# Digitalisation: why using the opportunity of Fintechs can create an innovative digital client experience
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-10-22
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Navigating the Challenge of Digitalisation in Banking and
Meta Description: Learn how banks and wealth managers can adapt to the changing digital landscape and differentiate themselves to succeed in today's tech-driven world.
URL: https://financedigest.com/digitalisation-why-using-the-opportunity-of-fintechs-can-create-an-innovative-digital-client-experiencehtml

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Martin Zahner, Head Software Exchange at Avaloq

**Challenge of digitalisation**

Digitalisation is impacting all walks of life – both business and consumer. Subsequently, all sectors, from travel to books or music [face the same threats and opportunities](https://www.financedigest.com/digital-ticketing-the-challenges-and-opportunities-facing-ptos-and-ptas.html "Digital ticketing: the challenges and opportunities facing PTOs and PTAs.").

This includes the world of [banking and wealth management](https://www.financedigest.com/pragma-investments.html "Pragma Investments on Wealth Management versus Private Banking"). In today’s technology-driven world, digitalisation has become a [key driver for the change the financial industry](https://www.financedigest.com/packaging-and-textile-industries-key-driver-for-digital-printer-market-demand-2021.html "Packaging And Textile Industries : Key Driver For Digital Printer Market Demand 2021") is experiencing.

As a result, the financial sector is facing a critical challenge; banks and wealth managers must assess whether their current mind-set and approach [towards digital](https://www.financedigest.com/the-clear-aligner-market-to-tilt-towards-digitization.html "The Clear Aligner Market to tilt towards digitization") fits the business and if not, what are the strategic consequences?

Digitalisation has empowered consumers with the capability to compare one company’s product and service offering with a competitor’s, at the click of a button. When [services become comparable the risk of switching to a competing business](https://www.financedigest.com/philanthropy-is-an-underrated-tool-for-growing-financial-services-businesses.html "Philanthropy Is an Underrated Tool for Growing Financial Services Businesses") is far higher.

At the same time, consumers tend to be less loyal and multi-banking has become very common. This is despite the traditional bank-client relationship in which one main financial institution is the main point of contact for a client. So how to [address this challenge](https://www.financedigest.com/rising-to-the-challenge-addressing-the-difficulties-of-pillar-2-reporting.html "Rising to the challenge: Addressing the difficulties of pillar 2 reporting")?

**Increased competition requires a new strategy**

Fintechs, with their often purely web-based financial [services offering](https://www.financedigest.com/any-business-can-now-offer-their-customers-financial-services-how-embedded-finance-is-reinventing-the-wheel-when-it-comes-to-banking.html "Any business can now offer their customers financial services: How embedded finance is reinventing the wheel when it comes to banking"), are fuelling the threat of easily-accessible online competition. The ease at which it takes to set up an account was cited as the top reason for using a Fintech in a recent survey of banking clients [\[1\]](#_ftn1).

The [research also revealed](https://www.financedigest.com/non-finance-data-sets-increasingly-sit-at-the-heart-of-investment-with-over-70-of-decisions-impacted-by-esg-factors-bright-data-research-reveals.html "Non-Finance Data Sets Increasingly Sit At The Heart Of Investment With Over 70% Of Decisions Impacted By ESG Factors, Bright Data Research Reveals") access to different products and services and a better online experience are key motivators in the adoption of Fintech services. Ultimately though Ernst & Young states it is the simplicity involved in using Fintech products and services that is driving adoption.

With clients just one mouse [click away](https://www.financedigest.com/global-economy-collapse-just-one-click-away.html "Global economy collapse just one click away") from moving to a competitor’s offering, banks and wealth managers need to adapt their competitive strategy. As part of this strategic review, financial organisations are faced with a choice of how they differentiate themselves. They can either win a client with a specific offering and then upsell additional services in order to increase profitability, or [focus on a specific niche market](https://www.financedigest.com/powder-dispenser-market-market-2019-2029-where-should-participant-focus-to-gain-maximum-roi.html "Powder Dispenser Market Market (2019 – 2029) | Where Should Participant Focus To Gain Maximum ROI ") and differentiate by providing an attractive offering. The latter option is most likely to [enable a financial services organisation to become a client’s primary bank](https://www.financedigest.com/the-open-banking-revolution-enabling-accessible-and-inclusive-finance.html "The open banking revolution – enabling accessible and inclusive finance"). Therefore, improving and differentiating the client [experience must become an integral element of the competitive fight in today’s digital](https://www.financedigest.com/choosing-the-best-digital-experience-platform-dxp-in-financial-services.html "Choosing the best Digital Experience Platform (DXP) in financial services") age.

