Banks’ digitalization strategy is straightforward: to provide the best service to the customer, who drives financial innovation with their desires and needs. Banks’ decisions have always been subject to the client’s interest. Now client behavior guides the digital transformation of banks.
Previously, banks determined how and at what pace they met customer demand, but now it is the customer who sets the direction and timing. Customers are demanding a different, flexible, agile, technological, and user-friendly approach from banks, as opposed to more traditional solutions of the past, such as branches. They also request new financial services with greater added value, in an environment of increased speed, convenience, and a focus on security.
For their part, banks are making significant investments in technology and promoting the development of startups with technology partners, fostering training and talent, with the ultimate goal of continuing to provide the best customer service.
The digitalization and financial innovation carried out by banks should not be understood solely as a defensive process against potential competitors. Nor should it be identified only with the objective of improving efficiency. Digital disruption in the financial world is a natural process, a profound transformation of traditional banking activity thanks to new technologies and new digital channels.
This natural process of change is subject to necessary regulation to guarantee both customer protection and financial stability itself. However, ensuring compliance with these two priorities is compatible with financial innovation. It is necessary for authorities to enable a testing ground (sandbox) that allows for the controlled development of innovation that customers demand and benefit from. Technological change entails risks, and it is necessary to understand and learn how to manage them. But the risks of not moving forward in the new digital context are much greater.
Banks are focused on growth and optimizing activity, always with the customer at the center of the business. Changes and innovations encompass many aspects of banking operations, from financial applications that improve personal finance management to those that enhance payment and identification methods. All of this generates a self-reinforcing process, where financial innovation itself leads to changes in customer preferences. The advantages for customers are enormous, in an environment of increased competition and high transparency. Digitalization also strengthens trust between the customer and their bank under the principle of mutual responsibility.
Financial innovation also enriches the payment ecosystem. From cash and check payments to card and electronic payments, whether via the internet or mobile devices. Are we evolving towards a society with less cash and more electronic payments? Although everything suggests this is the trend, only customers can answer this question. Banks must offer all existing possibilities so that the customer’s experience decides. Without forgetting regulation. The PSD2 payment directive recently implemented in Europe not only promotes competition in payments but also offers enormous business opportunities for companies, which can differentiate themselves by creating services with greater added value for the customer.
According to the latest Mastercard barometer, over 82% of Spaniards own a payment card. And of this figure, only 21% still opt for cash payments. Low-value cash payments are generally relegated to a habit that is slowly changing. The study also shows the growing use of digital payments, where cards are still used by over 80% of online commerce users. The digital divide is determined by internet penetration. According to the barometer, 18.5% of the population does not have internet access. This could pose a risk of exclusion for this percentage of the population. It is important for authorities to get involved in solving this problem. Spanish banks are also addressing solutions for these customers. Their priority is to continue increasing financial inclusion which, today, is one of the highest in Europe.
José Luis Martínez Campuzano, AEB Spokesperson
