificial Intelligence (AI)

AI-powered chatbots, for example, are being deployed to provide 24/7 customer support, answer queries, and assist with account inquiries.

These chatbots use natural language processing (NLP) and machine learning algorithms to understand and respond to real-time customer queries, improving response times and customer satisfaction.

Furthermore, AI in banks is being utilized for fraud detection and prevention, where advanced algorithms analyze transaction patterns and detect anomalies indicative of fraudulent activity.

5. Introducing Biometric Authentication

Biometric authentication utilizes unique physical characteristics such as fingerprints, facial features, or voice patterns to verify the identity of users.

By implementing biometric authentication, banks can offer customers a more secure and convenient way to access their accounts. Instead of relying on traditional passwords or PINs, customers can simply use their biometric data to authenticate their identity, reducing the risk of unauthorized access due to stolen or compromised credentials.

6. Enhancing the In-Branch Experience

Beyond mobile apps and online platforms, banks are increasingly utilizing digital signage solutions for banks. These strategically placed digital displays throughout the branch offer several benefits:

Informative Content: Real-time wait times, product information, and promotions can be displayed, keeping customers updated and informed.

Financial Literacy: Educational content can be showcased to raise awareness about financial products and services, empowering customers to make informed decisions.

Personalized Experience: Targeted messages and offers can be delivered based on customer demographics or preferences, creating a more relevant and engaging experience.

Brand Awareness: Banks can leverage digital signage to reinforce their brand image and messaging, fostering stronger customer relationships.

7. Exploring Blockchain Technology

Blockchain, a decentralized and immutable ledger system, offers several potential benefits for banks, such as increased transparency, reduced transaction costs, and improved efficiency.

One critical application of blockchain technology in banking is in cross-border payments. Traditional international money transfers often involve multiple intermediaries and can take several days to settle.

However, blockchain-based solutions offer the potential for near-instantaneous cross-border transactions, as transactions can be recorded and verified in real-time on the blockchain network.

8. Personalized Financial Services

Banks are increasingly focusing on offering personalized financial services to meet their customers' unique needs and preferences.

One way banks are offering personalized financial services is through targeted promotions and offers. By analyzing customer spending patterns and preferences, banks can identify relevant products and services and offer personalized promotions to customers, increasing engagement and satisfaction.

9. Enhancing Cybersecurity Measures

As digital banking becomes more prevalent, banks prioritise cybersecurity measures to protect customer data and transactions from cyber threats and attacks.

Banks are implementing multi-factor authentication (MFA) methods to strengthen account security. To access their accounts, MFA requires users to provide multiple verification forms, such as passwords, biometric data, or one-time passcodes. This adds an extra layer of security beyond traditional password-based authentication, reducing the risk of unauthorized access.

Conclusion

The tech revolution has brought about significant changes in the banking industry, prompting banks to adapt and innovate to meet customers' evolving needs in the digital age.

As technology advances, banks must remain agile and proactive in adopting new technologies to stay competitive and continue providing exceptional customer service. Through these adaptations, banks are shaping the future of banking and contributing to a more efficient, secure, and customer-centric financial ecosystem.

CFOs are starting to be seen as “co-CEOs,” reliable leaders who navigate economic uncertainty and low consumer confidence, securing overall business stability. While CFOs aren’t expected to lead on all fronts of business operations, they are expected to widen their professional remit to be involved in areas traditionally covered by other business functions - such as ESG or managing investments to link disparate tech systems. 

Recent research we conducted in partnership with Deloitte, surveying 700 CFOs and senior departmental leaders globally, found that CFOs’ self-perceptions are not aligned with the rest of the business. For example, CFOs are seen as “inspiring” by others – a characteristic that many CFOs didn’t see in themselves: only 10% of CFOs consider themselves as such vs. 37% of their colleagues. So, how can CFOs look to take charge of business leadership, and exercise the potential they have, whilst carving out a unique scope within the business to tackle what may seem challenging but exciting business priorities?

Realigning self-perception and expectations

85% CFOs compared to 86% of their colleagues believe they can help solve business problems. But when it comes to human skills, there is a clear divide between how CFOs are perceived and how CFOs see themselves. CFOs tend to over-credit themselves when it comes to actively coaching others across the organisation (27% CFOs vs. 12% colleagues), but at the same time, CFOs don’t give themselves enough credit for being empathetic (18% CFOs vs. 29% colleagues) or strategic (32% CFOs vs. 45% colleagues).

The trend of undervaluing their own leadership efforts holds across a variety of business challenges. It’s especially noticeable regarding tech-related efforts like facilitating hybrid work (81% vs. 93%) and ensuring effective cybersecurity measures (82% vs. 90%), although these duties traditionally fall to CIOs. It seems that ongoing global disruption has helped businesses understand the importance of the CFO in ways they themselves have yet to realise let alone capitalise on. 

Transforming the role of the CFO

Today’s business environment requires leaders to be confident in their ability to quickly adjust plans according to ever-changing realities. CFOs are often the first in the room to dissect the impact of a particular challenge, mitigating risk and determining the best next step. With this visibility, they’re in a unique position to observe and navigate the boundaries between different departments and look forward, rather than back. But where exactly should they be moving? 

Our research found that 86% of CFOs and 81% of business colleagues agree that improved 'processes' - to make workflows more efficient, less burdensome, etc. – are important for businesses to become more agile. At the same time, 82% of CFOs vs. 86% of their business colleagues agree the challenges they’ve been facing in the past 2.5 years could have been improved with stronger communication between departments. Keeping in mind the business needs, it’s essential that CFOs, uniquely positioned to become the link to every corner of the business, implement a revamped approach to planning, making it a process that would connect all business units and enable greater transparency. 

Enabling cross-departmental digitisation through connected planning

Connected planning refers to the technology-enabled process of business planning that joins together people, data, and plans to help accelerate better business performance. Traditional planning approaches lack the collaboration, insights, and predictive, self-learning capabilities necessary to inform strategic decision-making. This process breaks down information silos to eliminate any inefficiencies in financial, corporate, and operational planning.

Connected Planning will be key to agile and influential CFO leadership as this role requires heightened strategic vision. 40% of business colleagues would like to see their CFOs provide a stronger strategic vision and 38% would like to see stronger planning & growth orientation from their CFOs. With such planning tools, all the departments will have a single source of truth to refer to, and the ability to quickly adjust plans based on performance or during unforeseen circumstances. 

