The main purpose of banks is to serve the population and the economy because through them the movement and effective redistribution of funds occurs. However, banks have long been losing their market positions. The process of these financial organizations leaving the market continues in 2021. One of the main problems that will emerge this year will be the reduction in the bank’s liquidity due to the further outflow of funds from the population from bank accounts and deposits due to the wider opportunities for investment. If you wish to initiate fintech project, be careful in choosing the software developers. Only experts with a strong reputation can assist you in designing of invulnerable, flexible, and multifunctional solutions in this highly competitive market.
Individual funds are the main source of funding for many small and medium-sized banks, while household incomes have declined since the pandemic and unemployment is on the rise. Against this background, the amount of money received from citizens in banks is decreasing, because the population is not attracted by the low interest that financial institutions offer them on deposits. For professional advice about potential vulnerabilities of your software of strengthening your financial platform, you can ask independent audit.
Banks now have a huge number of illiquid debtors. In this regard, banks’ liquidity is becoming increasingly important as one of the key factors of their stability. When managing liquidity, these financial centres face many problems that can be identified by considering liquidity in terms of incoming and outgoing payment flows.
Liquidity concentrated on the bank’s balance sheet, as well as attracted by it from the country’s financial market, has many natural restrictions that are subject to significant changes over time. For this reason, the bank at some point in time may not be able to quickly cover the liquidity deficit resulting from the imbalance of its operations.
The most significant impact of this kind of problem has on the activities of banks operating in volatile markets, which significantly limit the borrowing capacity of the bank. Moreover, the bank does not have any guarantees that it will be able to attract additional liquidity in the financial market at any time.
Problems in managing the bank’s liquidity may also arise due to the impossibility of determining the number of payments for unplanned operations at a specific point in time. It is this kind of payment, as well as the error in predicted payments, that can lead to the uncertainty of the bank’s position on payments made at a particular point in time.
The main reasons that give rise to this problem include:
– customer concerns about changes in the bank’s stability;
– deterioration of the economic situation, which directly affects the financial position of all market participants without exception;
– mass withdrawal of the largest bank deposits;
– withdrawal of funds associated with seasonal fluctuations in the business activity of the bank’s creditors;
– bursts of purchasing activity of the population.
A significant outflow of funds from a bank can most often be associated with a deterioration in the situation in the financial market, or with a deterioration in the state of the bank itself. In any case, the danger for the bank is that the outflow of funds may additionally be reflected in a decrease in the level of the bank’s liquidity.
Loss of investor confidence
The behaviour of ordinary depositors, when people take their money out of the bank en masse, in most cases this leads to an avalanche increase in such customer behaviour. This sign is a black mark for banks not only during the period of the total financial crisis in the world but also a local sign of trouble.
Inadequate to meet modern customer needs
Banks not only use a conversion factor convenient for them but also charge a fairly high commission. Money transactions often take days and sometimes weeks. In addition, the transfer itself is made only on weekdays, when the world is trading 24 hours 7 days a week. Thus, 15% of the time, banks are corny useless.
This form of work significantly reduces overall productivity, since the company cannot ship the ordered products before the payment arrives, and the buyer has to cover all these additional costs.
Never before have such comfortable conditions been created for trading, and the daily trading volume in the world foreign exchange market is about 5 trillion dollars. Therefore, both buyers and companies expect that the trading process itself will be simplified and faster on a global scale.
Decreased service activity
A change in the style of communication with clients, the lack of constant incentives to continue cooperation, the proposal of new lending conditions, when the bank cuts its marketing budgets, there is a lack of advertising for the bank in the usual places and the activity in the media decreases, clients generally perceive this as a bad sign.
Banks often lose customers due to the inability to get in touch on time. Many organizations use solutions that support a wide variety of service channels. However, the data suggests that there is no unified service ecosystem.
In a single ecosystem, the contact center operator has access to the full amount of information for each client, for all his calls using existing communication channels. When an organization does not have such a platform, incomplete and cancelled applications are inevitably lost, resulting in lost revenue and reputational losses.
Without the right tools, a business cannot use proactive methods of interaction and stimulate customers to use services. By itself, such a possibility is a matter of correctly configured CRM system algorithms and integration with an omnichannel contact centre solution.
