Digital agility in lending is a topic financial leaders can’t afford to ignore. In case you’re not familiar, digital agility is the technology-enabled ability to rapidly deliver the innovation and experiences that help acquire and retain loyal customers.
Financial institutions that are digitally agile are able to launch new products in response to market conditions, competitive pressure, regulatory changes, and consumer expectations with quick action.
Why is there a push for digital agility in lending now?
There are four primary reasons your organization will want to have digital agility in place — quickly. Let’s dive in to examine these reasons to touch on how digital agility can help you thrive in a world that’s moving at a faster pace than ever.
1. Rising customer expectations shape a need for digital
According to Salesforce, 76% of consumers expect businesses to understand their individual needs. 64% expect companies to respond to their inquiries in real time. The average consumer is more empowered to demand what they want. Lenders are expected to deliver seamless service in every interaction.
Today, that includes simplicity and ease of use, efficient processes, and personalized experiences. PwC says, “Successful disruptors typically offer a better customer experience and greater convenience at a much lower price.” Technology is key in enabling the responsiveness needed to meet these expectations.
2. Digitally native organizations are gaining market share
Disruptors, including neobanks and tech companies offering consumer lending and banking products, have been gaining market share each year. Unencumbered by the costs of physical branches and boosted by fast-paced structures, these organizations can move faster than traditional banks. They can spin up new products due to their nimble structures and have access to capital to spend testing the latest technologies.
Tech giants have already displayed their ability to break into consumer finance. Amazon loaned over $1 billion in 2019. Uber offers a bank account and mobile banking app through Green Dot, and the tech giant is quickly expanding their offerings to develop a suite of products for both drivers and customers. Additionally, Google will begin offering checking accounts this year.
3. The birth of new technologies brings life to new opportunities
Countless new technologies, including artificial intelligence and machine learning, are predicted to redefine the lending space over the next few years. AI alone has the potential to add $1 trillion of value for banks each year across more than 25 use cases, McKinsey says. This value can be realized in many ways, including higher profit margins and personalization.
Some banks are already utilizing certain machine learning capabilities to detect fraud, provide quick answers to customer queries, and market new offers customers. To support forward-looking preparedness in advance of relevant and effective technologies, lenders are turning to digitally agile architecture.
4. The accelerating pace of change challenges even the most responsive companies
The financial services industry has historically been slow to change, but this is no longer the case. Continuous innovation is required to keep up with this new pace.
COVID-19 necessitated big changes in lenders’ operations, and for some, it quickly became clear that they were not as prepared as they may have thought. Some lenders utilizing technologies that helped ease the transition to working from home and remote customer interactions fared better than those who hadn’t implemented these tools.
New technologies can be brought to market faster than ever before, and as a result, 70% of financial services leaders are concerned about the accelerating pace of change in the industry. Lenders can’t afford to be caught flat-footed.
What can you do to increase agility in your organization?
Evolving consumer expectations, increased competition, and new technologies are all contributing to the disruption of the industry and the speed at which it moves forward. Setting a foundation of digital agility can help your organization be ready to adapt regardless of the ways the industry reshapes in the future.