In his keynote ‘Barbarians at the Gate’, Sam Maule correlated the fall of Constantinople with the position of financial service providers today. He linked the status in UK and Europe with the existing myth and reality related to FinTech. There are three things to be considered when we look at financial services: Data, Open-banking and the disruptions. Financial services have been around for ages and they had built their barriers to entry. But in 2008 the financial services industry as a whole was in a state of massive destruction and getting torn up. 2008 saw the collapse of the financial industry, the concept of cloud computing and the rise in mobile phones we had a computer in every hand. In the UK and Europe, barriers to data sharing were removed with Open Banking and PSD2 (Payment Service Directive 2), and this data was protected through GDPR. With PSD2, the data could get out thereby enabling open banking which helped in providing the best services provided that the customers could opt for.
The reality is that financial services have left behind as they fail to keep pace with technology. Many have started using digital products but there is a long way to go as digital banking is only 1% finished. Billions have been spent on digitizing products but little difference is seen in online through 1998 to 2018. Here comes the concept of what is Born Digital V. Digitized Objects. Digitized objects learn whereas born digital are born in a time where digitized things existed so they are born that way, with the knowledge of how to use these things. Because of this, there is a tendency that when new technology comes in, to take the old form factors and shove it into that new form factor. We do not have a whole new interaction model with the new interface. Digital Banking requires a New Interactive Model for transformation. To make things better, API’s are needed to bridge the gap between different systems such as moving between website to mobile and mobile to mobile and back. Investment in API is required. People do not want to go to FinTech companies because of the security of their data. Even so, because the average time to detect a data breach is 229 days which is a lot of time.
The next question is what do we do about it? How to keep existing customers or gain new customers? The general idea followed is that the banks go after the big consultancy firms who in turn follow up on big service providers. But that is not the case here, the financial services industry is evolving, and the answer to questions like what happens next and how to get over it is to Grow and Evolve. The UK saw a new wave of FinTech companies who had banking licenses and took advantage of open banking and building. What needs to be done to be successful is to-
- Use truly digitized capabilities
- Deliver valuable services to customers
- Who are underserved or overcharged
Digitized capabilities include going Digital- Real-time, intelligently, contextually, humanly, extendable and socially. Credit unions need to learn and adapt how to use data to provide real context and solutions for customers. What is important in the current scenario is the need to keep pace with what’s happening around globally. But the catch is not to apply the same model as it is where you are working because the government is different, the regulations are different, the customers are different and the customer needs differ. The requirement is not only to look around internationally what they are doing but also to what the American companies are doing overseas. Useful learning can also be absorbed from their working.
For example, in India, post the demonetization drive in 2016 three major digital payment channels emerged- PayTM (Payment through Mobile) where direct transfer of payment can be made to the retailer, Google payments and WhatsApp payments. Things like these are not yet seen in the credit union services to their customers and ideas like these can be used in their services.
It is necessary to be very strategic in what you can solve because you cannot solve everything. The key is to do everyday stuff differently in a digital way.