**Simplify the life of clients**

Most [successful companies](https://www.financedigest.com/key-ingredients-to-formulate-and-communicate-a-successful-company-ethos.html "Key ingredients to formulate and communicate a successful company ethos") have something in common: They focus on the users’ needs. If the organisation understands the complete consumer journey and anticipates [future trends](https://www.financedigest.com/renal-cyst-treatment-market-covid-19-industry-analysis-future-trends-opportunity-growth-regional-outlook-and-forecast-2028.html "Renal Cyst Treatment Market COVID-19 Industry Analysis, Future Trends, Opportunity Growth, Regional Outlook and Forecast 2028") they will be far better positioned to become the preferred service provider. In a relationship based on human interaction, this can be achieved by having [well trained senior advisors service](https://www.financedigest.com/uk-says-baker-hughes-altus-deal-may-hurt-competition-in-oil-well-services.html "UK says Baker Hughes-Altus deal may hurt competition in oil well services") the clients. In a [digital world](https://www.financedigest.com/fraud-in-a-mobile-digital-world.html "FRAUD IN A MOBILE DIGITAL WORLD"), a stand-alone banking transaction does not unveil the true objective of the client. But, perhaps the client would love to get the support from your organisation to make their life simpler.

Whether a client is buying a car, getting married or purchasing a home, banks and wealth [managers have an opportunity to become an integral](https://www.financedigest.com/power-management-integrated-circuit-pmic-market-research-report-2022-global-forecast-till-2028.html "Power Management Integrated Circuit (PMIC) Market Research Report 2022 – Global Forecast till 2028") part of these life experiences. By adding value to the experience a financial [services provider](https://www.financedigest.com/high-energy-shockwave-therapy-units-market-end-user-demand-by-types-regions-top-players-service-provides-regional-outlook-and-forecast-to-2028.html "High Energy Shockwave Therapy Units Market End-User Demand by Types, Regions, Top Players, Service Provides, Regional Outlook and Forecast to 2028") is in prime position to not only be used for day-to-day banking, but also when the next significant event occurs.

In every landmark event there are a series of financial [factors which are essential](https://www.financedigest.com/essential-factors-to-consider-before-purchasing-a-cobot.html "Essential Factors To Consider Before Purchasing A Cobot") to the success of the occasion. For example, when a person gets engaged, the first step is to start thinking about their wedding day and how they want to celebrate. This means a budget needs to be created and managed. A decision then needs to be made on where to get the financing.

The next step in the journey is to organise the wedding. At this point project management support tools can help to eliminate the many stresses associated with wedding planning. A bride and groom also need to think about their guests, most of whom will want to gift them a congratulatory present. Many couples will therefore welcome the capability to enable guests to easily contribute a gift.

By integrating the financial advice and the financial products sourcing smoothly within the client journey, banks and wealth [managers can add value to ensure the client can focus on their own primary needs while the financial solution](https://www.financedigest.com/quality-and-compliance-management-solution-market-to-rise-at-a-high-cagr-of-9-4.html "Quality and Compliance Management Solution Market to rise at a high CAGR of 9.4%") is seamlessly proposed during the journey.

**Competence of partnerships**

Traditional financial service institutions often lack the expertise and focus to create [digital systems which create this personalised level of value](https://www.financedigest.com/how-to-create-value-in-digital-transformations.html "How to create value in digital transformations") add to clients. Such applications are not built the same way as banking applications. They use different technology, often have a very different design and follow a different implementation pattern than standard banking applications.

The way forward is to [work on a culture](https://www.financedigest.com/smart-working-versus-presenteeism-enabling-productivity-in-a-post-pandemic-hybrid-work-culture.html "Smart Working Versus Presenteeism: Enabling Productivity in a Post-Pandemic Hybrid Work Culture") of partnerships. The financial institution selects external providers which focus on certain aspects of life or [business processes](https://www.financedigest.com/automating-business-processes-is-essential-to-digital-transformation.html "Automating business processes is essential to digital transformation") and package them into their client offerings. The wave of Fintech-entrepreneurship is instrumental in this by increasing the potential offerings which can be integrated.

The impact of digitalisation in the financial services sector is outlined in a report from McKinsey [\[2\]](#_ftn2).  The report analyses the potential threats and opportunities in the sector and the subsequent impact on net profit for [retail banks](https://www.financedigest.com/the-power-of-digital-why-theres-still-life-in-the-traditional-retail-banks-yet.html "The power of digital: Why there’s still life in the traditional retail banks yet").

Threats such as innovative new offers from competitors and margin compression are weighted against opportunities including increased revenue from innovative new offers or [business models](https://www.financedigest.com/apis-open-banking-and-new-business-models.html "APIs, Open Banking and New Business Models") and increased revenues from innovative new products and using data to cross-sell. According to McKinsey, the potential opportunities are greater than the threats.

