Today, the promised benefits of digitalization are close to being fully realized. Already, it has caused people to fundamentally change how they interact with businesses and with each other. Thanks to these changes, financial institutions (FIs) are now in a unique position to become even closer with their clients than ever before. It’s now clear that a more intimate, more, redefined relationship with clients may be key to driving growth in the finance sector over the next generation.
A growing number of banks and other FIs are now betting big on this possibility, in a wave of digital banking transformation often called “Banking 4.X”.
What Is Banking 4.X?
Every generation or so, new trends and technologies cause seismic shifts in the banking industry. The maturation of mobile technologies has, over time, brought with it an expectation of convenience and personalization. This brought about recent changes in finance often referred to as Banking 4.0.
Banking 4.0 denoted a shift to banking systems that are digital, experience-driven, personal, and multi-channel in nature. Critically, it was a shift away from a relatively impersonal financial product marketing toward a customer-centric approach. In contrast to traditional banking, Banking 4.0 also saw FIs not only widen their roles but become more invisible in the lives of clients, as well.
Banking 4.X is the next step. In this paradigm, banking systems are set up for seamless collaboration, theoretically allowing better innovation and elevating the overall customer experience. Banking 4.X can therefore be seen as taking the basic premise of Banking 4.0 even further by giving customers and other key entities a greater degree of control in so-called “ecosystem partnerships”. This is similar to strategies already being executed by major tech players such as Apple, Google, and Amazon.
Essential Features of Banking 4.X Platforms
Banking 4.X systems expand on the capabilities of Banking 4.0 platforms by offering secure methods for customers to personalize their experiences—and for third-party developers to create apps, products, and services facilitated by bank systems designed for digital banking transformation.
To facilitate this, Banking 4.X platforms need the following features:
1.) A Framework That Permits a Secure Multichannel Digital Experience
The platform should offer everything a developer might need to address the requirements of customers, wherever they may be. This means that it should be able to work on mobile devices, desktop computers, wearables, messenger apps, social media, and other devices or channels used by customers. The system should also facilitate seamless customer experiences across different channels.
2.) A Dashboard That Offers Smart Personalization and Templates
Regardless of how and where they choose to interact, bank clients and collaborators should have well-designed dashboards that are intuitive and functional. Templated solutions should be available for customers and developers who may desire more personalization but do not have the time to take deeper dives into the functions of the bank’s system.
3.) An Extensive and Intuitive API Library
For ecosystem partnerships to be successful, developers need to have access to a full set of API tools. What’s more, these tools should be properly curated, updated regularly, and organized so that developers have an easy time finding what they need. This is critical because having a well-stocked and properly managed API library can be what causes collaborators to choose one bank over another.
4.) Service and Support Infrastructure for Customization
Even with a properly curated API library, there is no telling what developers will need to stay on top of future market trends. For this reason, a Banking 4.X platform should be designed from the ground up to be customizable, to address every potential point of the customer journey. Additionally, there should be proper support infrastructure for customizations on the platform. This will not only improve the flexibility of the system but also its longevity.
5.) Multi-level Security and Authentication
None of these other features would be safe without the appropriate level of security. With malicious actors becoming more sophisticated every year, Banking 4.X platforms should be designed to be secure against current hacking methods but also the next generation’s cyberthreats.
Why Should Banks Transition to Banking 4.X?
Today, financial markets are changing at such a rapid pace in such profoundly new directions that it will be practically impossible for any single bank to develop all the best possible services and products in-house. The past few decades of mobile banking indicate that banks that attempt this are at a disadvantage from fintech and other tech businesses that could pivot direction more quickly.
To survive in the next few decades, banks have to leverage their stability as their strength through conscientious digital banking transformation. By offloading app development to other innovators and providing stable systems and platforms others could use, banks and other forward-thinking FIs can become indispensable to the future’s financial ecosystems. All indications seem to point to this ecosystem business model as becoming necessary if banks are to remain relevant in the coming years.