Top 10 Banking Challenges in 2023: Tips & Solutions

Core banking 21-Dec, 2022

A radical shift is underway in the banking industry. A shift that is largely driven by evolving business models, regulatory pressures, and FinTechs.

The emergence of this shift is further making traditional institutions revisit the way they do business. However, with the digital boon taking over each sector, certain challenges pertaining to data breaches and privacy concerns loom over the operational freedom of these financial businesses.

Now, let’s take a look at some of the most prevalent concerns related to the banking industry that need to be addressed for the smooth sailing of all financial businesses.

1. Changing Cultural Attitudes

The digital era has no room for manual procedures and systems. Technology has become ingrained in our culture, from wearables that monitor your health to smart thermostats that help you adjust heating settings through the internet - and the banking sector is no exception. Banks and non-digital financial institutions must integrate technology-based solutions to maximise their efficiency and embrace digital transformation.

2. Regulatory Uncertainty

With fintech taking over the world, regulatory uncertainty ranks as one of the most critical threats. One major reason behind this concern is the absence of an exclusive regulatory policy for the FinTech sector. Currently, it is governed by existing legislation and regulatory frameworks designed for traditional financial institutions. With digitalisation taking over the world and FinTech leading its way through the boom, compliance with the ever-increasing yet traditional regulations can strain a company’s resources. Hence, to set up a favourable growth environment for FinTech to consistently provide innovative solutions, the authorities need to revisit the regulatory framework. The concern is not just limited to that. In the FinTech industry, there are a variety of business models, making it challenging for regulators to develop one-size-fits-all regulations. To close this gap, all the stakeholders need to unite and work towards building trust in the new FinTech regulatory environment.

3. Changing Business Models

Compliance management is just one of many challenges forcing financial institutions to change how they conduct business. Increasing capital costs, low-interest rates, decreasing returns on equity and decreased proprietary trading are all putting pressure on traditional banking profitability sources. All these factors are compelling many institutions to come up with different service offerings and look out for sustainable improvements in operational procedures to meet profitability. There is no room for failure when adapting to change; therefore, financial institutions must be structured for agility and be able to pivot as and when needed.

4. Rising Expectations

In today’s time, customers pay a subsequent amount of time before opting for a service. They are smart, informed, and have an ever-growing expectation for a convenient banking experience. Millennials must be credited for leading this change towards increased awareness. Consequently, financial institutions face a unique challenge: how do they satisfy both older and younger generations of banking customers at the same time?


5. Customer Retention

A personalized and meaningful experience through a simple and interactive interface on any device is what a financial services customer looking for. Even though customer experience is hard to quantify, customer turnover is tangible, and customer loyalty is in danger of extinction. According to a global study of approximately 33,000 banking customers across 18 markets by Accenture Financial Services, 49% of them indicated that loyalty is driven by customer service. By reading customer behaviour and then serving them accordingly, financial institutions can better work towards customer retention. 

6. Margin Pressure

Since many FinTech companies operate on digital-centric and asset-light models, they have an edge over traditional institutions in terms of cost-saving and scalability. This is largely because FinTech depends on cloud systems for its operational infrastructure. Hence, it results in threatening margins when they seize business opportunities from incumbents or empower competitors by offering their services.

7. Security Breaches And Privacy Risks

High-profile global data breaches over the past few years have led to a major concern for all the stakeholders of the banking industry. To win the trust of the customer and make them feel secure, financial institutions must focus on integrating technology-driven powerful security measures such as:

  • Risk-based Authentication (RBA)
  • Location-based Authentication
  • Out-of-band Authentication (OOBA)
  • Biometric Authentication
  • Address Verification Service (AVS)
  • End-to-End Encryption (E2EE)

8.  Legacy & Monolithic Applications

As per a Gartner CIO Survey, more than 50% of financial services CIOs agree that more revenue will come from digital channels, and more value will be generated from digital initiatives. But, organizations that are still using outdated business management applications will find it difficult to adapt to this increasingly digital-first world. To not miss out on crucial business evolution, survive by growing wallet share and improve customer experience, they need a dependable forward-thinking technological approach by applying technologies like artificial intelligence, cloud computing, bots, etc.

9. Outdated Mobile Experiences

Today, every financial institution has its mobile application. Although, it doesn’t imply that it is being leveraged as effectively as possible. It must be fast, easy to use, engaging, secure, and regularly updated with live chat and voice-enabled assistance to keep the customers completely satisfied.

10. Constant Innovation

Do you know what defines sustainable success for a business? It’s insight, agility, foundational client relationships and a constant drive to innovate solutions. As the famous saying goes, businesses must benchmark to survive, but innovate to thrive. Through customer interactions and continuous organizational analysis, insights are discovered, and they lead to innovation.  In order to lead the digital transformation race, financial institutions need to use the latest technology, particularly cloud applications.

The growing trend of digital transformation is compelling every financial institution to adapt to it to stay in the business. But in this highly competitive landscape, many are failing to add value to their digital services. However, to bring value and effectively serve the consumer with convenient solutions, an organization must aim to be digital beyond digital transformation. From disrupting legacy platforms to overcoming the roadblocks of monolithic banking systems with personalized key solutions, we, at Coreium, can help you win in this digital age by building next-generation business platforms. Email or call +60 166173975 today to get consulted by our experts on innovative fintech solutions and customized services.

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