To give a definition of Digital Finance, according to the European Commission, this term refers to “The impact of new technologies on the financial services industry. It includes a variety of products, applications, processes and business models that have transformed the traditional way of providing banking and financial services.”
In recent years, the financial sector has invested effectively in technology to adopt digital solutions to digitalise financial services, giving rise to exponential innovation. Now we access our bank account online through a multichannel bank or through an app, it is possible to carry out transactions remotely with a simple click, connect your phone to your credit card and pay contactless mode. Artificial intelligence, machine learning, mobile applications, cloud computing and big data analytics reshaped new business models in banking.
To present, inform and shape a Digital Finance Strategy and provide citizens with specific financial actions, the European Commission established in 2020, the Digital Finance Outreach, a series of events organised in collaboration with the Member States, about Fintech and digital innovation in the financial Industry.
The technological Pillars in Digital Finance
Beyond Digital Finance and Digital Banking is FinTech, a term used to describe any technology or digital solutions that deliver financial services through software, such as online banking, mobile payment apps or even cryptocurrency. The main objective of Fintech is to change the way customers and businesses access their financial services by replacing traditional procedures and physical in-branch presence with paperless and remote forms.
With the prospect of deriving the maximum benefit from technology in terms of quality, optimization and effectiveness, digital finance is structured on some technological pillars that generate a basic structure for the construction of strategic and operational objectives, which are:
1. Omnichannel Solutions
To improve the use of customers’ online services, the option of omnichannel banking is recommended, which, compared to multichannel banking, is able to make online transactions and access to remote services smoothly and automaticallY, from any type of device such as smartphone, tablet or laptop. This optimizes the user experience, personalized services, enhances the interaction and points of contact between the two parties, giving the bank a new innovative and digital image.
2. Open Banking
Open Banking is a new business model that enables customers to manage and control their banking data independently through the internet, granting access to this data to third-party suppliers who in turn can initiate transactions and digital payments.
Open Banking is a system made possible by the new regulations introduced by the Revised Payment Services Directive known as PSD2, a directive introduced by the European Commission to decrease the costs of entering fintech markets and make online transactions safer.
3. Banking Process Automation
Like in other industries, to streamline ordinary banking procedures and speed up document review and approval, Business Process Automation (BPA) can help financial institutions to increase productivity and reduce operating costs.
Banks generally require customers to provide personal and financial data in various forms (on websites, paper forms, mobile platforms, third party platforms, etc.). This data goes through the bank’s internal processes which may include background checks, identity verification, financial fraud prevention and anti-money laundering checks. These procedures require entering and extracting data from various internal and external systems, which traditionally implies that staff spends time on these repetitive tasks. Through Automation software, Bot, Artificial Intelligence and Machine Learning, the automation processes of banking activities can be possible as if they were bank employees.
Digital Services Availability
Now more than ever, in a digital landscape and especially after Covid-19, for financial institutions, having digital services and giving their customers the opportunity to carry out a transaction can no longer be seen as an optional service, it’s the norm. Customers expect to have access to banking services remotely and from any device. The The most common banking services digitally available are:
1. Digital Identity
Banks must guarantee total data protection with digital ID solutions that are in compliance with legal requirements, and current european regulations such as eIDAS, AML5, PSD2, Sepblac and BaFin. Through digital identity it is possible to verify that the user requesting access to a specific banking service, is the real person. To do so, a strong digital identity verification is required to protect sensitive data and avoid fraud and anti-money laundering, achieveable with the use of Biometric Authentication which uses components such as Face Identification, Voice recognition, Liveness Detection, etc.
2. Digital Payments
Digital payment methods are often easy to carry out, are instant, paperless, more convenient, and offer customers the flexibility to make payments from anywhere and anytime. They represent a good alternative to traditional payment methods and speed up transaction procedures. After demonetization, people slowly began to embrace digital payments, and even small merchants and store owners began accepting payments via digital and contactless methods. The benefits of digital payments include a high level of compliance, enhanced security and protection of customers’ data, fraud and anti money laundering prevention, cost optimization and time savings.
3. Digital Signature
Every day banks manage many documents, loans, agreements, or many kinds of financial document that need to be signed, for that, businesses should grab the opportunity of digital technology and adopt digital signature software and tablets to speed up the whole process by maintaining the same legal value of a handwritten signature, by choosing carefully a full legally compliant solution recognized at European level.
At Euronovate we can support banks and financial institutions with digital, paperless, secure and legally compliant solutions such as Digital Signature, Customer Onboarding, Business Process Automation, Workflow Management, Software Integration, etc.. If you want to find out more about the advantages of our services, please contact us to arrange a demo or to ask for more information.