To truly capitalise on the opportunities of digitalisation and add real value to clients throughout their journeys, many banks and wealth managers are therefore realising the benefits that can be gained by integrating the [digital innovations](https://www.financedigest.com/the-schizophrenia-treatment-market-to-get-digitally-innovative.html "The Schizophrenia Treatment Market to get digitally innovative") of third parties, such as Fintechs. These partnerships provide [banks and wealth managers with three key](https://www.financedigest.com/russia-bans-western-investors-from-selling-banking-key-energy-stakes.html "Russia bans Western investors from selling banking, key energy stakes") benefits:

**The three key benefits of partnering with Fintechs:**

1. **Creating new opportunities to provide improved services to clients.** Banks and wealth managers can aggregate multiple services and products. However, they must also consider their value network and how they will [provide services](https://www.financedigest.com/high-energy-shockwave-therapy-units-market-end-user-demand-by-types-regions-top-players-service-provides-regional-outlook-and-forecast-to-2028-2.html "High Energy Shockwave Therapy Units Market End-User Demand by Types, Regions, Top Players, Service Provides, Regional Outlook and Forecast to 2028") going forward. Banks and wealth managers can choose to produce solely in-house, focus on being an aggregator and use [third parties](https://www.financedigest.com/why-a-replacement-to-third-party-cookies-is-key-to-post-pandemic-recovery.html "Why a replacement to third party cookies is key to post-pandemic recovery"), or combine a mix of the two.

2. **Differentiate the client offering through a wide choice of niche providers** The growing number of digital providers in the market is providing banks and wealth managers with the opportunity to select from a wide choice of niche providers to enable them to differentiate their offering.


   The basis for the partnership can be based upon an entirely unique score card of requirements. Ultimately [banks and wealth managers will consider whether the focus of the score card should be the return](https://www.financedigest.com/britains-metro-bank-returned-to-profit-in-september-sees-no-customer-stress.html "Britain’s Metro Bank returned to profit in September, sees no customer stress") on investment, or are more ‘soft’ factors, such as culture, a high priority?

3. **Competition stimulates business** Banks and wealth managers are being challenged to switch their focus from offering products to focusing on clients’ primary needs.


   Client engagement has become a key measure of success in the industry and it is easy to understand why. Client journeys which encourage loyalty and engagement mean further relevance can be added to the client as more is learned about them. There is then a far lesser threat of being replaced by a competitor, and a far greater chance of doing more business together.

**Adapting to the digital age**

In the digital age, client experience feedback is critical to success, not least because clients are just one click away from a competitor’s offering.

Successful financial offerings can win the market in a very short space of time, but those who do not react to [changing client needs can lose a client base equally quickly](https://www.financedigest.com/seeking-right-tone-new-uk-pm-truss-had-to-quickly-change-gear-for-queen.html "Seeking right tone, new UK PM Truss had to quickly change gear for queen") and to competitors who are seizing the opportunities of digitalisation. Therefore when it comes to evaluating the return on investment in digitalisation, the potential financial loss of not doing anything must be added to the equation.

Reacting to the digital change becomes even more essential as the marketplace becomes filled with a growing number of offerings. Competitors now include innovators such as [Google and Apple](https://www.financedigest.com/uk-investigating-apple-google-mobile-browser-dominance.html "UK investigating Apple, Google mobile browser dominance"), who bring with them a completely different type of DNA.

Traditional e-banking, even if responsive, is therefore no longer solely enough to cater for the changing needs and demands of today’s clients. Financial organisations not only need to expand their digital offering, but in addition, their entire culture needs to adapt to the focus on clients needs and providing value add.

By packaging the [digital innovation](https://www.financedigest.com/the-cosmetic-threads-market-to-get-catapulted-to-growth-with-digitized-innovation.html "The Cosmetic Threads Market to get catapulted to growth with digitized innovation") of third parties such as Fintechs, banks and wealth managers can differentiate through their digital innovation offering, while still retaining a reliable and solid technical foundation of core banking activities, bolstered by customer relationship management (CRM) data.

Ensuring such additional [digital services are centred on the clients will enable banks](https://www.financedigest.com/major-myths-and-questions-holding-banking-and-financial-services-back-from-full-digital-id-adoption.html "Major myths and questions holding banking and financial services back from full digital ID adoption") and wealth managers to provide more value added services which are unique to a client’s individual journey. Such an offering will expand the [brand experience and therefore cement brand loyalty](https://www.financedigest.com/bad-interactions-and-unethical-practices-impacting-brand-loyalty.html "Bad interactions and unethical practices impacting brand loyalty").

Amidst the [digital revolution](https://www.financedigest.com/evolution-not-revolution-digital-transformation-today.html "EVOLUTION, NOT REVOLUTION: Digital transformation today") currently taking place in the industry, it’s vital financial organisations are setting themselves apart to ensure their success. It will be those who reap the rewards of cutting-edge, next generation technology which will remain competitive and increase [growth rates](https://www.financedigest.com/microbial-rennet-market-overview-2022-2029-top-manufacturers-cagr-value-future-scope-revenue-growth-rate-and-forecast.html "Microbial Rennet Market Overview 2022-2029 (Top Manufacturers, CAGR Value, Future Scope, Revenue, Growth Rate and Forecast)").

[\[1\]](#_ftnref1) [http://www.ey.com/GL/en/Industries/Financial-Services/ey-fintech-adoption-index](http://www.ey.com/GL/en/Industries/Financial-Services/ey-fintech-adoption-index)

[\[2\]](#_ftnref2) [http://www.mckinsey.com/industries/financial-services/our-insights/strategic-choices-for-banks-in-the-digital-age](http://www.mckinsey.com/industries/financial-services/our-insights/strategic-choices-for-banks-in-the-digital-age)


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