While the Covid-19 pandemic has had a devastating effect on the global economy, it has also been a catalyst for change, particularly in relation to the way people bank.
Here Myles Bertrand, Managing Director of Mambu Asia Pacific, unpacks how digital transformation is evolving and why embracing cloud will be an integral step in our economic recovery as we settle into the ‘new normal’.
Throughout 2020, many banks and financial institutions have had to make adjustments to the way they operate in response to dramatically shifting market conditions and changing customer demand. Cash transactions – already on the decline pre-Covid – have taken a serious hit, with customers avoiding notes and coins due to fears of the virus transferring, as well as being unable to shop or bank face-to-face due to stay-at-home orders. For some banks, this has meant streamlining services in order to focus on meeting customer needs, particularly assisting customers in dire financial straits, with many banks having to press pause on longer-term projects and activities as they redeployed resources.
Now, however, as we count down the final weeks of 2020 and look ahead to 2021, organisations are seeking to re-establish a sense of business as usual – and are coming to terms with what that means in the context of the ‘new normal’.
Many legacy banks and financial institutions are starting to realise that digital transformation is not just about taking existing products online or offering customers a swanky new app – rather, a truly effective digital transformation needs to start at the core. Wrapping an old product up in a digital layer is no longer going to be enough for customers who now expect innovative, personalised banking products and services that allow them to bank how, when and where they want.
While 2020 certainly saw a number of banks – particularly freshly minted neobanks and challengers – come unstuck, it also provided some much-needed breathing room for established banks, with regulators in several APAC countries including Australia, Singapore and Malaysia halting or delaying issuing new digital banking licences. This break has allowed established banks to ‘catch up’ to some of the challengers in terms of their digital transformation strategies, and many are now in a better position to meet the stringent requirements associated with applying for these new licences.
Cloud comes of age
The increase in the adoption of digital banking worldwide has not only been due to changing customer demand; regulators have also been more vocal in their backing of cloud banking, with their endorsement leading to greater confidence in cloud by established banks and financial institutions. With the approval of regulators, legacy institutions are starting to understand that cloud can offer greater security, enhanced flexibility, and a superior customer experience.
Customers, too, have become much more financially literate over the last year, after having to really get to grips with their finances – from their superannuation to insurances to mortgage renegotiations – and have also become more comfortable with the cloud banking experience. The result of this is that customers are expecting more from their banks, and have the confidence and know-how to switch providers if their needs aren’t being met.
Collaborate for success
Composable banking – the flexible assembly of best-for-purpose components – is set to transform the banking and finance industry in a post-Covid world. To succeed in this new era, banks will need to cultivate a collection of trusted collaborators and partners, with each organisation bringing their particular expertise to the mix. Challenger banks have been leading the way in terms of collaboration, routinely working with a carefully selected group of fintechs that provide solutions in a range of functions, leaving the bank itself free to focus on providing the best products and services it possibly can.
Established banks need to follow their lead. Open APIs can allow banks to collaborate with third parties like fintechs or other technology providers, while also making it possible for them to leverage all of their advantages – trust, security, customer loyalty, data, sector knowledge and brand awareness – and connect with technology that delivers all of the functionality that the challenger banks are offering.
To survive and thrive in a post-Covid world, banks need to focus on embracing cloud, leveraging technology like APIs, and collaborating with high-performing cloud and technology partners. This will allow them to streamline operations, automate processes and significantly reduce the overall cost of doing business.
Mambu will be at the Singapore Fintech Festival from 7-11 December 2020. Register for the event or book a meeting with the team to find out how Mambu can help your organisation to take a digital leap into the world of cloud banking.