Low speed of processing applications
The speed with which a bank conducts its account transactions is critical in today’s reality. Delays in payments or submission of information make customers suspicious. Today, the company must be able to transform all of its divisions into a single customer service mechanism. This is the only way to successfully compete in segments where the level of service becomes a determining factor in business growth and development.
In most credit institutions, the process of considering applications for issuing bank cards is working with serious disruptions. Banks were not ready to get in touch with the client about the abandoned application within 24 hours. In addition, work with clients became more difficult due to the remote format during the COVID-19 pandemic.
An application or request for a loan, entering the bank, passes through a certain number of employees from different departments. The fate of such an application depends on the smoothness of the route within the company, the speed of decision-making, the transparency of business processes, and the quality of information transmission among employees. Delaying deadlines, loss or incomplete transmission of data works against the bank.
In the retail segment, an increase in customer satisfaction by only 10% gives a noticeable economic effect. It is more than realistic to achieve such results, for this you need an appropriate technical platform that will allow you to build an effective system for considering all applications and appeals.
Blockchain and automation
In recent years, we have seen reform in the banking sector around the world, when the automation of traditional tasks for banking is being introduced. Automation has become a great tool in almost all industries, and the banking industry cannot afford to complete its tasks without it.
One of the ways to automate banks is to implement Blockchain. Technology has the potential to completely change the financial industry we know and use today. Blockchain is revolutionizing banking by providing a digitalized, secure, and tamper-proof platform for transaction value without centralized governance.
At the same time, for effective work with clients, it is no longer enough to simply automate service in different communication channels. It is necessary to create a unified ecosystem with common governance, comprehensive analytics, and transparent reporting. An integral advantage of this approach is the ability to easily integrate new systems with traditional banking software products.
Blockchain implementation can be a particularly useful tool in the world of corporate taxes and finance. Blockchain can optimize the time that running capital is tied to a transaction, helping finance leaders diagnose taxes, tariffs, and their financial implications in real-time, and automate processes. In addition, blockchain can reduce or even eliminate fees and errors by reducing reliance on a third party for transactions.
Companies can also use blockchain to calculate taxes and their financial implications in any jurisdiction in real or near real-time, tracking the transactions of each of their branches and consolidating them into a single, easily accessible digital ledger.
Blockchain technology is decentralized, so even if one of the computers on the network is hacked or exited, this will not affect the operation of the database as a whole, which cannot be said about the classic centralized database.
Advantages and Disadvantages of Blockchain Implementation
The introduction of technology into the banking sector has both advantages and disadvantages. Blockchain technology is much more advanced than previously used when creating banking applications. It allows you to:
– register all transactions using cryptocurrency;
– users track the transactions of interest, which makes the system transparent.
In addition, it appears:
– the ability to conclude simple contracts automatically using smart contracts;
– saving money on system maintenance;
– reducing the risk of fraud;
– increasing the speed of banking operations;
– the ability to access information without an Internet connection is also an advantage of the technology, provided that data is synchronized promptly.
The disadvantages include the following aspects:
– the relatively high cost of implementation;
– a large number of resources are needed to move from outdated technologies to new ones.
– significant energy consumption;
– since blockchain appeared on the market not so long ago, there is a lack of performance, as well as a lack of basic cryptographic tools;
Is it worth it to implement Blockchain?
All over the world, financial institutions are studying Blockchain technology to apply it to their electronic services, conducting tests with a distributed ledger, conducting proof-of-concept.
Now they are actively introducing blockchain technology in transactions with securities, clearing, crowd investing, registers of property and property rights, decentralized data storage when identifying users and customers, when using smart contracts, as well as to confirm the relevance of identification data.
Already today, many banks use Blockchain technology and prove its effectiveness to the whole world. One of the successful examples of blockchain implementation is the serokell.io project, which has gone ahead.
Many companies fail to maximize return due to lack of data in a tangled web of systems, unsettled record-keeping processes, lack of resources, and dependence on third parties. Moving return data to the blockchain eliminates the need to manually enter data into various systems, thereby reducing errors and creating a single source of authentic information.
Ultimately, thanks to blockchain, the entire process can be improved and provided companies with the opportunity to return significant funds.