How can banks continue digital transformation in a downturn?

Abstract

Digital technologies have come to play an increasingly important role in our lives. Their availability to customers has set expectations for personalised experiences with the banking services they use, making it imperative for banks to innovate and continuously evolve their product offerings to keep up. The banks that are able to do this most successfully are new entrants with advanced technological capabilities that can adapt to changes in the economic environment and consumers’ shifting expectations more quickly. It is this adaptability and technological knowledge that ensures that these new entrants are best positioned to capitalise on periods of downturn. This paper will examine digital transformations that have reshaped the world of banking to date, including the shift to digital banking in the wake of the COVID-19 pandemic, the uses of data and analytics, as well as data-driven tools like AI in present-day retail banking. Furthermore, the paper will detail areas where digital transformation is yet to exert a profound effect on banking, particularly lending to small and medium-sized enterprises (SMEs), an essential area given the contribution that small-to-medium businesses make to economic growth. Finally, the paper will explore ways that new entrants can use digitalisation to support these crucial businesses, as well as detail other examples of digital innovations that are shaping the future of banking; for example, AI automation in know your customer (KYC) and the rise of ‘open banking’.