This approach allows businesses can stay ahead of any future disruptions and pivot as needed, providing CFOs with the data to support the relaying of their vision, collating data from employees, analysing it, and acting based on data-driven insights 

Ensuring success of ESG initiatives

Our research also found that CFOs see ESG as a fifth item of priority on their list, whilst 85% of senior colleagues consider ESG to primarily be the CFO’s concern. ESG has undoubtedly risen on the corporate agenda, and it is now imperative that organisations look at how they can pivot the operations they already have in place, so they are more sustainable. 

Clearly, there is a real opportunity for CFOs to expand the role of managing their organisation’s ESG initiatives and embrace it as one of their core priorities. CFOs’ active involvement can help bring more visible, significant improvements in this realm. 

Championing the CFOs unique role

The business landscape will continue to evolve and there is an urgent need to be even more proactive and forward-looking. To thrive in this new dynamic, CFOs need to take ownership of new business priorities and drive them forwards. 

Be it in the delivery of agile planning or ESG initiatives, success will largely depend on whether CFOs are able to evolve with time. It can be challenging to positively pivot the role and responsibilities – but it also brings exciting new opportunities to drive organisational success and become a more strategic leader across many business functions. 

About the author: Victor Barnes is the Senior Vice President at Anaplan.

Despite the high cost and high maintenance traditionally associated with corporate portals, banks have been slow to adopt SaaS technology for helping them better manage their budgets. Leading banks are spearheading the way in facilitating digital trade services for their trade clients and prioritising the support of digital trade by relying on innovative Fintechs to build fast, future-proof solutions that can even support multi-banking capabilities.

To future-proof trade finance communications, these are the top priorities large banks are considering and some of the factors that have nudged financial institutions to pursue solutions from external vendors.

The ability to deliver a quick digital trade experience to customers

 Through trade portal as-a-service solutions, banks are now able to allow their trade customers to not only conduct transactions but over time be able to fully handle directly from a single portal application, advising as well as utilisation of electronic documents

 Many of the world’s largest financial institutions are not able to offer a fully digitised service to their trade customers due to the immense cost, time and complex implementation processes required to offer a fully digitised user journey. But with advancements in recent technologies like Bolero’s Galileo, banks are well placed to offer truly digitised experiences to their customers to conduct their business at speed and with great efficiency.

The pandemic has highlighted the inherent inefficiencies within trade finance operations and as a result, the demand for digital trade services is at its peak. Trade customers today want to conduct their business online therefore it becomes vital for banks to digitise the customer experience as quickly as possible or risk losing that customer.

Dissatisfaction with their current portal solution

As a result of corporates' digitisation of their trade finance processes, banks have been under significant pressure to provide new and improved digital services to their corporate customers who are pushing for a fully digital experience.

Some of the banks we have spoken to tell us that their existing portal solutions do not meet the requirements of their clients anymore. Corporates today are looking for solutions that could adapt quickly and flexibly to new requirements so that they could offer their corporate clients a quick and smooth transition from the old to the newer more innovative systems. They can handle their trade finance transactions as well as having all correspondence between their trade clients and the banks electronically.

Exorbitant ownership costs

For many banks, the total cost of ownership for a trade portal is prohibitive. As a result, banks are reluctant to offer their trade improved customer experiences because the setup costs are too high which in turn slows down the adoption of these services despite the incredible appetite from trade customers.

Subscription-based, turnkey solution cuts the cost of acquisition from millions to a fraction of the cost whilst also reducing the need to hire teams to build solutions and to support clients by developing new upgrades and by providing regulatory-change compliance. By replacing their legacy systems with a state-of-the-art technology platform, banks are able to deliver a more sophisticated digital experience to their customers at a lower cost than they would have paid before.

That’s not all, for smaller more regional banks that do not have many trade clients, the efforts and resources associated with installing a portal solution for their clients often are not worth it. A plug and play solution opens the market up for financial institutions of all sizes.

Freedom from technical debt

Technical debt often becomes a major factor that deters banks in their pursuit of building bespoke solutions as they do not want to deal with the expensive upkeep of their trade portals.

 We are seeing many banks that have changed course as they adopt white-labelled solutions that not only cut costs but free them from the shackles of constant updates for their trade customers. In turn, they are providing upgrades to their online banking platforms and making a positive change to the customer experience and channelling innovation into a booming industry, all without the technical burden caused by in-house solutions.

Ability to support digital trade with e-presentations

Many of the existing legacy portals we see banks use today do not allow for corporate clients to manage their own trade transactions and products like Letters of credit, guarantees, electronic bills of lading and standby letters of credit.

As corporate clients become more demanding of their trade partners to embrace digitisation and increasingly rely on technology to conduct business, banks are stepping up to the challenge by delivering enhanced user experience, improved functionality, and a broad suite of connectivity options.

Importance of structured bank communications and audit trails

Structured bank communications and audit trails between banks and clients are very important. Banks have the responsibility of ensuring that their communications with clients are structured and clearly defined to avoid any ambiguity or uncertainty. It is also important that the correct parties respond to the communication in a timely manner, such that there is an appropriate audit trail for all individuals involved.

For example: On many occasions, we have seen cases where a client receives a notice from the bank but does not respond to it immediately. In some instances, the client may not be aware of the deadline or may be unaware of what actions need to be taken as a result of receiving this notice. The lack of proper structure and clear messaging can often lead to delays in responding to requests from banks.

Lack of connectivity for corporate clients and reduced customer stickiness

As demand for multi-bank trade finance solutions has more than doubled over the last few years, an increasing number of corporates that use the services of multiple banks are finding it inefficient to work with every bank on an individual basis.

Larger corporates have the bargaining power to dictate to their banks the formats they should use, however for smaller corporates, buying or building a multi-bank solution can prove to be expensive – and then they convince their banks to work with it. The growing demand for multi-bank solutions presents a difficult hurdle for many banks that must focus on client needs.

To end; a black swan event has created chaos and new opportunities for businesses, forcing them to adapt to a new technological status quo. To navigate successfully through the technological advancements being made, corporations are undergoing a rebirth and embracing new-age technologies. Banks must do the same to keep up.

About the author: Jacco De Jong is Global Head at Bolero.

Richard Shearer, CEO of Tintra, explores the importance of frictionless banking technology for cross-border transactions.

At the height of the pandemic’s first wave, the BBC ran an article on the struggle for migrants to move money from one country to another in lockdown conditions. The story of Liberian national Arthur Beare was striking. He said that it was almost impossible to receive remittances from other countries because he couldn’t access banks or transfer shops: either the banks “ask you to leave” or else it takes five hours to get inside. Many people in emerging markets depend heavily on cross-border payments to survive, so Arthur’s lack of access was a life-or-death situation. This kind of financial exclusion needs to change. 

