Traditional banking and its obstacles: closures, fewer staff and reduced opening hours create challenges for accessibility.
Financial digitalisation towards the democratisation of services guarantees accessibility and usability for all, including senior citizens.
New technology has erupted in all aspects of life. In many cases, technology has gone from being unrealistic or superfluous to being of vital importance. This is precisely what has happened in the financial sector, and over time, the use of new technology has continued to increase. Obviously, the evolution of society is a major driver of these changes, but other factors are also playing a key part, including COVID, branch closures and reduced customer service hours.
Traditional banking is quickly disappearing. According to data from the Bank of Spain, of the 43,000 bank branches that existed in 2010, just 18,556 remained in April 2022 (similar to the number of branches in 1976). In just three months this year, 548 branches have closed. Last year, some 3,149 bank branches vanished (14.5%). Furthermore, in those branches that have remained open, there are fewer employees. In “empty” Spain, branches have very limited opening hours or are only open by appointment. These extensive closures have forced many customers, especially those in more remote areas, to either switch banks or use new technology in the form of online or mobile banking.
In light of this new paradigm, digital banking has had to respond to some immediate challenges, namely the accessibility of services and the inclusion of all customers. For all banks, the customer plays a key central role and should come first. However, it appears that the banking industry has neglected certain age groups. If banks are not able to reach all groups, particularly older people, they will be less efficient, less effective and less profitable. According to GDS Link, when it comes to serving customers, firms need to perform several complex calculations to offer each customer the most appropriate product that is also profitable for the bank. This is why it is vital to go beyond mere segmentation and achieve a true one-to-one in real time. To understand what consumers want, they need to first observe their behaviour, not just understand their demographic characteristics. How do customers interact with their brand? What topics or products are they most interested in? Thanks to companies like GDS Link, it is now possible to analyse primary behaviour data and combine it with third-party data to create a more complete and detailed consumer profile.
According to GDS Link, regulations, compliance and overall risk management represent a significant operational load for the financial services sector. Risk management is an essential part of the strategic processes of fintechs to guarantee their credibility, security and quality. As a result, they need to be prepared to face any risk that could have an impact on their operations. Such risks include fraud, risks to personal data (customer privacy) and cybersecurity, and then there is regulatory compliance (each country has its own regulations which can change at any time) and operational, financial (market, credit or liquidity), legal or reputational risks.
In the fight against fraud, GDS Linik believes that “financial institutions need to have better tools that are deployed across the company in order to beat scammers”. They claim that fintechs should drive innovation to attract and retain more users, but they also need to strengthen the security of their platforms and automated systems to better protect user data. Antonio García Rouco, managing director at GDS Link, claims it is vital that fintechs detect and anticipate the main risks associated with the services that they offer. Financial risk management and prevention provide considerable benefits when it comes to approving credit and loans.
The rise of fintechs and the impact of their innovations have led the financial authorities to seek appropriate instruments to promote these innovations in the market without undermining consumer production or the stability of the financial system as a whole. In Spain, there is an instrument called the financial sandbox, which is a controlled space that combines innovation and user protection. It assures an appropriate fit for innovations within the financial system and provides a legal security framework for emerging companies in the world. The sandbox is a secure space where finance companies can try innovative technological projects and the risk to participants and the financial system has been mitigated or minimised. Since the tool was first introduced in 2021, almost 30 projects have been accepted. Just like traditional financial institutions, fintechs need to manage risk in a comprehensive manner to ensure the continued provision of high-quality services and products.
