Online shopping and banking emerged around the same time in the mid-1990s, but arguably the retail industry has been faster to evolve and introduce new technologies, taking the in-store and web shopping experience to a new level by quickly harnessing new technology like QR codes and augmented reality. Financial institutions have been more cautious, held back by their own technology infrastructures and the limitations of legacy software, which is unable to cope with the demands of emerging cloud and mobile applications.
The larger industry also hasn’t had the urgency to innovate. Unlike retailers, they haven’t felt the squeeze of nimbler competitors looking to grab a share of their revenues. To date, many consumers have also been quite happy to take care of their banking and insurance needs the “old way.” But as digital natives get ready to apply for their first mortgage, old methods won’t assist tomorrow’s expectations.
As mobile banking apps, contactless payments, the cloud and wearable technologies grow in popularity, more institutions are realizing they need to do more to keep up with consumers’ needs. We’re looking at a future where mobile transactions are expected to grow rapidly worldwide, having reached more than $47 billion in 2015.
The need for digital transformation in the industry boils down to the need to bring consumers a more seamless user experience. Consumers demand real-time visibility over their finances and faster decision making to get the best deals, regardless of device. The proliferation of technology in finance has casted a strong urging for financial services to align and offer a truly omnichannel, real-time consumer experience.
As the number of service channels that financial institutions and insurance companies use increases, the number of potential security vulnerabilities goes up too. Online banking is now the No. 1 target for all cyberattacks globally. While a high-profile loss of sensitive consumer data might grab the headlines, institutions and insurance companies are also increasingly at risk of Distributed Denial of Service attacks, which bring their online services to a grinding halt with lasting damage to customer and member relationships.
The financial and reputational implications of DDoS attacks are growing in significance, and companies face the threat of not only losses inflicted by operational downtime, but also of extortion from a recent phenomenon called ransom attacks, where payouts can amount to tens or hundreds of millions.
Realizing a cyberattack is a matter of “when” rather than “if,” many are bracing themselves for impact. They are adopting data-powered digital forensics, fraud prevention and risk management tools, which enable the detection of unusual events and suspicious patterns of behavior before they paralyze the network or result in a loss of sensitive information.
While protecting consumer data is their priority, organizations are also increasingly looking to gain deeper insights from the vast amounts of data they hold to enable greater consumer segmentation and personalization.
The benefits of harnessing big data insights are clear: According to IDC analysts, companies that adopt a comprehensive approach to data are able to realize an additional 60% return on their data assets. Institutions are beginning to invest in analytics to develop a much more complete view of their customers and members and their decision making processes with an in-depth analysis of their behavior, spanning online and offline and including websites, contact centers, branches, social channels and mobile apps. The combination of structured and unstructured data allows them to then target each consumer much more effectively with new offers for credit cards, loans and mortgages.
The next step for forward-looking institutions is to fine-tune their big data analytics to be able to not only better predict consumer behavior, but also change their processes so that real-time feedback and insights can be delivered to consumers engaging financial providers for increasingly complex services.
Many financial institutions and insurance companies now realize that this next-level service requires new technology foundations. For the financial services community to capitalize on the huge volumes of data they gather across different channels, many are turning to the cloud. The cloud provides the computing power needed to process and analyze all this data, and the flexibility to innovate through the development of new products and services without allocating too heavy of an investment in their own data center infrastructure.
The more organizations rely on cloud-based applications, the more important their network infrastructure becomes – and justifiably, many are reluctant to use the public internet for their increasingly critical cloud-based applications. That is why we are witnessing more and more companies invest in solutions that protect cloud-based applications against potential performance degradation and rollout networks that connect to cloud applications, which bypasses the public internet altogether for maximum network performance.
As cloud and mobile technologies grow in popularity, many in the financial industry will be playing catch-up with their digitally-savvy customers and members, who expect a similar seamless user experience when applying for a loan or insuring their home, as they do when shopping online. In the past, security concerns might have been an easy get-out clause for organizations dragging their heels over the adoption of new digital services, but not anymore. The choice is simple: Embrace digital disruption, take consumer engagement to a new level and discover untapped revenue streams – or find yourself without the standards to compete in tomorrow’s marketplace.
Dave Ryan is chairman of the Americas Tata Communications. He can be reached at 703-547-5900.