On the other side of the coin, there are stories like those of Chandra Ceeka, an IT consultant living in Britain who sends money home to India. Although he can make payments online, he “doesn’t get the deals he used to” from local transfer shops, costing his family vital funds at a dangerous time. Of course, if Chandra only wanted to make a domestic payment within the UK, there would have been no such issue. There has been a real drive towards ‘frictionless’ banking – ways of making transactions as quickly, easily, and cheaply as possible – in Western countries. And, with the arrival of the pandemic and its social restrictions, this drive has been sped up considerably. This gives rise to the question: why aren’t cross-border payments equally frictionless? Especially for those in emerging markets, who have everything to lose and much to contribute. 

Navigating “a devil’s obstacle course”

The inefficient state of cross-border banking is certainly not due to a lack of enthusiasm. Let’s put aside the 800 million migrants who send money home (according to the UN): even then, we are left with emerging markets who are very happy to embrace the digitisation and technological advances that fuel frictionless banking. These regions have young populations who are digital natives, hungry for speed and convenience. 

The fact remains, however, that people in these countries - from the 800 million who rely on cross-border remittances to large multinationals who drive emerging markets’ growth - still have to deal with what research analyst Sam Klebanov calls the “devil’s obstacle course” when transferring money. This is reinforced by the fact the fees alone for cross-border payments cost a frankly exploitative 11%, and they can take several days to clear.

This is an unacceptable state of affairs, and it is those from emerging markets who suffer the most from such exorbitant costs – individuals and large corporates alike.

This kind of practice has no place in the modern world. If domestic bank transfers can happen with no payment barriers and at the tap of a smartphone, then we need similar technology for cross-border payments too.

Cross-Border Technological Innovations

What kinds of technological solutions are on the horizon for frictionless cross-border transactions? Naturally, given the digital nature of such solutions, cryptocurrency may well have a part to play. According to Stan Cole, Head of Financial Institutions at Inpay, there is promise in using blockchain to offer customers “cheap, real-time international money transfers that are more reliable and secure.” Crucially, this system avoids the “devil’s obstacle course” and high prices that cause problems for people like Arthur and Chandra.

Alternatively, recent white papers published by technology integration specialists Banking Circle point to the use of “decoupled architecture” – a system in which “commoditised services – like payments and cross-border transactions – can be delivered by specialist providers.” This kind of system allows banks to streamline international transactions by outsourcing them to cloud-based service companies. As Banking Circle notes, this may be an appealing move for banks who need the latest technological advances but don’t want to invest directly in infrastructure which may become swiftly outdated. It’s encouraging to see these kinds of developments for established banks since their fees are far higher than those of third parties in cross-border transactions.

Cross-border futures for the global economy

Obviously, the stakes for this kind of financial inclusion are high: for many individuals in emerging markets, easier cross-border payments reduce poverty and, according to the Centre For Global Development, enable investment in sanitation, education, and healthcare. But there’s another side to this story: it is a mistake to generalise emerging markets as merely ‘victims.’

Emerging markets and the powerful multinationals based within them need to be considered in terms of their substantial and vital contribution to international trade.

Emerging markets have huge potential as drivers of the global economy: cross-border trade from parts of Africa, Latin America, and Asia is expected to grow by as much as 11% between 2018 and 2022 according to EY. By contrast, developed markets with protectionist policies are marked by slow and uninspiring growth and do not come close to hitting the lucrative heights of emerging markets’ outward-looking engagement with international trade. 

From a national to an individual level, then, the need for frictionless cross-border banking is a tale of two halves. For individuals like Arthur and Chandra, ensuring that they or their families in emerging markets receive as much remittance as possible with as little fuss as possible allows for investment in a personal future. For large multinationals and financial institutions based in emerging markets, there is clearly much to gain from lowering exclusionary barriers within the cross-border payments sector, as such markets lead the way in cross-border transactions. A mixture of tech innovation and inclusive sentiments will allow emerging markets to usher in new levels of growth, development, and prosperity on the global stage.

Business growth consultant Daniel Groves offers Finance Monthly an insight into the business trends which will define post-pandemic life. 

2021 is expected to be a year of change, with businesses around the world optimistic that the months ahead will be brighter than what 2020 dealt us. Many of the micro trends that companies thought would be temporary measures throughout the pandemic have become macro trends that are here to stay. These are a few of the trends that small businesses and entrepreneurs should be watchful of in order to maximise their efforts and enhance the likelihood of success.

Digitisation will become the focus

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The way we shop and interact with businesses has changed and it’s unlikely that we’ll return to the old way of engaging with companies. Businesses have had to adapt swiftly and boost their online presence, including digitising their operations to meet the demand for online services. There’s been a huge shift to online shopping, forcing companies to rethink their strategies, owing to the desertion of the high street. 

An online presence is vital in today’s digital world to compete, and companies need to have a strong digital footprint to engage with customers. But in the next normal, the focus will be on online experiences over in-person alternatives. The future of business will centre around digital offerings and solutions, from the increase in remote working tools to experiential shopping experiences that make use of artificial intelligence and data-driven innovation, including live streaming eCommerce.

Convenience is key

A study by PwC discovered that customers expect efficiency, convenience, and a welcoming service from businesses, and they would pay more for these elements. All of these features are achieved through a blend of technology and the human touch, so, companies need to focus on digitisation going forward to stay competitive. There are various ways that businesses will create a more convenient experience for customers, from subscription models and delivery to reducing friction with cashless payments. Contact-free payments, like QR codes, are a flexible way to accept contactless payments, creating a new kind of convenience for customers while also streamlining processes for staff. QR codes are faster and versatile for a host of industries, but they are also incredibly accessible and easy for customers to use, making them a frictionless solution. 

Automation will increase

Automation will be a top business trend in the next normal, as businesses return to normal, albeit with a larger remote workforce than pre-pandemic. Many businesses are seeking efficiency, in many cases because their workforce has diminished as a result of the pandemic, which has meant a greater reliance on automation. Automation tools can help businesses build greater resilience and agility to adapt when situations call for it. Here are a few of our favourite automation tools for UK businesses: 

• Hubspot - CRM system for small businesses 
• Buffer - free social media scheduling platform
• Zapier - custom automated actions between essential applications
• Calendly - automatically book meeting slots depending on your availability
• Trello - free visual project management tool for teams 

 Automated interfaces such as chatbots are helping businesses to deal with customer service and are delivering a better customer experience. While simplicity was important during lockdowns, automation isn’t going anywhere now that lockdowns are lifting. 

