This article is an excerpt of our conversation with Javier Guevara Torres, who is co-founder and CEO of C-Innovation, a fintech-focused market research startup that helps startups and corporates to navigate the fintech ecosystem. Javier has an international background, having worked with companies like HSBC and Santander and he has a unique view of the challenges from both sides of the table.
Bitrise: So much is changing so quickly with the pandemic and it looks like it will continue to change. How do you see that impacting businesses and institutions around banking?
Javier: The 2020s were already being framed as the decade of digital transformation in finance and banking, but the pandemic just accelerated long-standing consumer and business shifts away from brick-and-mortar and towards digital channels.
"There is a strong shift to digital customer experiences that are and will increasingly be a primary area of differentiation, setting the ground for competition between financial institutions dedicated to going forward."
COVID-19 has transformed the role digital experiences play in people’s lives. New consumer habits are already forming, and digital experiences are becoming many people’s primary method of interaction.
Bitrise: Having worked at banks during your career, do you see financial services catching up to those offered by companies that are digital natives? In what other ways can fintechs and technology inspire traditional institutions?
Javier: First off, a big one — In 2021, Google will partner with some banks to directly offer fully online checking and savings accounts inside Google Pay — a service called “Plex.” This application will allow financial institutions to separate their external presentation layer from their back-office data layer to create enhanced digital consumer experiences that are both simpler and faster!
"Among technologies, which have seen increased demand from new entrants and established banks is Cloud and Software as a Service (SaaS). Having low infrastructure costs, they enable products to be created and changed very quickly, while offering resilience, scalability, and security."
Harnessing new technologies will continue to drive global banking for the next couple of years, as technology provides the tools to fend off many of the changes in customer demand, external environments as well as the challenges that competitors can bring.
Bitrise: Besides the Cloud, could you give us some examples of what these technologies could be?
Javier: According to McKkinsey’s research, artificial intelligence (AI) could unlock as much as $1 trillion annually of incremental value for banks. Front of mind, it can boost revenues by improving customer experience through personalization of services to customers (and employees). AI technologies are increasingly integral to the world we live in. To use AI simply to make certain processes and functions run faster and cheaper will be limiting its impact.
Embedded Finance is about abstracting banking functionality into technology and enabling any brand or merchant to integrate innovative financial services and creative forms of payment, debit, credit, insurance, or even investment into their offerings and end user experiences, rapidly and at low cost.
Bitrise: Ultimately, what else can fintech startups and trailblazing banks do in the mobile space to stay competitive?
Javier: Well established startups are becoming more aggressive and ambitious. For a long time, new market entrants found it difficult to break into the financial services industry, but this is no longer the case and despite profitability challenges, challenger banks keep showing sustained user growth, while there is a record number globally in granting banking licenses. From Monument in the UK and Varo Money in the US to Square and in between.
Fintechs keep on adding new innovative features to their service portfolios while expanding their existing products and service capabilities to complement their propositions, outside of their original focus or target segments — driven by the need to show a sustainable model. Ant Group debuted with a virtual bank in Hong Kong, while Australian challenger bank Xinja is to launch a share trading account for customers to invest in US stocks.
"We no longer live in a world where one financial services provider builds the entire customer experience. Traditional banks are committed to transforming into digital ecosystems, making the bank the centre of these platforms."
Banks will overhaul their business models to create a platform for services. Banking as a service (BaaS) can extend offerings, by providing a unified digital channel and technology-driven user experiences for customers. The impact of these trends, combined with macroeconomic realities, like the low-interest-rate environment in the decade ahead, can fundamentally reconfigure the banking industry.
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