Rapid technological innovation and the emergence of more stringent regulations means that banks are having to reinvent themselves as trusted providers of a much broader range of financial services, delivered securely to consumers primarily via mobile technology.
The unbundling of banking and transactional functions from traditional financial services providers — driven by increased development of mobile technology, regulatory change, and competition from agile new challenger banks and fintech providers – is forcing banks to radically rethink their business models.
“Managing change on multiple fronts can be difficult for any organisation but especially for large multi-disciplinary financial service providers that operate globally,” says Schalk Nolte, CEO of mobile security specialist, Entersekt.
He says by adopting a mobile-first strategy, banks can cement their role as the central hub for customers’ financial activities — and grow the range of services they provide.
“Banks are finding it hard to categorise and prioritise financial technology innovation that will enable better customer interaction and reduce costs.
“However, by offering a single secure mobile banking app, banks can create a trust point between users and new fintech services providers, making it easy for consumers to choose which payment method to use,” says Nolte.
Consumers now have many ways to manage their finances and make payments, which are often provided by new single-service fintech companies. Banking aggregation services that combine financial offerings from multiple suppliers are also popular with consumers, especially in the 18-35 age range.
Says Nolte: “Historically, the main financial trust relationship consumers had was with their bank. Now, the use of services offered by other financial providers is threatening that bond.”
To avoid disintermediation and service erosion, banks need to strategically position themselves at the centre of mobile-centric financial services by acting as a bridge between their customers and new fintech services. This is especially true for payment services.
Nolte says that banks can help their customers navigate this fast-changing environment and remain competitive by offering a banking app as an anchor point.
“This reinforces and strengthens the relationship between banks and their customers. Our locally-developed Connekt software, deployed around the world, provides issuing banks with a digital commerce enablement tool. The software puts them firmly at the centre of managing digital payments and allows their customers to have a single trusted app for digital payment.
“This removes the need for people to download a range of mobile payment applications as they can now be supported through one mobile banking application. Connekt becomes the single trusted anchor from which the mobile and payments world is unlocked for consumers, and supports their daily financial needs,” says Nolte.
In the EU, the second Payment Services Directive (PSD2) become effective in January. This will make customer data held by the retail banking sector available to a large range of third-party providers that, like banks, also help consumers and businesses transact and manage their finances or make payments online.
Nolte says PSD2 will make it even more important for banks to focus on providing an enhanced mobile banking and financial services offering for their customers.
“It keeps them relevant in a sector that’s being rapidly reinvented by innovation,” he says.