Digital banking: traditional banks move towards fintech

Digital banking is the future for a sector undergoing a process of profound digital transformation. With the advent of innovative new payment methods and the arrival of tech giants in the payment and loans sectors, banks must adapt in order to keep pace with the times and not be left behind. Some of the leading names in digital – with their hordes of loyal customers and infinite databases – are beginning to make waves in the world of digital payments. Amazon, for example, launched Amazon Pay before sealing an agreement with Bank of America Merrill Lynch in order to bolster its Amazon Lending programme for companies. And who would bet against an organisation that has been able to in sell everything, all over the world, earning trust and critical respect in the process, succeeding in selling loans?

Currently only in operation in Japan, USA and the UK, Amazon Lending allows interested companies to request a loan from Jeff Bozos’ e-commerce colossus. For now, Amazon Lending is primarily oriented toward other e-commerce companies, who may request a loan of between $1000 and $750,000 with a short repayment period of 12 months. Since 2011, Amazon Lending has handed out around $3.5 billion in loans.

 

The reaction of the banks

The British Lloyds Banking Group is to invest over £3.5 billion to transform itself into a simple, low-risk digital bank. Lloyds, which was bailed out during the financial crisis but became a private company against last May, has just revealed a hotly anticipated Strategic Update which sets out a recovery strategy centred around digital.

The bank will focus on taking advantage of new technology to create products that allow customers to manage their accounts and investments on the move. As part of its Strategic Update, Lloyds has declared its plans to use new technology to make banking simpler and easier for its customers while reducing operating costs over the next three years.

 

Deutsche Bank  CEO John Cryan has stated that the bank “must revolutionise its business because the world is changing”. Yet he admits that its diverse client base makes it difficult for the bank to fully embrace digital: “We haven’t yet come up with interfaces that can replace humans, but we’ve developed robo-advisors, robotic ‘consultants’ equipped with artificial intelligence and online banking tools. However, many of our customers believe it is vital that they can speak to a real-life person. The key is to strike the perfect balance.”

 

Poste Italiane’s digital banking strategy

Digital payments will soon become a reality for Poste Mobile, too. On 25 January, the company published a statement announcing that it had “approved the release of activities and assets relating to monetics and payment services from BancoPosta’s Ring-Fenced Capital to be transferred to PosteMobile SpA.” In essence, this means that Poste Mobile has become a new arm of the company “destined for monetics, e-payments and payment services, through which PosteMobile can operate as an Electronic Money Institution (EMI)”. According to Poste Italiane, the decision will allow Poste Mobile to operate more efficiently in terms of services for retail, business and public administration clients. Poste Mobile will now aim to integrate its payment and digital banking systems in order to offer its client base a single payment services interfaces.

 

Digital banking: the study

Digital banking seems to be popular among Italians. The 2017 edition of the CheBanca! Digital Banking Index, which measures the digitalisation of banking in Italy and is carried out by CheBanca!, shows that 17.6 million users regularly access their current accounts through the internet or an app – an 8.9% increase on two years ago. While the majority still do this via the internet (72.2%), the biggest increase has been identified among mobile users, who – spurred on by the ubiquity of smartphones and apps – now number 5.9 million, a 66% increase on 2015. In practice, nearly one current-account holder in three (32.3%) use mobile banking, with a million people (5.3%) exclusively using apps for this. Yet this already irresistible rise has plenty of scope for growth: 5.5 million people do not use the internet to manage their accounts, despite having a current account and being a regular internet user.