Cryptocurrencies and e-commerce inspiration are new opportunities for banksMarch 2021
Last year clearly showed which sectors can benefit from digital transformation, and which have only hastily and impulsively begun to transfer their off-line service offers to the online world. Industries such as e-commerce and e-learning have, of course, succeeded perfectly, and banks, which can handle most of their customers' normal requirements without face-to-face visits haven’t done too badly either. But by using the e-commerce example banks can learn that opportunities in the online world have certainly not been exhausted, and if they want to maintain relevance and profitability, they have a lot to do this year – whether it be better personalization of digital services, opening up to third-party services, or even entering the world of cryptocurrency.
Banking as a service
One of the trends we can see in e-commerce is the opening of large retailers’ platforms to smaller retailers who can benefit from their partner’s sophisticated infrastructure. This principle, called “e-commerce as a marketplace”, has its counterpart in the world of financial services. This is the concept of Banking as a Service, where banks allow their partners access to their systems and infrastructure on which they can build their own products. For fintech companies, for example, this means being able to meet all regulatory requirements in the area of financial services, while offering innovative online services.
“The concept of banking as a service brings together the best of the financial services and e-commerce worlds. For customers, this means that they can obtain financial, investment, insurance, credit and other products from many more providers that are often significantly more flexible and innovative, while benefiting from the background and credibility of the bank behind it,” commented Čeněk Navrátil of BSC, a company that has been dedicated to the digital transformation of banking in the Czech Republic and abroad for 30 years.
New payment types
With mobile banking and transfers between accounts made immediately or on the same day at the latest, banks have made a huge leap in customer comfort. But even these methods of payment transactions are no longer enough for clients. They know from their experience with internet banks that payments can be made even more comfortably, for example, by simply selecting the recipient from their mobile phone address book. In addition, there is growing interest in personalized micropayments, various forms of digital wallets, deferred payments and, of course, payments using bitcoin and other cryptocurrencies. Once again, we can look at e-commerce to see that the largest retailers also provide the widest choice of payment methods – so that the customer can choose the one that suits him best at any given moment.
Cryptocurrencies, meanwhile, represent an untapped area of great opportunity for the vast majority of traditional banks. If innovative banks take them on, and are able to explain and sell the very complex and elusive concept of cryptocurrency to their clients, they can quickly acquire a substantial part of this dramatically growing market. Preparing to provide cryptocurrency services is also important to banks because the introduction of a purely digital currency is being considered not only by major internet companies and some countries, but also by the European Central Bank, where the introduction of the “digital euro”, and a card association led by MasterCard is being discussed.
While there is a great deal of uncertainty surrounding current cryptocurrencies and regulators are working out whether to treat them as a genuine currency, commodity or other financial instrument, they will certainly not disappear from the world and will continue to be traded vigorously. Banks that have cryptocurrency products available for clients that want them, will also be ready for the introduction of a “real” virtual currency.
Digitisation with a human face
We started this article with the inspiration of e-commerce, and we’ll end it there too. If we think about the secrets of the biggest online retailers’ success, it’s hard not to notice the high level of personalisation they use in their customer approach. A good online merchant knows what items the customer looks at most often, what they regularly buy, and what method of payment and transportation they prefer. With this information they can effectively offer other products and services to their customers. Banks are very well positioned to adopt this approach as clients often have a much longer relationship with banks, and carefully analysing that relationship history makes it easy to gain insight into their habits, needs and reactions to different life situations. Surveys from around the world clearly confirm a strong correlation between this personal approach and brand loyalty.
“On the way to the highest possible level of digitization, it is very easy to forget the extremely important factor of friendliness and a personal approach to the customer. At the same time, it is absolutely crucial that the customer has at least as good an experience from using a digitized service as from a personal meeting with a banker who knows the client’s current situation and can evaluate his needs,” explains Čeněk Navrátil, adding: “The essential element for providing highly personalised services in a purely online environment is the ability to process large amounts of data and to use that information to respond with a personalised approach and communicate the right offer in real time.”