In fact, in the next normal, we’re likely to see more automation as businesses look to technology to streamline their operations, deliver more consistent services and manage workloads. From smart devices used in healthcare to monitor patient's vitals to using it for administrative tasks, automation is here to stay.

A redefined workforce

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The pandemic forced businesses to adapt to a distributed workforce, but many business owners have been pleased with the results and don’t want to return to the old way of doing things. There’s no doubt that there are challenges to working remotely, for some industries more than others, whether it’s data security, fostering effective engagement, or maintaining efficiency. 

 But the benefits have outweighed the difficulties to make remote working a staple feature of businesses going forward. Remote working offers productivity benefits, cost-saving measures, and a better work-life balance for staff, making it an appealing option for many companies who will be seeking solutions to the challenges they’ve faced over the past year to improve operations in the future. 

Final thoughts

The way businesses operate has changed indefinitely. SMEs can begin making tactical adjustments to adapt accordingly while also growing. There are many ways to adopt these trends going forward but staying flexible and prioritising digital transformation are at the heart of them all. Companies that can integrate digital practices into their existing processes with agility will increase their successes in the long term. 

Ian Perry, Principal Solutions Architect at Zscaler, shares his thoughts on financial services modernisation with Finance Monthly.

This past year has seen the financial services industry speed up the implementation of many digital processes. Not only did the global pandemic force banks to shut, employees to work from home and consumers to use digital payments services both online and in-person, it has also raised questions around the brick-and-mortar heavy model of banking, with many pointing to a fully digital financial future.

Maximising digital investments

Despite the technical capabilities available to assist in such a move, no analysis of how the financial industry is attempting to modernise would be complete without a reference to the sector’s legacy infrastructures holding them back.

This isn’t because of a lack of desire to modernise. In fact, most financial firms are quite well advanced in their cloud journey. The financial services industry as a whole has already invested heavily in digital transformation and is well aware of the benefits of moving workloads to the cloud in the backend. However, many financial services CTOs have not necessarily been able to move the corresponding infrastructure and users along the same path. This means that unfortunately, many financial services firms have been unable to fully realise their investments in new applications and cloud platforms to the frustration of many financial services CTOs and CFOs alike.

Many financial services are unfortunately falling into the trap of developing hybrid infrastructures that are flexible enough to adapt to some new digital services and requirements yet are still based within old foundations. We often see core banking applications stay in mainframe on-premise networks, whilst more general apps and functions, such as office and admin related tools, are moved to the cloud. For example, there has been a huge uptake in banks migrating to the cloud-based Office 365, which promises the agility required to adapt to our new digital ways of working. However, all the benefits and functions of new digital tools like Office 365 are often at odds with legacy network set-ups, and this inability to harmonise new tools with old systems is holding banks back.

The financial services industry as a whole has already invested heavily in digital transformation and is well aware of the benefits of moving workloads to the cloud in the backend.

The pandemic has only led to further existential frustrations around the banking model itself. For example, is there really a need for massive HQ locations? Is there still a demand for individual branches, which require complex architectures to secure all traffic? There are many predictions as to what the branch of the future might look like, but ultimately, the industry must face the facts that there will be less reliance on branches and more pressure on digital services.

Staying ahead of the curve

As other industries continue to innovate at a quick pace by maximising their cloud deployments, consumers and employees alike will increasingly expect seamless experiences across all their touchpoints with a financial services organisation as well. Taking a page out of the digital transformation of other consumer services, the finance industry must assess the journey of banking from a user’s point of view, rather than driven by processes and necessity. “Digital transformation” for banks is no longer providing the capability of a digitally scanned cheque – the ecosystem is far more reactive and more user-focused as the market opens with more options available, many of which are geared to disrupting legacy organisations and processes.

As such, agility is more important than ever if the financial sector hopes to adapt to new business models, while managing and deploying products remotely worldwide in a consistent manner. For financial teams spread across the world especially, agility in the market is more important than ever to manage and deploy products worldwide in a consistent manner. Many banks own different brands to drive differentiation in regional markets, and this behaviour needs to be reflected in their operating model. Not only do regional compliance needs apply, but markets have very different demands based on their local consumer needs.

Adopting enablers

These growing pressures don’t necessarily mean that financial firms have to undergo complex and expensive overhauls of their existing legacy infrastructure to fully realise the promise of the cloud. A future-proof infrastructure that can support flexible requirements during the pandemic and beyond, while delivering a great user experience, increasing productivity, and supporting business continuity is possible to implement. Indeed, true network transformation drives beneficial outcomes from a risk and cost reduction perspective without requiring heavy technical lifting.

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For example, the growing popularity in the financial sector of the “Zero Trust” approach has been touted by many as a solid solution for financial services in particular. Many banks still rely on the legacy “perimeter” approach to securing their data – which focuses on stopping intrusions. However, the Zero Trust approach instead enables banks to “trust no one” as default, and requires further security before allowing access to secure assets.

This is every banking CTO’s dream as a Zero Trust model allows for traffic to run securely through the internet instead of having to run through corporate IT, which enables banks to have maintenance-free branches. Individual branches are not only more flexible and significantly easier to maintain – but costs are dramatically reduced. Furthermore, a Zero Trust model allows banks to fully realise the benefits of cloud-based tools like Office 365 as they can be deployed safely through the internet, rather than relying on legacy corporate IT systems. From this transition alone, it’s possible to see how financial services infrastructures can enable convenience and simplicity. A complicated refurbishment is no longer required to implement digital delivery of all the key requirements that customers expect from banking services, but with the same – if not more advanced - secure and frictionless experiences offered by other industries.

Looking ahead, it’s clear that financial services need to urgently assess their capabilities for keeping up customer demands and ability to innovate quickly, if they want to survive in our rapidly changing world. Only by truly realising the benefits that were promised by the cloud infrastructure financial services were so quick to adopt, can the industry shake off the curse of legacy infrastructure for good.

Steve Cox, Head of Accountancy at IRIS Software Group, shares his thoughts on MTD and its implications with Finance Monthly.

HMRC’s prompt decision to delay the next phase of the making tax digital (MTD) rollout in 2020 due to the coronavirus was a welcome move. This now means any businesses who were expected to put digital links in place last year must have this done by the rapidly approaching deadline of April 2021.

