6 SME financial institution trends to know
Since the pandemic disrupted our way of life, businesses are building themselves toward recovery.
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However, one thing still on their minds is how they will succeed in the new normal with increased pressures, disruptive trends, and more competition?
Customers today expect the same user experience from financial institutions they get from digital leaders such as Amazon, Google, and Netflix or SME or a start-up.
More than ever, B2B customers and their users want it anytime, anywhere, on their chosen devices at their fingertips.
In addition, they expect lower prices, wide range of products and services, the same reliability, simplicity, 24/7 service, convenience, and efficiency.
It’s getting harder than ever to tick all these boxes.
As a result, SME financial institutions, such as banks, cooperative unions, micro-finance, insurance, and post-offices, will need to up their game.
To be successful, they must embrace emerging technology, be agile, flexible, and put customers at the centre of their strategy.
It is believed that these six crucial trends will help SMEs adapt and stay ahead of the curve.
Digital Transformation
Digital transformation is not a new trend.
However, it has dramatically increased during the pandemic, in the Banking, Finance, and Insurance (BFSI) sector.
As a result, many Latin American financial institutions are shifting from manual paper-based processes to digital business models, leveraging online, mobile, and social platforms.
They are looking at new ways to engage their customers who are more tech-savvy, connected, digital natives armed with smartphones.
The numbers speak for themselves.
The fintech platforms globally reached 2,482 in 2021, a growth of 112 per cent from 2018 to 2021 - nearly a quarter (22.6 per cent) are from LatAm & Caribbean, according to IDB Invest and Finnovista.
Digital banking is one such example.
It's also become a necessity for African banks.
As per survey of 100 African banks, 94 per cent said digital transformation was one of the three essential factors in their growth strategy.
In addition, 42 per cent said that providing better service is priority² when investing in new digital infrastructure, and 79 per cent said their banks used some form of third-party help or partnerships for digitisation.
Small and medium-sized (SME) financial institutions have a huge advantage over large ones: not having complex, ageing legacy systems.
As a result, the transformation process will be relatively economical, faster, and manageable, which means it can leverage technology and compete better.
It's no longer a question of why, but when? Financial institutions now realise that becoming "fluent in digital" is essential to future proof.
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Hyper-Automation
One critical method of making the shift is to automate all possible routine, manual, and repetitive processes to reduce time, enhance customer relationships, and optimise costs.
Even the word automation seems to be dated as it has an industrial-era origin.
The fast-growing trend is hyper-automation - an automation expansion that adds a layer of advanced technology and Robotic Process Automation (RPA).
The difference is that while RPA focuses on robotically taking over and automating simple processes, hyper-automation is a more significant transformation of how a business operates that takes RPA to another level.
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Banks typically use multiple legacy systems to run their operations - this is where RPA can make a difference; the tools can ensure all the systems work together, reducing the dependency on humans and the percentage of errors.
Since finance involves heavy documentation, compliance, and regulation, hyper automation will speed up the processing time, authentication, approvals, and predict fraudulent applications.
Bank servicing, marketing, sales & distribution, regulatory reporting, compliance, payment and lending, customer support, and back-office operations are areas where hyper automation will transform the business.
For instance, with eKYC (or digital Know Your Customer), taking a selfie (instead of scanning and sending a photo ID), recording a video (for facial and voice recognition), integrating an Intelligent Character Recognition feature, and using biometric data will speed up onboarding from days to seconds.
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In addition, Predictive models can monitor all transactions and flag fraudulent transactions around the clock.
Today, few Anti Money Laundering (AML) solutions leverage hyper-automation can prevent errors, compliance risk and loss of business.
In short, hyper automation can take back almost every task done by humans and makes the process simple and virtual.
Artificial Intelligence (AI)
In 2020, a study among 1,200 data executives on AI best practices, investment plans, and performance metrics³, over three-fifths (62 per cent) of banks and capital market institutions were an advancer or a leader, ahead of the all-industry average for these two categories combined (48 per cent).
Furthermore, looking at the leaders exclusively, they were ahead of the average across all industries (31per cent and 15 per cent, respectively).
A staggering 75 per cent said AI was important, placing it ahead of the all-industry average for these two categories combined (64 per cent).
Moreover, they have a higher weight toward significant (51 per cent), while organisations across industries cited AI as transformative (37 per cent).
SME financial institutions now realise that vast and diverse data sets, current, historical, and real-time, must be processed together to draw meaningful insights.
This can only be done by using a combination of AI, Machine Learning (ML) and Natural Language Processing (NLP) techniques that can process this sea of data to identify patterns and trends.
Source: bankingly.com