Banks need to modernise their systems to exceed the services offered by fintechs who are eating into their market share.
While speaking at the 11th Finnovex East Africa Summit, Wole Odeleye, Technology Industry Lead, Financial Services at Microsoft stated that banks would need to compete strategically in the four areas of lending, deposits, savings, and payments because these are where they generate much of their revenue.
“As organisations, financial institutions must consider the outcomes they wish to deliver and work backwards from there, defining those outcomes clearly and consolidating the understanding of those outcomes across the business before considering which enablers, both technology and non-technology, are required to deliver them,” Odeleye said.
Odeleye also urged banks to collaborate with fintechs, some of which provide niche capabilities that they could use to improve their services. “By leveraging partnerships, they can layer fintech services on top of their own foundations – corporate banking or retail banking services – and deliver them to customers as packaged services,” Odeleye explained.
According to Odeleye, traditional banks should also consider acquiring fintechs as part of their growth and diversification strategy.
“For example, a bank that has traditionally focused on commercial banking and wants to diversify into capital markets and investments may consider buying a fintech that has established specialized services and a critical mass of customers in that space,” Odeleye explained.
Odeleye advised banks to accelerate digital transformation to empower intelligent banking, accelerate growth and loyalty as well as deliver differentiated customer experiences.
According to him, successful digital transformation initiative is enabled by two things.
The first is the digital capabilities itself, in terms of tools and platforms. “Data is the driver of digital transformation. Organisations must identify the new capabilities required, across data and cloud, and then to look at how they can modernise their systems, their structure, and their applications, to ultimately change the way people work and how the organisation delivers value to the consumer base. Organisations must ensure that they are using the right tools and using technology in the most creative and intelligent way to deliver value,” Odeleye stated.
The second aspect to tech intensity, he explained, is developing human capacity. “The capacity development initiative must address the knowledge gaps in both technology and business teams to comprehensively grow the digital IQ of the organisation. Only when this digital IQ has been properly scaled up can organisations successfully realise the value from the deployment of tools and services within the organisation. Organisations must rethink how they enable reskilling, and how they mandate human capital management to orchestrate digital IQ development end-to-end, he added.