As the fintech buzz has rapidly caught the attention of both venture capitalists as well as the boardrooms of major banks, referring to business and operational model of financial services as either digital, or digital-first or mobile-first, or mobile-online has started to catch on.
Daragh O'Byrne did a great job recently on bobsguide to get underneath the terminology especially focused on ‘digital lending’ and look for the meaning, value and real-world impact of 'digital' in digital lender.
O’Bryne breaks down ‘digital’ into characteristics like speed, ubiquity and agility, and how those translate to business impacts like being able to be a market leader, increasing sales ability and driving profits through portfolio quality:
Seamless, fast and unique digital experience not only drives customer loyalty but also helps you differentiate from the competition. While this may not apply to a highly price sensitive market, studies indicate that many customers are willing to pay a premium for a faster, better and personalised experience.
By making better credit decisions faster, you improve the quality of your credit portfolio, which in turn reduces the level of non-performing loans translating into higher returns. An end-to-end digitized infrastructure eliminates manual intervention, reduces errors, standardizes decision making (not relying on individual, case-by-case judgment) and identifies pre-delinquent cases early (which can help prevent them becoming delinquent).
He also steps back and looks at how to think about this strategically to summarize that:
As banks are ultimately in the business of growing revenues while increasing profits, they need to outline a digital transformation strategy that aligns with the long term aims. Narrowly focusing on efficiency gains will deliver short term gains but may mean that banks miss the opportunity that ‘going digital’ brings.
Recommended reading in it’s entirely for those interested in going beyond the buzzwords.