Added to this, from April 2022, all VAT-registered businesses will be expected to file their tax returns digitally regardless of their turnover - which was a limitation in the previous phase. For many businesses, this requires a substantial amount of work if the bookkeeping is done manually, on paper records or even not at all, adding to their already full plates as they look to rebuild following the on-going challenges borne from the pandemic last year.

Accountants naturally have a critical role to play in supporting businesses through this next phase of MTD. So, it’s important to have a clear understanding of what needs to be done right now and how to make the transition as simple as possible for clients.

Actions to take now to meet MTD

The first port of call is to evaluate all clients who must comply with MTD before the phase 2 deadline, and review the MTD template built for the first phase. This will help establish a clear strategy of what each client needs to do. Accountants should then begin the transition preparation - communicating with clients about their exact financial positioning, workflow, filing and how to approach switching to digital records.

The first port of call is to evaluate all clients who must comply with MTD before the phase 2 deadline, and review the MTD template built for the first phase.

This is where it is important for accountants to think smart as MTD is a volume play - in both clients and data - when it comes rolling out across a large portion of their client base. One tool that is incredibly valuable and available from software providers, including IRIS, is record digitisation which enables anyone who needs to track receipts, capture photos and digitally process receipts, invoices, purchase orders and bank statements. The physical data automatically becomes a digital record and uploaded to a cloud-based platform, ready for accountants to review and compile VAT returns as required in their process. Such automation tools dramatically increases client efficiency and process productivity, while making life less stressful for accountants and business owners.

Through automation, such systems eliminate the time-consuming everyday chores, ensuring accountants can act smart and get more done. The majority of small business owners end up spending their personal time compiling their records from the week (or month) and would love to get this time back thanks to automation tools. In return, time saved chasing and reconciling client data frees up accountants to focus on client relationships and higher-value advisory services. It also rapidly improves communication speeds, transforming how accountants engage and connect with clients and prospects, ultimately helping them to retain and attract new clients.

Once accountants have successfully evaluated and prepared their clients for MTD and established a clear, proactive plan of action, they then need to make sure all clients have registered for an HMRC Agent Services Account, although proactive accountants could do this ahead of client evaluation. Once this is done, certain HMRC online services, including the MTD, VAT and income tax pilots can be accessed so business owners and accountants can work together to manage the transition efficiently; making it as simple as possible for both parties involved.

By using technology to gain instant access to accurate, real-time data well ahead of this year’s MTD deadline, accountants and business owners can be sure they’re in the best position possible to move forward with confidence.

Future-proofing for challenges ahead

Every client is different and will have their own way of managing their tax - some will have been using paper-based processes for years on end. So, it’s important to frame MTD in a way that isn’t complicated or confusing. Given the rapid digitisation of UK businesses over the last year to survive - and in some cases thrive - during the pandemic, businesses are more likely to be open to a digital records conversation than ever before.

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Yes, the practical side of what’s required and expected with regards to MTD is essential to get right. But MTD is about more than mere compliance, it’s about looking to help future-proof businesses. This is a real opportunity to build relationships with clients on a personal level and move into that trusted advisory role.

Working with clients to lay out a clear roadmap of steps they should be taking ahead of the 2021 MTD deadline - as well as the April 2022 VAT rollout - will enable accountants to help their clients on a real-time basis. And ultimately be of more support to business owners looking to recuperate from the impact of the last year.

By digitising now and creating great efficiencies across the client’s business, accountants can take advantage of improved workflows, increasing productivity and working smarter and help their clients future-proof their business for good. Harnessing technology to streamline tax management and create a single view of the data for all financial records, means accountants will put their clients in the best position to move forward with confidence.

Scott Bozinis, CEO at InfoTrack UK, explores the changes we have seen in the property market and the path ahead post-pandemic.

21 June 2021: it is a date already engrained into the minds of people across the UK. It is the day when Boris Johnson hopes to lift all forms of lockdown and social distancing measures; it is the day life is due to return to normal.

In many respects, however, life will not return to normal – at least, not the normal we knew before the pandemic. Certainly, when it comes to the ways businesses operate and industries function, irreversible changes have taken place, meaning the long-term outlook is not one of returning to the past but preparing for a future defined by new processes. The most prominent of these is the adoption of new technology.

The property sector is a prime example of this. From estate agents and conveyancers through to homebuyers and sellers, the industry is in the midst of many interesting trends which look set to shape the year ahead.

The need for technology will only get stronger

Technology has been embedded in our lives for many, many years. However, when COVID-19 began to spread rapidly in early 2020, forcing offices to shut and people to remain in their homes, there was a further leap from the physical world to the digital.

In the property industry, lockdowns and social distancing rules have caused many headaches. It is, after all, an industry that has traditionally been slow to embrace technology, instead remaining reliant on offline processes and masses of paperwork, particularly when it comes to the transfer of property from one person (or organisation) to another.

In the property industry, lockdowns and social distancing rules have caused many headaches.

In a very short space of time, businesses throughout the property sector had to adapt; digital transformation strategies were greatly accelerated, and entirely new practices were adopted almost overnight. This is especially true when we look at the way in which people buy property, with virtual house viewings, e-signatures on documentation and new compliance requirements quickly becoming the norm.

But it is the conveyancing space that has perhaps been the greatest beneficiary of the sudden rush to embrace technology. With buyers, sellers, agents and solicitors all involved in a property transaction, the conveyancing process has historically been blighted by inefficiencies in coordinating activities, providing updates to stakeholders and securing all the necessary documentation. However, when this process is put through a single digital platform, it becomes exponentially easier, saving time, money and stress for all parties. What’s more, the risks of human error are also removed.

In short, the pandemic has underlined what was already becoming clear to many businesses: technology can provide both competitive advantage and significant efficiency gains. When it comes to conveyancing, technology enables firms to streamline the entire process, automating cumbersome and time-consuming manual tasks so that skilled employees can instead focus on delivering a better service to clients.

There might be a timeline for the easing of lockdown measures in the months ahead, but the property sector’s reliance on technology will not recede in line with these changes. Faced with no alternative, firms have found better ways of working by using digital tools. These tools will not only help them through the limitations of lockdowns but ensure they are better positioned to win more business in the future and maintain higher caseloads.

Will there be an exodus away from British cities?

Away from the fundamental, technology-driven changes that have taken place behind the scenes, the property market could also be facing another notable shift over the coming year. It could be about to witness a significant change in demands from homebuyers, which will have ramifications on businesses in this sector.

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COVID-19 has, in the short-term at least, sparked an “exodus” from cities. Unable to enjoy the vibrancy of life they are used to (pubs, bars, restaurants, shops, theatres, museums and galleries all being closed), data shows that urban homeowners have been selling up in their droves so they can move into rural areas.

