Building financial empowerment through digital transformation

Research from Finastra found that banks should invest in digital transformation to empower customers and help them achieve their financial goals

Building financial empowerment through digital transformation

Finastra recently completed some ethnographic research examining the relationship that people around the world would like to have with their financial institutions. The study examined the individuals’ relationships with their bank and their views about the current state of digital banking. It also explored how technology can help empower customers and how open banking can make a positive difference.

The study found that the pandemic has impacted the way people think about and interact with their financial institutions and has accelerated the usage of online and mobile banking. But increased engagement via digital apps does not automatically mean that people are truly engaged in their finances and have all the knowledge they need to plan ahead. In some cases, digital apps are dismantling the relationship between traditional banks and their customers by removing the need for interaction in the branch and taking away communication and dialogue. 

Three key enablers that lead individuals to build a good relationship with their bank and optimise their finances were identified: knowledge, control and freedom. People first need knowledge about the products, services and tools their bank provides – a practical understanding of what is available to them to help them manage their money. This in turn gives them a sense of control, and with that comes a feeling of freedom – the independence and peace of mind that gives the individual the power to enjoy their finances.  

Respondents indicated that challenger banks are more proactive in engaging with them than incumbents and in helping them reach their financial goals. They use everyday language, a customer-centric approach, easily customisable and flexible tools, and visual cues. Many challengers are also using data insights to offer products and services to meet customer needs. Add open banking into the mix and customers can move ahead further – saving and investing in a way that’s not possible with traditional banks. 

While incumbent banks have some catching up to do, it would be wrong to dismiss the vital role they play. Most survey respondents have their salary paid into these banks whom they trust with their money. But established banks need to think more like challengers and be more proactive in helping people on their journey to financial empowerment. Investing in digital transformation can help banks engage more effectively with customers and play a more active role in helping them achieve their financial goals.

Federica Bonato-Hayes is the cloud and core banking solution marketing lead at Finastra 

This article was originally published in the Summer 2021 issue of The Record. To get future issues delivered directly to your inbox, sign up for a free subscription.

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