Significant hurdles have made the path to expanding financial inclusion in emerging nations more difficult. However, we believe that there is tremendous potential for 'brave' companies – and investors – in areas such as fintech.
It was only a matter of time until platform- and ecosystem-based financial services (FS) emerged and began to challenge dominance as digital channels became increasingly prominent. In addition, lockdowns and a challenging economic environment have increased the trend by driving more customers to use electronic payment platforms and alternative financing sources.
A recent poll done by the IBM Institute for Business Value in cooperation with the Economist Intelligence Unit found that 66 percent of global banking executives said their traditional value chains are being replaced. Fifty-seven percent believe that the lines between the banking and non-banking industries are blurring.
Many people believe that innovation is occurring at an alarming rate in and around banks. The face of banking is changing, owing primarily to:
- Ubiquitous digitization, paired with ubiquitous mobility and cloud computing, has resulted in significant improvements in artificial intelligence (AI) and cognitive computing.
- A highly sophisticated and demanding consumer base in both retail and institutional markets.
However, by leveraging financial technology, extraordinary corporate success has been achieved in countries ranging from Kenya to China. Moreover, fintech has aided in the advancement of one of the critical goals for long-term global development – financial inclusion – by giving access to payment systems and services such as credit, hence reducing inequality and alleviating poverty.
Applying concepts of Digital Reinvention to traditional banking value chains and banks can yield dramatic results. Conventional efficiency improvement and cost reduction approaches have characterized bank strategies over the past decade. However, these approaches are internal-looking and not conducive to customer expansion and revenue growth.
Technology underpins platforms and ecosystems, and it is foundational to creating reinvented customer experiences. Embracing Digital Reinvention rather than incrementalism provides a pathway for the most visionary banks to adopt an "experience-first" planning approach, employing the strengths of ecosystem partners and themselves.
Digitization and advanced data analytics, such as the use of AIs, are creating essential opportunities for banks and NEO banks; they also render long-standing business models obsolete as new entrants compete aggressively to steal market share from incumbents.
Behind all of the buzz around ecosystems is a genuine possibility of addressing consumer demands more effectively while creating new revenue sources.
The role of technology in making these models function is undeniably essential. This is where NEO banks have emerged and gained their popularity. However, when you seek to redefine value and reset strategic priorities, this is a cultural as well as a technology leap.
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