For example, Londoners bought 73,950 homes outside of the city in 2020, a four-year high, according to Hamptons International. Meanwhile, during June and July last year, the number of city residents enquiring about village properties via property portal Rightmove rose by 126% when compared with 2019.

Will this trend continue throughout 2021? Only time will tell. The reopening of leisure, retail and hospitality businesses may reignite the appeal of city living – or maybe the desire for more spacious properties and greener surroundings will win out.

Either way, it is an important trend for businesses in the property space to monitor. It will, of course, have an impact on house prices and may affect the areas in which they operate.

Tax reforms are on the horizon

Public debt has spiralled as a result of the pandemic, with the Government having little choice but to borrow eye-watering sums of money. This debt will need to be brought under control in the years ahead, making tax hikes almost inevitable.

There are some we already know about: as of April 2021, for instance, non-UK residents that purchase properties in England and Northern Ireland will be subjected to a 2% SDLT surcharge. Coupled with the impact of Brexit, this may result in fewer overseas buyers looking to invest in UK property.

For now, the extension of the stamp duty holiday, as announced in the Spring Budget, will ensure the property markets in England and Northern Ireland remain hives of activity. However, buyers, sellers and property businesses must monitor prospective reforms closely.

Public debt has spiralled as a result of the pandemic, with the Government having little choice but to borrow eye-watering sums of money.

One thing is for certain: even as the virus abates, the transformation of the property industry will not. That’s why I believe we are set for a disruptive 12 months which will radically redefine the property market as a whole.

Sanjay Radia, Sales Engineering Manager at NETSCOUT, explores how financial services have changed with the global health crisis and how its more positive changes can be made permanent.

Even before the pandemic, the financial services sector was under pressure to meet the challenges of the modern, digital world. The rise of open banking, and the move to hybrid cloud infrastructures was a shot in the arm for new digital native competitors, which demonstrated a flexibility and agility that larger, older financial services firms lacked.

When the pandemic eventually struck, staff moved to remote working and customers were forced online as bank branches closed, it caused an acceleration of digital transformation in the largest institutions. Now, customers have grown accustomed to the speed and convenience of online banking. If these changes are signs of a more permanent change, what does this mean for financial services institutions?

Digital transformation in the past

Online banking has been around for nearly twenty-five years with mobile banking following a decade later – financial services are well versed in online provision. However, the level of demand placed on these services over the past year has been unprecedented. Indeed, according to research by Fidelity National Information Services, in April 2020 there was a 200% increase in new registrations to mobile banking and an 85% increase in mobile banking traffic.

In the year since then, continued lockdown restrictions have prevented bank branches from reopening for in-person banking. In this time, employees have adjusted to remote working and customers have adjusted to online banking. This shift to an increased reliance on online banking has resulted in several banks announcing the closure of branches. HSBC, for instance, plans to close 82 branches this year.

Online banking has been around for nearly twenty-five years with mobile banking following a decade later – financial services are well versed in online provision.

The previously gentle digital transformation process has rapidly accelerated since the start of the pandemic, and it looks like these changes are here to stay. Customers who did not previously bank online have had a whole year to get used to the change and are now unlikely to revert back to visiting their local branch, it is just not as convenient as logging into an app on their phone.

The rise in online banking means that customers and employees are increasingly dependent on online systems. This has significant implications, both from a service assurance and a security perspective. Any drop in service could disrupt the customer experience and impact customer loyalty. Added to that is the fact that employees working from home are more vulnerable to cyberattack.

Preparing for the digital future  

With customers disproportionately dependent on online systems, service assurance needs to be a top priority for providers. A recent survey revealed that Barclays is the top rated of the traditional banks’ apps with 76% of users rating it 'great' for usability. Barclays launched its mobile banking app in 2012, so it has had plenty of time to fine tune it. Even so, to cope with the increased demand, some banks have been forced to increase their VPN capacity, by as much as 600% in the case of Standard Chartered.

As we begin to return to the ‘new normal’ it is important that this progress is continued, and the adjustments made to cope with the pandemic become more permanent. To ensure a high-quality user experience, companies must test and monitor new developments over both wired and wireless networks to account for the expanded user parameters. Companies must also pair this with a revamped vulnerability monitoring process to make sure that any issues are spotted and resolved rapidly.

From an employee perspective, lockdown restrictions forced a shift to working from home but, with closures of bank branches, this shift looks to be here to stay. This impacts security. Bad actors love to take advantage of tumultuous times and the decentralisation of workforces is the perfect opportunity for them. Indeed, in 2020 the annual number of observed distributed denial-of-service (DDoS) attacks crossed the 10 million threshold for the first time in history – the numbers speak for themselves.

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The fact of the matter is that home office networks are just not as secure as corporate infrastructures. The rushed nature of the shift to working from home meant that many businesses did not have time to implement best practice security procedures. Of course, it has now been a year and many businesses will have updated these procedures to enhance their security. The next step is to future proof these procedures to account for the hybrid office-home landscape that will likely become the norm in the post-COVID world. Implementing advanced automated DDoS technology will be critical to securing dispersed workforces.

We are only just beginning to understand what the post-COVID world will look like, but with banking apps becoming more popular than social media apps in 2020, it is clear that the trends of the past year will continue. Remote working impacts both employees and customers so it is vital that the financial services sector continues to advance the progress made over the past year and ensure that mission-critical businesses services can operate securely and uninterrupted.

Finance Monthly hears from Stan Cole, Head of Financial Institutions at Inpay, on the progress that has been made towards creating seamless cross-border payment solutions.

Modern technology continues to advance at astonishing speeds, and recent years have given us plenty of remarkable developments in the fintech sector in particular. Yet, despite phenomenal progress in other areas, the trillion-dollar cross-border payment industry was stuck in the dark ages for an inexplicably long time. Banks and other financial institutions had to make do with outdated models, which slowed down international transactions, rendering them expensive and unreliable. And to make these frictions even more frustrating, many cross-border payment systems offered very limited transparency.

Improvements were long overdue, and thanks to rapid modernisation within the industry, customers are now enjoying a far better experience. However, we’re only at the beginning of the cross-border payment revolution. In fact, changes are expected to come even faster in the wake of the coronavirus. For example, Stephen Grainger, executive vice president of Mastercard’s New Payment Platforms, believes that global eCommerce will transcend the need for face-to-face transactions, while more remote and migrant workers move overseas, and more people enter the gig economy. “As the change becomes reality, it's the financial institutions that will be expected to step up and provide efficient cross-border payment systems that their clients demand — especially in regions where the need for trusted, reliable cross-border payments is increasing rapidly,” he explained to Business Insider.

