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Banca Digital

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Banks Need to Transform into Tech Companies

Business

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16 August 2018

The disruptive era we are experiencing is a consequence of the new technological solutions that are increasing value for society; we adopt them quickly and change our behavior. With this, and without realizing it, we are changing industry rules, such as the car with Tesla electric motor and the hotel with Airbnb, among others. In addition, we have seen a test on what will be hyper adoption and hyper expiration of technological fashions, such as the Pokémon Go game, which was used and abandoned in a viral way and with the same speed by tens of millions of users.

The financial industry ecosystem evolves rapidly and new technologies such as artificial intelligence, machine learning, chatbots, cloud computing, advisory robots, and others that spring into isolation in different regions, provide local benefits and deliver better services more efficiently to start a global implementation career. This is good news since the financial sector has been characterized by its low rate of technology adoption. Now automation and technology represent an opportunity to increase profitability and the customer base.

However, the business model must evolve into B2B (Business to Business) due to new trends. The PSD2 (Payment Services Directive 2) regulation in Europe will take effect in 2018 and will be the legal basis for opening the data customers and products across all financial service providers in the European Union. This will accelerate the increase of Fintechs, which will provide customers with a comprehensive view of their accounts in financial institutions, and with this information will deliver a true diagnosis of its financial health, and not partial as it does nowadays.

This will lead to the transformation of the banking business continually, since customers will receive proposals to improve their financial health immediately (from switching a product from different banks until they detect duplicate payments or personalized promotions) based on their consumption behavior. In addition, other trends that are changing the current scenario are crypto-coins and the entry of industry giants like Google, Apple, Facebook and Amazon, that have shown some interest in banking products and offer an incredible experience for customers. The risk is latent and the consequence of the pilots already in the market can end up with products and services in a transversal way and at a global level.

Therefore, banks must change to become technology companies, with a very clear position as to where they will be in the value chain. Banks will become providers of highly regulated financial service components of their nature in lending, savings and investment accounts, while companies where people entrust their personal information and context data to be monitored in all areas of life, including financial will manage customer relationships.

The Spanish giant BBVA has been providing an example of this theory for a few years, actively participating in Fintechs, exposing its products and services in the API Market and other initiatives such as chatbots on Facebook and WhatsApp.

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