Although the banking industry has long been tech-heavy, its technology has not always served it well and this presents a particular challenge when trying to serve the important SME market. Banking tech has not been able to keep up with the pace of change in other industries, and the monolithic systems and in-house servers on which they are built have held them back from competing with the agility of new entrants. The once-pioneering systems pose a significant challenge for banks deploying new software and applying best practices. And that’s before you factor in a global pandemic.
One particular area in which incumbent banks struggle to compete with FinTechs is international transfers. Using the correspondent banking network, cross border payments are slow and expensive. In a competitive, fast-paced, digital and international market, delays in cash flow and the high cost of cross border transfers wastes resources and limits SME growth potential.
Resolving these challenges has been on banks’ agendas for some time, but COVID-induced pressure has undoubtedly pushed the issue higher up the list. Financial infrastructure providers are delivering new technological solutions that play an increasingly vital part in the financial ecosystem, helping banks and payment businesses improve cross border payments for their business clients, in particular helping small businesses to access new opportunities and get back to profitable growth.
Financial infrastructure providers are focused on integrating with a vast network of local clearing and payments schemes, delivering faster and cheaper cross border banking solutions to empower SMEs in their global expansion.
A 2020 legacy
As the COVID-19 crisis spread, causing nationwide lockdowns around the world, it was both exciting and encouraging to see the rapid, dramatic increase in recognition of the value and potential of digital.
Early in the pandemic, we surveyed and interviewed senior executives from a range of financial institutions across Europe to study how financial institutions in Europe were developing digital strategies. The decision-makers who took part in the study confirmed that the businesses they represented already had in place plans to digitise more processes. However many shared that these plans had to be fast-tracked due to the crisis, demonstrating the need for organisations to be adaptable, agile and prepared in order to best serve their business and consumer customers. COVID-19 has certainly proved to be an accelerator for change.
That change, though, has taken place at different rates in different regions and among different countries as Thibault de Barsy, Vice-Chairman & General Manager, Emerging Payments Association EU explained: “The biggest problem for digital solutions in Europe is that it is not a truly unified market. It’s not even about cultural differences. We’re talking about basics like regulation and tax.”
Building futureproof post-pandemic global banking
The pandemic has demonstrated the efficacy of working digitally, as well as the importance of human interaction. Understanding how and where human interaction fits into a digital model and determining which services should be digitalised, will be critical in the future.
As the world makes its way out of the pandemic, banks and payments businesses must take time to understand the future, use the lessons of the past – including those learned during this pandemic – to determine longer-term thinking around the collaboration and infrastructure that enables success.
In the process, everyone can regain the clarity and confidence that 2020 originally offered and see it as a time that lay the foundations for a bold new collaborative, accessible and future-proof financial ecosystem.
Banking Circle has published the results of its study in a series of three white papers, which are available to download here.
Anders la Cour, co-founder and Chief Executive Officer of Banking Circle
