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Digital value creation in the banking sector Disruptive digital technology has now taken over the banking industry. An interview involving about 50 senior bankers, financial executives and venture capitalists has shown a willingness to invest in the digital economy.

• By Naveen Joshi • 12:38 pm

To gain digital value creation, banks will have to fundamentally transform the way banking processes, clients, and banking executives operate. For implementing digital technology in banking, they must change their execution model to become more digitalized.

What are the steps in generating digital revenue?

1.    Create a List of Opportunities that Promote Digital Value Creation

The first step in the process of digital value creation is identifying and describing the potential digital revenue streams that can be applied to a bank’s target objectives. CIOs must understand and explain each opportunity that provides digital revenue. CIOs can prepare case studies for further strategic and market use.



Take a look at the following table.


Scope of Digital Revenue

Segment

Description

Enabling Technologies

Data Brokerage

Retail

This scope explores a proposition where clients are
willing to share their information with the advertisers. In such situation,
banks act as the broker among the clients and advertisers.

Enterprise data warehousing and mobile cloud
computing

Personal Data

Asset and Wealth
Management

This venture explores
the possibility of a bank that will be allowed to collect an individual’s
personal data. The bank’s task will be to protect and monetize the data
entrusted upon them by their clients. For instance, personal data banks can
perform operations like carrying out a house auction for a client or
communicating MRI and blood test results to any surgeon or healthcare
facility in advance of a surgery.

Cloud computing and IOT
devices.

Client Credential Tracking

Digital Business

This scope explores tracking of customer
credentials using third-party cookies.

 

IGA and IAM



Thus, CIOs can prepare a similar table as given above for studying use cases.

2.    Estimate the Strategic Value of Digital Revenue Opportunities

The second step in incorporating digital technology in banking is that CIOs need to evaluate the capacity of new digital revenues streams to create a positive impact on the client and boost their customer engagement strategy and financial institution performance.

Let’s take a look at how to create an evaluation template to determine the strategic value of digital revenue streams.


Number

Client Expectations

Bank Performance

ROI

1

Saving time

Boosts revenue

Payback Time

2

Providing transparency
in data access mechanisms

Increases productivity

Existing gaps in
skills

3

Giving advanced security measures

Minimizes frauds

Secured firewall solutions



You can use the following scale to calculate the impact of a use case on the bank’s performance.

0 = No impact

1 = Very low impact

2 = Low impact

3 = Medium impact

4 = High impact

5 = Very high impact

 

You can place this indicator against each use case to evaluate which will provide optimum benefits to banks.

3.    Adopt an Open-Platform Strategy for Implementing Digital Technology in Banking

By adopting an Open-Platform, banks can promote the development of business ecosystems. It will help CIOs in determining a bank’s industry vision and assist them in enabling value-creating conversations with clients. An Open-Platform strategy can also facilitate development and exchange of financial products, services, and social currency. It also allows banking platforms to share technological assets like data, algorithms, and interactions between people, and monetary transactions.

For enabling digital value creation, CIOs must focus on developing mobile channels that can pool data from various locations and provide valuable insights into a customer’s financial journey. By utilizing these insights to develop new products and services, digital technology in banking can be implemented successfully.

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  1. Why start conversing with your digital banking customers? Banking is more than just financial transactions. The products and services offered by most banks include credit cards, financial investments, certificates of deposit, and loans for homes, vehicles, and businesses. When customers approach a banking institution for a simple deposit or withdrawal, it presents an opportunity to sell other revenue-producing services. Enter digital banking.
  2. Next Generation Banking models It is high time now that banks change their strategies. They are now in the face of a daunting array of market, regulatory, customer, cost and operational challenges.
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  4. Banking technology – What 2016 has in store  Competition among banks has increased and they are waging financial wars on a number of fronts. Not only this, a number of fintech startups, digital challengers and tech giants present a threat that is unlikely to go away soon.

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