With goods and services moving more quickly and across greater distances than ever before, customers are increasingly demanding cross-border payments that are as seamless and convenient as domestic ones. Huge progress has already been made and the future is just as exciting, and we’ll explore how all of that has transpired below.

How have cross-border payments modernised so far?

Cross-border payments have traditionally been the domain of correspondent banks. While these institutions are still major players in the industry, the rapid advances in technology and consumer demands mean that times have changed. With the click of a button, people are able to send emails, photos and videos globally, and these are received in real-time. Why shouldn’t consumers expect the same convenience when wiring money abroad?

With goods and services moving more quickly and across greater distances than ever before, customers are increasingly demanding cross-border payments that are as seamless and convenient as domestic ones.

There have been a host of new arrivals in the cross-border payments sector, so people are no longer forced to undertake a costly, slow, non-transparent international bank transfer. In lots of countries around the world, innovative services have made it possible to make an instant payment to a mobile number, email address or another unique ID form. This ID is mapped to the correspondent bank details, so in many nations, sending money is already as easy as sending an email. This marks a huge evolution from the traditional way of transferring money internationally.

In the face of stiff industry competition, banks need to embrace today’s consumer demands more than ever, and speed up their product propositions, reduce costs, and offer new, modern digital solutions if they are to retain their customers.

What does the future look like for cross-border payments?

Stablecoins

The future of payments is digital and tokenised, which explains why stablecoins have been gaining such popularity. These are cryptocurrencies that attempt to peg their value to an external reference, like a hard currency or commodity, in order to resist the high volatility usually experienced by the likes of bitcoin.

We have already seen this digitisation in action in South Korea, which has started to move from card to stablecoin payments. Likewise, Chinese central banks have partnered with e-money providers to test and provide central bank digital currencies (CBDC), vowing to launch a system like this before the 2022 Winter Olympics in Beijing. “As cross-border payments involve numerous players, time zones, jurisdictions, and regulations, they are often slow, opaque, and expensive, making us believe that an interoperable CBDC could play a role in improving cross-border payments,” explained Senior Editor Mirela Ciobanu in a feature for The Paypers.

However, it remains to be seen how large financial players in the current marketplace will respond to this shift. They could try to remain in the centre of such infrastructure and charge fees to their users for making transactions, or merely provide platform access to allow users to make peer-to-peer [stablecoin] transactions. We already know that Visa plans to help partners launch cryptocurrency services through its partnerships with wallets and exchanges, while Mastercard is also introducing cryptocurrency to its network, “allowing [customers] to transact in an entirely new form of payment”.

The future of payments is digital and tokenised, which explains why stablecoins have been gaining such popularity.

Blockchain & cryptocurrency

Incorporating blockchain into the cross-border payments space will help resolve key drawbacks of using correspondent bank transfers for overseas transactions. Banks that proactively adopt blockchain solutions will be able to attract and retain customers by offering cheap, real-time international money transfers that are more reliable and secure.

As Payments Journal notes in its feature on blockchain in cross-border payments, many issues with international transfers “stem from the high number of intermediaries in the form of correspondent banks that are involved in processing a transaction. Each additional intermediary drives up the processing fee, increases the number of failure points, and adds to the risk of fraud somewhere along the payment pathway”. Blockchain means these intermediary stages are not required, and the risk of fraud is significantly reduced, as all transaction information is stored on the network and is very difficult to modify.

A big obstacle to blockchain adoption has been its regulatory uncertainty. However, the situation is changing now that governments across the world are increasingly looking into blockchain, and developing CBDCs to distribute and receive payments outside of traditional banking systems.

Collaboration between banks and fintech PSPs

As an ex-banker and an ex-oil/gas professional, I like the analogy of banks being oil tankers — they’re big and strong, but take a long time to change direction when out at sea. The key issue here is that banks tend to rely on systems for international payment products which were developed last century, requiring customers to provide standardised legacy data. And as banking systems vary between different countries, one size certainly doesn’t fit all.

Fintech PSPs, on the other hand, are speedboats — fast and agile, jumping over the waves. Collaborating with these organisations means that banks can take advantage of the right data and access new instant payment infrastructures that are being created around the world.

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Having worked on both sides, my view is that banks and fintech PSPs both need each other. Banks have already acquired a long-standing, loyal customer base, and although fintech PSPs don’t yet have that in their favour, their freedom from client acquisition and legacy infrastructure costs lets them concentrate exclusively on product and service delivery. Therefore, teaming up with them enables banks to enhance their product offering, improve time-to-market, reduce costs, and retain their customers. Collaboration beats competition, and results in a win-win outcome for both sides.

Kris Sharma, Finance Sector Lead at Canonical - the publisher of Ubuntu - offers Finance Monthly his thoughts on  APIs and how firms are already using them to enhance their services.

Cloud computing, big data analytics, artificial intelligence (AI), machine learning (ML), distributed ledger technology and process robotics are all playing a key role in reimagining financial services for a digital world. A growing number of financial institutions are drawing plans to adopt these technologies at scale as part of their digital transformation initiatives to accelerate financial data processing, deliver mass personalisation and increase operational efficiencies.

Most organisations currently deploy a complicated mix of technologies, legacy software platforms, applications, and processes to serve customers and business partners. On their digital journey, financial firms will have to integrate data, processes and business functionality from legacy systems of record to this set of new technologies. Many businesses have tried to adopt various transformation approaches such as re-platforming and re-hosting, direct integration between applications, rip and replace, and deploying middleware technology to deal with legacy systems and their integration with new technologies. But each of these approaches have their own drawbacks and can limit the adoption of new solutions within the constraints of legacy technology debt.

An evolutionary approach to digital finance, however, will unify information and data without the need to merge operational systems. Application programming interfaces, or APIs, can overcome the challenges involved with adopting new technologies and more innovative solutions while integrating with legacy run-the-business applications.

Where APIs become a core piece of the puzzle

APIs are increasingly playing a central role in digital finance. They essentially bind different parts of the financial value chain together, even though the underlying components may be based on different systems, technology, or supplied by different vendors. Using APIs, financial firms can securely share digital assets while masking backend complexity, integrating software applications and focusing on maximising their proprietary strengths by sharing data, systems, and functionality with customers, partners and developers. This in turn drives digital transformation without a complete overhaul of existing infrastructure.

