Calling All Financial Institutions: The Way to Offset Digital Disruptors Is at Your Fingertips

10 December, 2019

Calling All Financial Institutions: The Way to Offset Digital Disruptors Is at Your Fingertips

By David Mitchell, President of NYMBUS

A new report from McKinsey & Company says that nearly 60 percent of the world’s banks need to make bold changes to reinvent themselves or they’ll struggle during the next financial downturn. Investments in technology are urged in order to stay competitive with newer rivals and as more consumers are trusting big technology companies to handle their financial needs.

The stakes just got higher with the rumored 2020 launch of Google checking accounts. And while skepticism remains over how well data is managed and safely secured by challenger banks and big tech operating in public clouds, is it enough to stop the disruption in motion?

According to this Citibank report, the incumbent banks face up to a 30 percent revenue hit from digital-first banks and big tech players. Now is the time for your institution to make bold and strategic moves to compete, and launching a standalone digital bank has quickly become a survival strategy. With no time to waste, the right fintech partner like NYMBUS can short-cut innovation in order to quickly and affordably stand up customized and competitive digital banking experiences without undergoing a technology conversion or hiring new staff. This is the blueprint for success you have been waiting for.

A Do or Die Scenario

McKinsey is justified to describe this as a “do or die” moment. The growth of digital-only challenger banks has already disrupted the market as more consumers are seeking their convenience, lower fees and enhanced experiences. Meanwhile, non-financial organizations including retailers and the major technology companies understand the value of participating in financial services to deepen their own relationships with consumers while offering potential new profit streams.

In August, Apple launched its own credit card in partnership with Goldman Sachs. Amazon is reportedly in talks with J.P. Morgan and other banks to develop a checking account product that would appeal to younger customers and those without bank accounts. Facebook has even joined the financial services bandwagon with a proposed digital currency project.

Despite the onslaught, entrusting sensitive financial data to the hands of newer financial alternatives can pose consumer risk. The recent Chime outage left millions of customers without access to their accounts and funds. Capital One’s data breach is another high-profile example of what can go wrong while banking in a public cloud.

Ultimately, using a hosted, private cloud solution for financial institutions offers significant advantages of cost, compliance, security, single-point accountability and flexibility for both developing innovations and scheduling maintenance. And while Bank of America and IBM just partnered to build a cloud for banks that addresses these industry-specific requirements, the highest security and compliance concerns are already being met in NYMBUS’ dedicated private clouds.

Established institutions with years of trust and financial security are safely innovating by introducing digital-only banks with private, reliable access to our world-class banking technology. Furthermore, they are succeeding quickly and affordably. Here is how.

The Short-Cut to Innovate

Although the immediate need to reinvent is clear, banks spend only 35 percent of their IT budget on innovation compared with 70 percent by fintechs. A majority of traditional institutions are meanwhile still feeling trapped by legacy providers with outdated banking infrastructures and middleware. In a do or die moment, this is a combination for disaster.

A different business model is required to remain relevant. A transformation strategy that is not dependent on a full-blown core conversion to introduce new digital experiences and revenue opportunities and that is available at a fraction of the time and cost.

NYMBUS SmartLaunch was introduced to the market with this low-risk approach in mind. Built on NYMBUS’ modern SmartCore platform, it outsources all of the necessary technology, resources and digital marketing for financial institutions to quickly stand up a separate digital-only bank experience. NYMBUS’ team of industry banking experts handles everything from a customer-facing call center and back-office operations to targeted digital marketing and sophisticated website services. Under their existing charter and without disruption or cost to the institution’s legacy operation, new digital banks are being achieved in record time for fast return on investment.

It takes more than modern technology for today’s financial institutions to compete and thrive in the digital age. The approach for innovation needs to involve less time, cost and risk. In collaboration with the right fintech partner, this is an achievable outcome. But finding one with a proven track record can be elusive. NYMBUS has the technology, compliance, operations and marketing expertise to succeed.