It is no secret that risk managers are now using risk technology more than ever before. While this paradigm shift is widely known, the unknown is ‘why this paradigm shift is happening.’ It is true that risk management technology means better and faster risk management than before, but it is also important to look at why businesses are looking for better risk management solutions now.

Changes in Supply and Demand

Demand and supply are two basic economic factors that determine how a product or service is used within any society. On the supply side we can see that Fintech organizations are releasing better tools made possible only due to advancements in technology. It is also important to understand the reasons why banks, financial institutions, and other BFSI organizations need better tools than they had before. There are multiple factors which affect this change in demand.

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New Customers and Needs

Banks have faced a completely new type of competition during the past decade – born digital fintech companies that provide financial services without acting as banks. It is important to recognize the significance of this paradigm shift that has occurred. For most of the people who have a managerial designation in the finance industry, it is unthinkable that anyone would not want to open a bank account. Having a bank account was essential for anyone if he or she wanted to be a part of the financial ecosystem.

The new generation, those who are currently entering into the workforce, has a quite different relationship with banks. They are familiar with apps that can help them to perform various transactions easily. They can use Apple Pay to easily pay for activities without needing a debit or credit card. They can use Robinhood App to invest their money. Will they still need bank accounts? Yes, most of them will have to open a bank account when they start a job. The problem is that they will continue to use other apps and fintech solutions to fulfill their financial needs which closes a lot of revenue streams for existing banks.

How Customer Expectations Changed

Most fintech solutions intentionally do not provide banking services – if they did, they would have to comply to all the regulations that banks need to comply with. This would mean a lot more compliance work, which would slow down the services provided by fintech solutions and apps. This allows these apps and solutions to deliver financial services at faster speeds than traditional banking channels. Instead of having to wait hours or days, most transactions carried out through modern fintech solutions are instant.

It is important to understand the reasons why banks, financial institutions, and other BFSI organizations need better tools than they had before. There are multiple factors which affect this change in demand. Click To Tweet

When these customers, who are used to faster services, start using the services provided by the banks they find it to be jarring. The people who entered into the workforce a decade ago did not think bank processes were too slow because there were no faster services available. The new generation expects faster and better services because it has options. Instead of having to wait days to open an account in a bank, this generation is used to installing an app and creating an account in seconds.

Better Tools, Faster Banks

Modern risk and compliance technology is helping banks improve the speed and efficiency of their processes to help them compete with born-digital competitors. This explains the sudden increase in interest in compliance management. Compliance management was previously not necessarily a competitive advantage. Yes, the bank with better compliance will get fines, and a bank with a major compliance failure may see serious financial damages, but in most cases the compliance fines were not significant enough to dethrone a market leader.

Now, faster compliance means the bank comes closer to offering services at the same speed as fintech competitors. It has become a necessary competitive edge that banks need to have to ensure that their new customers continue using as many of their delivery channels as possible. Banks still have the home advantage – they have been a part of the financial ecosystem even since a financial ecosystem has existed. They can compete with businesses that only entered the financial stratosphere a decade ago, but they will need to ensure that they are equipped for instant digital banking.

Enterprise Risk Management Software

Banks do not have to worry about compliance alone – they also need to make sure that their risk management frameworks can detect and mitigate risks at a faster pace. While banks used to have days to ensure KYC (Know Your Customer) documentation, we will soon be shifting to digital banking where users will be able to instantly sign up though biometric verification. This means that banks will need a way to detect and manage risks in real-time.

Interested in seeing how your bank can improve its risk management framework? Get in touch with our experts for a demonstration of Predict360, the American Bankers Endorsed risk and compliance management solution.