Digital Banking's Transformation to Omni-Channel: A Necessary Evolution - Essay Sample

Introduction: Transformation of Digital Banking to Omni-Channel

Just like the shift from traditional to modern banking, the transformation of digital banking to omnichannel is an inevitable consequence of advancing technology. The omnichannel approach (which is to provide access to similar services or products in various platforms such as online or offline) first started in the retail industry at the beginning of 2010; however, the approach has quickly been taken up by other industries such as media, telecommunications, and most recently, retail banking (Didur, 2018). The approach allows banks and fintech companies to cut their costs on various processes by automating them; hence, through increased customer experience, banks are now able to increase their revenues tremendously.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Recent studies show that although more people are starting to opt for digital banking services, about 50 percent of them also want to have access to bank branch as well either through telephone or face-to-face (CGI Group, 2014 p.10). It is because of this trend that omnichannel platforms are becoming increasingly popular as they cater for all client needs - both online and offline. An omnichannel approach gives a consumer the ability to make financial transactions such as sending and receiving money as well as checking their bank balances through digital platforms on their mobile gadgets and laptops. It also gives customers the reliability they need by being aware that they can access any bank branch for customer inquiries and help.

The principal goal of omnichannel platforms is to present customers with a seamless and real-time experience. A good example is real-time data synchronization, where customers do not need to constantly input their data as it is all saved in the cloud. Digitalization and the rise of fintech companies brought a disruption in the banking industry; more so for traditional banks whose services were not based on digital platforms. However, traditional banks can now use omnichannel platforms to their advantage by targeting customer with high demand for convenience and simplicity regardless of the digital devices they use (Obilisetty, 2018). This can be best done by integrating physical and digital channels; hence, shifting focuses from bank-centric transactions to customer-centric.

A Multi-Channel System

A multi-channel system refers to distribution management where organizations such as banks provide access to the same service through various platforms or ways. For example, in banking, a customer can check their bank balance through an ATM machine, over the counter at a bank branch, or through digital banking on their mobile devices. A multi-channel system is, in most cases, supported by advances in technology as well as the integration of this technology into ongoing systems within an industry or organization (Pavlovski, 2013, p.2). Despite the complexities associated with multi-channel systems, more organizations (and in this case, more traditional banks) are adopting its use primarily because of the demands of the consumer. As the world evolves and new technologies are joining the market, more consumers are starting to have the need of having access to banking options.

Technologies and Standards for Multi-Channel Banking

In addition to meeting customer demand, multi-channel systems allow organizations to increase their profits as well as their appeal and loyalty from their customers. Because this system is primarily based on pleasing and accommodating the consumer, great efforts are placed by companies offering multi-channel services in ensuring that the customer gets quality experience (Barrue, Staib, & Tessitore, 2010, p.4). In banking, this is exhibited through quick online services that are available on various channels such as mobile phones, tablet, and laptops. It is also exhibited through real-time financial transactions and data synchronization. Moving from a single-channel to a multi-channel platform also requires structural support such as systems, analytics, and capital. These structural systems, once integrated with technology, ensure consistency, sustainability, and profitability of the multi-channel system (Omarini, 2013, p.85).

Key Benefits and Challenges

There are many benefits of multi-channel systems, both for an organization and a consumer. Among the major benefits is increased efficiency in an organization as well as in the provision of services. This is made possible through the allocation of processes, technology, and data by banks. Another benefit is increased flexibility by an organization. Previous paragraphs and chapters have revealed the rigidity of traditional banks as compared to fintech companies, which are considered to be more flexible. However, as traditional banks adapt to technology such as the provision of multi-channel banking, they have become more flexible in their service and product providers as well as their target market (Stone, Hobbs, & Khaleeli, 2002, p.41). This has consequently given way to increased efficiencies by banks in dealing with stakeholders as well as exploiting customer data to identify their needs (Gajanan & Basuroy, 2007); hence, creating a new channel for growth.

On the part of the consumer, multi-channel systems have increased the convenience and efficiency in the banking experience (Goersch, 2002, p.752). Through the multi-channel system, customers can access financial services through various platforms; hence, giving them a sense of freedom and control over their finances. Banks which offer quality customer service based on multi-channel systems, in turn; get customer loyalty and positive brand perception - an important element for any business organization. Customers now have the ability to choose the platform which best suits them and their current needs. For example, if the customer is not near an ATM, they could opt to transfer their money to their mobile wallets and make transactions from there. Similarly, they may also opt to pay for goods via card or withdraw money and pay cash - the choice is all theirs.

Despite the numerous benefits for both banks and consumers, multi-channel systems also have a few challenges. A major challenge is a poor return on an investment after investing heavily on multi-channel strategies both on physical structure and technology upgrades. Because of this challenge, fintech start-ups find it especially difficult to offer multi-channel platforms and instead focus on omnichannel strategies. Another challenge associated with multi-channel systems is collecting and standardizing data from customers (Stone, Hobbs, & Khaleeli, 2002, p.42), which helps create an analysis of customer behavior and needs. Another major challenge is unifying different systems or integrating data across channels which may have different data models (Neslin, et al., 2006, p.97).

An Omni-Channel Platform

An omnichannel platform is quite similar to a multi-channel system as both are content strategies used by organizations to enhance their user experience. An omnichannel platform seeks to offer customers a seamless experience and in the case of the banking industry, these services include financial transactions and online banking among others. Unlike a multi-channel system where a product or service is available through various platforms, omnichannel platforms offer different services or products on one package or outlet. For example, customers can check their bank balance, send and receive money, request and pay for loans, among others through one mobile app platform.

The omnichannel platform focuses on retaining and gaining loyalty for the consumer through integrating various channels, services, and products such that they are made more accessible, convenient, and easy for the customer (Koszela, 2017, p.17). This platform is not deterred by physical and geographical barriers as it uses the technology of digital banking or e-commerce. A major contributor to the development of omnichannel platforms is the advances in technology such as increased internet and mobile network penetration as well as the development of smartphones (Avoka, 2016). With the rise of digitalization, online banking has become more of a necessity with more people demanding its use. The internet has become an innate part in individual's daily lives and just like the multi-channel system, omnichannel platforms are propelled by the need to satisfy the needs of the customer (Komulainen & Makkonen, 2018, p.194); thus this platform is purely customer focused.

Key Benefits and Challenges

As a rennet global technological trend, omnichannel platforms have various benefits for both the consumer and the organizations implementing it. The benefits of omnichannel platforms are quite similar to those of multi-channel systems such as increased efficiency for both financial institutions and customers, increased revenues and reduced costs for financial institutions as well as quick service provision (Komulainen & Makkonen, 2018). The customer experiences in omnichannel platforms are not only unique but they are also of good quality and offer a high-level of convenience unlike what has been experienced before. Omni-channel platforms have also increased digital security through technologies such as blockchain, machine learning, and artificial intelligence.

Despite the advantages, there are also a few disadvantages associated with omnichannel platforms such as the disconnect between a consumer and the bank since most transactions are made online. This reduces the physical or face-to-face assurance that customers get from institutions (Rosman, 2015, p.8). Other challenges include implementation of omnichannel platforms such as the upgrading of new technology and the financial input especially by traditional banks who are seeking to offer digital banking services.

Architecture Framework Proposed

An architecture framework, also known as an enterprise architecture framework, is used to describe how to create and use well-defined practices while analyzing, designing, planning, and implementing strategies for an enterprise. This framework uses principles and requirements related to architecture to steer organizations through changes associated with the business, information, and technology...