Application programming interfaces, or APIs, can overcome the challenges involved with adopting new technologies and more innovative solutions while integrating with legacy run-the-business applications.

Since APIs are self-contained, they can be readily deployed and leveraged for innovation at speed, enabling financial institutions to introduce and integrate new features. When powered by the cloud, firms can develop, test and launch new services to customers quickly and cost-effectively, fuelling business growth. For example, insurance firms can make more timely offers by cross-selling home, auto and life policies. Financial institutions can leverage APIs to connect sources and use cloud computing to handle massive amounts of data, as well as AI and ML services live in the cloud, thereby analysing all this data faster and cheaper than they can on-premises.

Who is successfully using APIs?

Challenger bank Starling was designed and built completely on AWS cloud to deliver and scale infrastructure on demand. Additionally, by building a bank with open APIs from day one, Starling is natively compliant with the European Union’s Payment Services Directive (PSD2) directive.

According to ProgrammableWeb research, financial services is ranked highly in the fastest growing API categories, given the rise in digital forms of payment, an ever-increasing customer demand for connected solutions, and open banking initiatives. APIs are at the heart of the PSD2, the UK’s open banking mandate, as well as the Bank of Japan and the Monetary Authority of Singapore’s open banking initiatives.

Finastra’s Open Banking and collaboration: State of the nation survey 2020 finds that “86% of global banks surveyed are looking to use open APIs to enable Open Banking capabilities in the next 12 months”.

As APIs attract an ecosystem of developers, a financial API provider can encourage participation to fill go-to-market gaps and extend its services and data to new markets and use cases. Barclays is fostering collaboration and generation of new ideas through secure, innovative APIs. The Barclays API exchange has built an API library that is available for use by third parties to develop and test new products. Barclays and third-party developers work together to create, develop and test new product ideas before releasing them to the regular API catalogue. Similarly, Starling Bank provides a marketplace that enables developers to build their own products and integrations using its API.

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Unleashing the potential

There is an opportunity for financial firms to leverage the power of APIs by bringing them together with digital technologies to broaden the possibilities for innovation and expand customer experiences. Financial institutions need to reimagine APIs as product offerings that will drive business expansion and increase revenues.

The future of digital finance will be driven by organisations building digital business models, redefining their API strategies and bringing new customer propositions to life using modern web architectures, best-in-class technologies and new ecosystems.

Nigel Frith, vice president of financial services at AskTraders, discusses how challenger banks have revolutionised the banking industry and the opportunities more traditional banks can explore as they aim to extend their digital offerings. 

As the high street has evolved in order to meet the changing needs of consumers, retailers have been left with no option other than to reinvent themselves. The banking industry certainly hasn’t been immune to these shifting trends either and as a result, over the last few years traditional banks have been forced to adapt and change the way they operate. While their face-to-face services still remain a crucial string to their bow, banks have had to invest heavily in their digital offerings in order to compete with increasingly popular digital-first providers. So, why are these challenger banks such as Monzo and Starling so attractive to customers and how have the big players in the industry risen to this digital challenge?

A focus on challenger banks

With their chic apps and personalised offerings, new banks can’t be found on the high street but are instead on your mobile phone. Their customer-centric approach has simplified banking by providing users with features which make daily tasks that little bit easier. From being able to split the cost of meals with friends to keeping track of monthly outgoings, these app-based services have really hit the spot in the eyes of many.

With more than four million customers, Monzo is perhaps the most well-known challenger bank. It started out in 2015 as a prepaid card that could be topped up via its app before transforming into a sole banking brand in 2017. It offers all of the usual current account services regular banks provide but also enables customers to manage their money in an effective and efficient manner. The ease at which you can navigate through the app is certainly a big draw for digital-savvy youngsters who are able to quickly transfer money to their friends and set monthly budgets.

In recent years it has continued to broaden its services such as by adopting a ‘get paid early’ feature which allows users to be paid their salary or student loan a day early. By embracing a channel-based communication model, Monzo has also been able to respond to incidents such as outages in a typically effective fashion. Customers can report any issues using a chat service on the app and they have the ability to freeze a card from their phone should they lose it.

With their chic apps and personalised offerings, new banks can’t be found on the high street but are instead on your mobile phone.

Another major benefit of banking with Monzo and many of its other app-based competitors is that it doesn’t have any foreign transaction fees for spending. It has therefore become a highly attractive option with regular travellers and holidaymakers alike.

How traditional banks have risen to the challenge

Although recent analysis of bank branch data has revealed that (if the current rate of closures was to be maintained) there would be no high street banks left by April 2032, there is clearly still a demand for in-person banking. Many people still feel more comfortable going into a bank to pay-in cheques while others are reliant on the financial advice they can access in-store. Clearly there remains a need for traditional banks, such as the big four in the UK - Barclays, Lloyds Banking Group, HSBC and RBS - to evolve their offerings.

In recent years, therefore, these banks have invested heavily in their online and mobile banking services in a bid to compete with digital-first providers like Monzo. This has included providing customers with perks such as being able to pay for purchases using virtual cards on their apps and providing them with the ability to cash-in cheques from the comfort of their own homes.

Leading the way has been Barclays who in 2017 invested £4,148 million into their digital platforms. Now, more than 90% of Barclays’ transactions take place over mobile devices, emphasising the effective nature of their transition to a more digitally-focused way of operating. In December 2018, Barclays also designed a feature which allowed customers to turn off payments towards certain websites should they feel they are unable to curb their spending. More recently, it has taken things a step further by enabling users to view the accounts they hold with rival banks on their platforms - an option which would have been unthinkable a decade ago.

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Key to ensuring customers have felt comfortable transitioning to these digital services has been the commitment banks have shown towards tackling cyber crime. This has seen the banking industry team up with the government, police and other regulators in recent years. Initiatives have been set up to not only raise awareness of the threat scammers pose but to also reassure customers of the stringent measures banks have in place to protect their personal data. Last year, UK banking security systems prevented fraud on an estimated £1.4 billion scale, demonstrating the importance of their investment into tackling cyber crime.

The future

With banks now constantly innovating in a bid to steal a march on their competitors, it is likely we’ll continue to see big changes taking place within the industry over the coming years. One thing that is clear though is that there will be a continued drive by providers to further improve and simplify the customer experience. Although further high street branch closures are inevitable, banks are working hard to maintain their in-person services for those who prefer to operate in this capacity also. While digital banking isn’t for everyone, the ease and efficiency at which millions of people can now complete financial tasks has left a lasting impression on many.