Digital banking and transforming an institution to embrace this, isn’t the same as implementing online banking. Where online banking refers, broadly, to financial-service delivery over the internet, digital banking relies on process automation in support of any and all web-delivered banking services. To accomplish this, open banking is implemented and application programming interfaces, or APIs, are used to enable technology integrations in support of particular transactions and products, virtually in real-time. In this light, digital banking supports online delivery, whether it’s via desktop, ATM, or mobile device.
“Here’s another way to see the difference,” offers Dmitry Voronenko, CEO and co-founder of banking-tech provider TurnKey Lender. “Online banking typically involves ‘front office’ tasks, transactions that might otherwise involve a teller at a branch — so, opening accounts, withdrawing cash, depositing checks, paying bills. “Digital banking supports sharing information across a company’s front, middle and back offices in ways that please customers — via faster, more inclusive credit scoring, for example — and result in more precise business-development opportunities for the company,” adds Vorenenko.
Under the shadow of the pandemic, digital banking makes more sense now than ever
The rise of digital banking was an ongoing and seemingly inevitable process before the coronavirus sped things up by creating an irksome new normal of masks, social distancing, and remote work. Although it has long been feasible to shop, pay bills, and apply for credit online, the public-health crisis has accentuated the need for advanced, access-anywhere technology for use in everyday life, including all aspects of banking.
Already in 2015, bankers saw “digital” as a way to improve customer relationships (47%), achieve competitive advantages (44%), reach new customers (32%), and enjoy lower operational costs (16%), according to a report by Celent, a technology consultancy. Meanwhile, consumers have signaled a willingness to see more services shift to online options via digitization.
A 2017 study by online-ad agency Verve Mobile shows that 63% of US consumers would prefer to use their smartphone for banking in preference to in-person visits, ATMs, and other online access points. Newer studies by integration-software maker MuleSoft indicates that:
- 27% of consumers would switch banks to get a better digital-banking experience
- 34% of consumers would consider using banking services from tech giants like Amazon, Apple, Facebook, or Google instead of a traditional bank
- 33% of consumers think it should take no more than an hour to hear back on a loan application
Benefits of digital banking include speed, accuracy and the ability to say “yes”
More recently, industry experts have extolled the business benefits of digital banking in the terms outlined above — efficiency, cost savings, improved competitiveness — while expanding the list to include these advantages.
- Enhanced accuracy Paper processing has an input-error rate of up to 40%, with particular data-verification steps taking more than five days to process due to such mistakes. Digital banking relies on simplified verification processes that reduce errors and make it easier to integrate particular solutions with core business software systems. Increased accuracy also makes compliance best practices easier to document
- More agility The straight-through sharing of data from different sources speeds up processing times, apparently up to the delight of consumers, says McKinsey. In fact, the consulting firm contends risk-management software, as an API-linked add-on, for example, might spot and adjust for market changes more quickly than a team of seasoned professionals
- Improved security In a world where even the US Internal Revenue Service can be hacked, banks can always benefit from digital-banking apps that provide extra levels of data protection
Tucked into the “cost savings” aspect of digital banking is a profound customer-experience enhancer that stems from being able to say “yes” to loan applicants, more often and with greater confidence.
With machine learning and artificial intelligence streamlining data for use in specific tasks, banks can use scoring methods that go beyond credit-bureau scores and basic biographical information. With digital banking, loan “decisioning” inputs include permission-based insights on things like household budgeting and social-media interactions that paint a fuller picture of the loan applicant, giving rise over time to more financial inclusion, and happier customers.
Finding a tech partner to facilitate digital banking for your business
This stands to reason, according to Dmitry Voronenko, TurnKey Lender’s CEO and co-founder. “When AI-fueled loan processing and other digitally enhanced banking services are in play, speeding up approval times, reaching more customers and processing more loans, the result is likely to be a measurable bump in customer loyalty,” says the software executive, who has a Ph.D. in artificial intelligence.
When it comes to adapting to a new normal imposed by the coronavirus through true digital banking, banks must either build it all in-house or outsource to a trusted and specialized technology vendor that can facilitate:
- Quick time to market and ability to make quick changes to support emerging needs
- Fast scalability and adaptability
- An end-to-end platform that provides institution-wide integration
- Dynamic API integrations
- Security at every level and juncture
- Lower total cost of ownership
The growing competition from alternative lenders willing to experiment with digital platforms accustoms users to well-designed interfaces and quick money disbursement. To convert new users into loyal customers, an established name of a reliable bank simply isn’t enough anymore. Borrowers expect their lender to be as easy to work with as getting an Uber.
Lengthy approval procedures, high risk of non-return, uncompetitive interest rates, tons of paperwork, and outdated legacy solutions. Many financial institutions to this day struggle with these and other problems that can be solved by means of intelligent automation.
TurnKey Lender is a trusted provider of enterprise-level solutions to banks and credit unions. The team has worked with National Iron Bank, HSBC, RHB, Citi, Bank of America, and others which helped distill the needs and wants of a large financial institution, regarding lending automation as a whole and the loan origination process in particular.
The company makes a special focus on credit decisioning and loan origination because these are the parts of the loan lifecycle banks struggle with most. The Enterprise platform TurnKey Lender offers to banks was built with a special focus on scalability, security, and flexibility. And even though TurnKey Lender Enterprise can automate every part of the bank’s business, the platform consists of modules that are fully autonomous and can be used independently to address the specific needs of a business.
“For banks and non-traditional lenders alike, the point of digital banking is to cover the customer’s whole journey with the business, from origination and AI-powered decisioning to underwriting, servicing and, where needed, collections,” says Voronenko. “This leads to comprehensive data consolidation, a lot less customer-facing complexity, and better outcomes.”
In closing, it is helpful for financial institutions to remember:
“When digital transformation is done right it is like a caterpillar turning onto a butterfly. But when it is done wrong, all you have is a really fast caterpillar.”
– George Westerman, MIT School of Management & Research Scientist
For a review of your current digital banking processes and what can be transformed contact us today.