The new digital tipping point

Technology has always impacted society and commerce in unpredictable ways, changing customer behaviour, spawning new enterprises and wiping out existing businesses that are unable to keep pace. Driving a culture of innovation either internally or through partnerships will be a critical core competency among technology-savvy organisations in the future. While the transformational impact of new technology has been slower to reach financial services than other industries, the sector has finally reached a tipping point. In this ‘new reality’ of banking, financial engineering is no longer sufficient to create value, and banks need to look at demonstrating customer value to remain relevant in the market.In Rwanda, the mVisa mobile banking product was developed by Visa to help banks deliver services to people in remote geographical areas who don’t have access to brick-and-mortar banking services. mVisa has been adopted by Bank of Kigali and Urwego Opportunity Bank, and is currently being rolled out to cover a wider geographical reach, targeting Rwanda’s over six and a half million mobile phone users. Urwego’s mVisa service also provides insurance services, which is a unique service in the mobile finance services available to Rwandans. mVisa demonstrates the power of digital finance as both a channel and a technology. It creates new ways to market and sell products and services, but also to connect and transform the propositions of traditional channels. Banks need to focus their strategies on a customer relationship primacy model, by building trust and deeper engagement with their clients - such as through platforms like mVisa and other innovations. There is little doubt that customer relationship primacy is the new source of value in financial services.Today, a successful digital offering in banking implies the provision of high quality online and mobile banking access. We find that the new digital feature set can be used to meet the increasing demands of the customer. Not only does digital deepen levels of customer engagement, it also opens up avenues for the monetisation of new services, with customers placing greater value on new digital offerings. As new entrants compete for inclusion in the banking value chain, a number will succeed in securing a position in the banking ecosystem. Even so, tools like mVisa are unlikely to displace banks as the primary provider of financial services, especially in markets where banking is widely accessible.With the battle lines being redrawn among banks, the successful ones will focus on taking steps to develop deeper relationships with their customers. Earning trust, building engagement and creating value for consumers should be their guiding principles.For financial institutions, awareness of these changes is important because they will challenge traditional business models and reshape the competitive environment in which financial institutions operate. New asset classes are developing rapidly as research and development continues to yield breakthroughs and new innovations. Building world-class capabilities through fostering effective relationships with both the innovators and regulators will be a core part of financial institution strategy, going forward. Also, understanding the impact of technology innovation on how risk is measured and priced is a core competency across financial services players, and particularly in insurance.As the speed of technological innovation accelerates, large financial institutions are facing immense challenges around where to focus IT investment, which technologies to use and how to manage implementation across multiple geographies and businesses, while at the same time trying to reduce IT complexity and ensure security. Technology is increasingly transforming customer behaviours and raising the benchmark for the best-in-class customer experience, and financial institutions must anticipate and adapt to these changes. Technology is enabling a new definition of customer centricity, allowing potential new competitors to re-segment the market, unencumbered by legacy systems. Financial institutions are using social networks to listen to what customers are saying about them and to market and sell their services, fundamentally changing service distribution models and the institution’s relationship with its customers. Going forward, the growing role of technology will continue to be critical as financial institutions continue to transform their relationship with customers to remain relevant in the market.The writer is a director in technology advisory services at PricewaterhouseCoopers Rwanda.

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The new digital tipping point