Kyle Ferguson, CEO
Everybody wants to rule the world, but without digital banking no one stands a chance
Global disruption in banking is creating uncertainty and volatility in some markets leading to many banks taking an even more risk averse approach to digital services. In many respects, it’s no surprise. It’s so much easier to be conservative, to sit back and wait but that could be too late.
Speaking at the MoneyConf in Madrid in June 2017, BBVA chairman Francisco González said that banks need to shed their past and image as 'incumbents' and transform into new digital technology companies if they are to prosper. He’s right of course but we’d take it a step further and say if banks want to survive in new global markets, embracing digital payments technology is absolutely essential.
Digital payment solutions are essential
The problem facing many banks is how to do it quick enough. For banks with global ambitions, looking into new and emerging markets, having a digital payments solution is now essential. A recent Business Insider Payments Disruption Report revealed that “some of the greatest examples of digital payments disruption can be found in developing nations. In some cases, these countries not only adopt certain aspects of a digital payments ecosystem faster, but they also do so with more efficiency than their Western counterparts.”
It’s an interesting point. Western banks looking to gain footholds or increase business in these territories have to take heed and recognise that less mature traditional banking ecosystems mean very little in markets readily adopting new digital methodologies. In a fast growing and rapidly maturing country such as India, this is important.
The report cites a trend which emerged in November last year when Indian Prime Minister Narendra Modi announced that 500 and 1,000 rupee notes, which represented 86 percent of currency in circulation, would no longer be legal tender in the country. “Although this move was aimed at curbing corruption and counterfeiting,” says the report, “it had a far more wide-reaching consequence: It forced consumers to change how they pay, making India the largest case study of digital payments disruption in the world.”
For banks looking to take advantage of market opportunities in a country such as India, offering digital payment services is clearly a must. However, getting up to speed quickly is not easy. Developing digital payment services takes time, which, given the rate of disruption in banking – more than $50 billion has been invested in almost 2,500 fintech companies since 2010, according to Accenture – is something a lot of businesses do not have.
Partnering adds benefits quickly and securely
Partnering with a digital payments provider is crucial, especially in the business sector, which is not well covered for digital banking services. By partnering, traditional organisations can almost immediately offer all the benefits consumers experience in terms of mobile banking, digital payments, virtual cards and easily accessible reports and records. As well as immediacy of service there is also reduced risk and cost efficiencies.
As KPMG suggests in its report The Digital Bank of the Future, the path to implementation requires a keen understanding of digital disrupters and enablers, customer experience, and strategic value drivers. For traditional outlets, this is time and resource consuming stuff. Understanding elements such as the demographic shift, new technologies, unstructured data, payment infrastructures, digital identities and cybersecurity are not easy tasks.
“Digital disruption will create winners and losers. Winners will be characterized as those with a clear strategic vision, an appetite for customer analytics and technology, and a stomach for volatile innovation returns,” says the KPMG report. Go it alone at your peril.