What is digital finance?
Digital finance is an umbrella of the many products that Fintech companies are launching into the financial ecosystem all in the bid to fully decentralize financial services.
Digital finance includes but not limited to; smart financial software, easy to access financial business models, mobile financial inclusion, flexible customer relationships that is all powered from the staple of Fintech startups.
Forward thinking banks tapped into this wave right from the time when www.paypal.com first launched their service while some waiting for too long before making a move and yet some are still to make a move – I will give examples of banks that are yet to make a move here as that will constitute negative press which is not right.
My aim of writing this article today is to identify some of those challenges faced by traditional banks because of the effect of digital finance and then proffer some solutions.
Is digital finance same as digital banking?
The short and simple answer to this question is NO, just as Banking is different from Finance. These two words are distinct in meaning according to normal daily lexicon – banking means ‘the business conducted or services offered by a bank’ while finance on the order hand is the ‘activity of managing money’. John Shepherd-Barron, an inventor and an engineer in 1967 invented the ATM for example.
Six (6) Reasons why Digital finance is posing serious challenges to banks
- Democratized nature of technology
- Ever increasing cheap source of quality knowledge
- Trust lost in traditional banking sector
- Shift in consumers focus
- Speed of words
- Increased drive to innovate
How can banks best tackle these root cause of these challenges?
No amount of regulatory reform done from the office of the central banks of any nation can completely take away these challenges posed by digital finance to traditional banks. The days of central regulatory board room decision making are gradually coming to an end – what I call the ‘laws of reality dynamics’ are unstoppable.
Six (6) ways of tackling digital finance challenges
Below are some of the untapped opportunities that banks should start tapping into to ensure relevance in the near future.
- Implementation of open digital transformation
- Implementation of customer first philosophies using Lean Six Sigma
- Regain back lost trust
- Tie executive bonuses to digital finance metrics
- De-emphasize profit making prowess of banks
- Implement on the field legislation for banks