Know your customer to gain market share and trust

WidasConcepts: Digital Bank – new Concepts through smart Data analysis

Wimsheim, 6. December 2016               Digital business models and processes are one of the most important foundations for viable strategy concepts today, in numerous economic sectors. With them, processes can be streamlined and made cost-efficient. Reaction times are shortened, the customer approach becomes more individual. Above all, banks are confronted with entirely new technologies in addition to customer and data protection requirements. Thomas Widmann, CEO WidasConcepts, on the opportunities and risks of digitization in the banking sector.

If one believes in research trends, it will not be long before portable computer systems, the so-called wearables, smart devices, robots and machines communicate in direct exchange with each other, thereby generating new digital data. These data streams can be competently evaluated keeping in mind the business processes and customer wishes, processed and ultimately referred to each time as required in the context of the company objectives and to address customers.

Digitally generated revenues in the economy, are growing

In the “Economic index DIGITAL 2016” of the German Federal Ministry of Economics and Energy, 43 percent of the companies active in the commercial economy now generate their revenue predominantly digitally, according to their own data. A year ago it was only 27 percent. Digitization is the result of progress through new technologies and new possibilities in data processing. Growing mobility and rising customer requirements also call for a rethink. Workflows should be done faster and more individually – ideally in real-time and independent of the location. Data management suddenly no longer covers only the technical but all facets of the company’s handlings. Key applications include Big Data, the Internet of Things, Smart Services, and Robotics and Sensor Technology. The driving forces behind digitization are companies in the ICT sector, where 75 percent are already highly digitized. Second place goes to the knowledge-intensive service providers (70 percent), followed by the financial and insurance industry, which currently with 61 percent falls in the “averagely digitized” sector.

From Big to Smart: How can Finances be digitized?

The fully digitized bank is still a futuristic dream. But in this sector as well, the upheavals are beginning to bear fruit and hold a variety of new possibilities. With their technological solutions for the financial industry, Fintechs currently occupy some niche markets. They have the potential to make banks with conventional business models superfluous if they miss the digital development. In the future, all processes relating to money, such as financing or investments, will increasingly be handled in real-time. For example, a large German bank now offers to close property loans completely on the Internet, regardless of time or place. The fully digital construction financing requires information from the customer on the cost of the purchase or construction plan and the amount of the equity. Runtime and monthly rates are calculated ad hoc. When concluding the contract, it is optionally possible to consult a bank employee via video chat or arrange an appointment at the branch office. This only works if the financial services provider can use adequate technologies. Only with Big Data, will it even be possible that active recommendations and sensibly controlled processes result from the large amount of data: sound knowledge from quick correlation. For this, it is necessary to develop a smart data strategy from big data, in order to distill useful, high-quality and secured data, which will help achieve a real value-add. This is the only way to meaningfully make data flow into processes and create innovations that enable the bank to stand out in the competition and gain valuable market share.

Ultimately, digital currencies – such as bitcoin – are becoming increasingly competitive against payment with paper money and credit cards. Also, a technological solution plays an elementary role: blockchain. This extensible list of records protects the digital financial streams by preserving their integrity by storing the checksum of the previous record in each subsequent one. Data stored in a blockchain can not be changed or removed. This means that digital money can be accurately tracked – payment becomes secure and thus a real alternative for customers.

Disruptive concepts: the way to the customer

Digitization is not primarily the automation of processes, but much more the recognition and implementation of complementary business models all the way up to disruption, the elimination of old models and the simultaneous development of new concepts. The customer of today, across all ages, communicates increasingly digitally over the Internet, often also via mobile devices – the direct contact with the bank has become very rare. According to the Google Consumer Barometer, 29 percent of Germans are now online with three devices. Among the under 25s it is even 40 per cent. 68 per cent of all respondents said they were surfing the net via a smartphone – in 2012 this was less than a third (29 per cent).

“Know your customer” is the motto: It is important to identify customers online in order to define their needs and profile. Users learn quickly and see, in other areas of life, what can be achieved with and through digitization. They expect the same from banks and financial service providers. This includes personalized  offers and appeals. Modern software-as-a-service solutions that not only identify customers, but also provide secure and very convenient access to portals, apps and services across all channels, enable companies establish in customer contact, an actual win-win -Situation. SmartData enables effective targeting, which is in line with their wishes. Advertisements can be oriented towards specific target groups and the sending of these can be automated. The user ergonomics continues to play an important role – these include, for example, functions that enable a new customer to be registered with just one click. This is made possible by smart services. The data- and service-based service offerings are applied on the increasing intelligence of machines and the continuous digitization of work processes. Internet-connected, corporate and external value creation chains are the basis for online portals or mobile apps.

Cost conscious Partnership

Sleek costs are a fundamental criterion even for banks themselves at times of low or even penalty interests – even in this respect they can profit from digitization: processes can be designed and streamlined more efficiently, to utilize maximum capacity. As a result, the financial expenses in the day-to-day business are reduced – a bonus which can also be partially passed on to the customer. And this is also necessary, given the strong competition with direct banks: banks without expensive branch infrastructure lure customers with low fees for account management and transactions. For end consumers this aspect is important when deciding on a financial service provider.

Conclusion: If the bank succeeds in establishing itself as a very good partner for finances across all sectors, chances are that it will also be successful in the long term. Then, all the doors stay open to the bank of the future, a hyper-digital consultant and partner for financial businesses.

Relevant Studies/Publications:

  1. Google Consumer Barometer 2016, Google, TNS Global, Hive, iab europe, 2016. https://www.consumerbarometer.com/en/
  2. „Monitoring-Report Economy DIGITAL 2016“, German Federal Ministry of Economics and Energy, TNS Infratest Business Intelligence, October 2016. https://www.bmwi.de/DE/Mediathek/publikationen,did=786208.html

About WidasConcepts GmbH
The innovative IT consulting company WidasConcepts supports its customers since 1997 in successfully shaping their business processes. WidasConcepts develops modern and future-oriented concepts in the areas of Big Data, Internet of Things, as well as mobile and web-solutions. It aims to create intelligent business solutions that brings more success to the customers in the competitive market. The company serves its customers strategically from the business analysis up to the implementation of the overall solution for a wide variety of platforms and end-devices. WidasConcepts transports the bigger picture of IT. The company headquartered in Wimsheim near Stuttgart. Along with the branch office in Bangalore, India, it has currently 80 employees and is a member of the high-tech Association BITKOM.