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In recent years, the banking and microfinance industry has undergone major changes driven by financial technologies (FinTech), digitization, stringent regulation and consumer demand for more seamless and personalized experiences. In this scenario, the trade-off between ensuring security and delivering an exceptional user experience (UX) is no longer a dilemma. Financial institutions are discovering that with the right technology, such as that developed by Tecalis and Moventi, they can deliver both without compromising service quality or increasing operating costs.
The changes that are shaping the financial sector, encompassing the adoption of emerging technologies such as artificial intelligence (AI) and big data, the evolution of transaction security and onboarding processes, and the essential role of user experience in customer retention are impacting banking operations head on.
From traditional banking to NeoBanks
The digital transformation of banking, financial services and microfinance is a global phenomenon. NeoBanks, with their 100% digital approach, have challenged traditional financial institutions by offering agile, accessible services with significantly lower operating costs. In fact, it is estimated that the number of NeoBanks users will exceed 50 million worldwide by 2024, according to Statista.
These entities have emerged as a response to the shortcomings of traditional banking, which, in many cases, has been unable to adapt quickly to modern consumer expectations. NeoBanks offer a banking experience that is fast, simple and, in many cases, completely fee-free, attracting a generation of customers accustomed to the immediacy and convenience that digital platforms provide. However, this growth has also brought new challenges, especially in terms of security and regulatory compliance.
Regulation and compliance ever changes
Financial regulation has historically been an area of great complexity for financial institutions. The growth of NeoBanks and FinTech platforms has forced regulators to adapt their regulatory frameworks to address emerging risks such as digital fraud and money laundering. Regulations such as PSD2 (Payment Services Directive 2) in Europe and the Bank Secrecy Act in the United States require institutions to adopt strict controls, especially regarding multi-factor authentication and transaction monitoring.
According to a study conducted by Accenture, 58% of financial institutions recognize that regulatory compliance is one of the main challenges when implementing new technologies. However, advanced solutions, such as digital identity verification systems (KYC and AML) and electronic signatures, have enabled institutions to comply with these regulations without compromising the user experience.
Safety systems integrated into Customer Journeys
One of the biggest risks associated with financial digitization is identity fraud. Kaspersky's Global Banking Security Report 2023 revealed that cyberattacks in this area targeting banks and FinTechs have increased by 42% in the last five years. The implementation of advanced cybersecurity technologies, such as biometrics and AI-powered KYC/AML systems, is critical to mitigate these risks.
Biometrics has gained prominence in digital banking due to its ability to offer a higher level of security than traditional authentication methods and its recent legal backing. Technologies such as facial recognition, voice biometrics and fingerprint make it possible to verify user identity accurately and in real time. According to a report by Juniper Research, it is expected that by 2025, more than 86% of financial institutions will use some form of biometric authentication for their risk operations.
In addition, the use of AI systems for real-time fraud detection has revolutionized security in banking. AI is capable of analyzing large volumes of data in a matter of seconds, identifying suspicious patterns that could indicate fraudulent activity. This is especially relevant for identity verification processes during the onboarding of new customers, as it allows for quick and effective assessment of the risk associated with a user or transaction, in addition to due diligence checks.
Digital Onboarding: maximizing conversion
The onboarding process, that is, the registration of new clients, is one of the key moments in the relationship between a financial institution and its users. This process must be fast, secure and simple. However, poorly managed onboarding can result in high abandonment rates. According to Deloitte, up to 43% of potential customers abandon the onboarding process if they encounter difficulties or perceive risks during the process.
The most advanced financial institutions have responded to this challenge by implementing RegTech automated verification technologies that not only improve security, but also reduce the time required to complete the enrollment process. Solutions such as electronic signature and unified document validation systems allow customers to complete the entire process from their mobile device or any end-to-end camera system, eliminating the need to travel to a physical branch.
Tecalis, in collaboration with Moventi, has successfully implemented such solutions in several financial institutions. Through its identity verification technology, based on AI and facial recognition, customers can sign up in a matter of minutes, complying with all banking security regulations and offering a frictionless user experience.
User experience: key factor for churn rates
While security is essential to protect customers and comply with regulations, user experience (UX) is what determines whether those customers will stay or leave the platform. A PwC study found that 32% of consumers will stop interacting with a brand after a single bad experience, underscoring the importance of providing an interaction flow that is seamless and enjoyable.
In the case of banking and microfinance, UX not only affects customer retention, but also has a direct impact on new user conversion. Financial platforms that achieve an engaging and seamless user experience are up to 30% more likely to convert prospects into customers, according to data from McKinsey & Company.
Financial institutions should focus on offering omnichannel experiences, allowing customers to interact with their services through multiple touch points, from mobile applications to web platforms or even shopping malls. An innovative example of this is the Customer Hub platform, which allows BFSIs (Banking, Finance and Insurance) to manage their sales and operations through alternative channels, such as airports and shopping malls and the use of interactive Kiosks, where customers can purchase financial products without the need to visit a physical branch.
Industry success stories
One of the best examples of how financial institutions can achieve a balance between security, innovation and user experience is the case of Caja Arequipa in Peru. This institution, which began its digital transformation more than seven years ago, has successfully implemented a digital banking platform that allows customers to open accounts, apply for microcredits and make transfers completely online with total security.
The implementation of advanced technologies, such as electronic signatures and multifactor authentication, has enabled Caja Arequipa not only to comply with local regulations, but also to offer an exceptional user experience. According to the bank, the adoption of its digital platform has increased the number of customers by 25% in the last year, and has reduced the time required to complete transactions by more than 30%.
Artificial Intelligence and Big Data: Standard by 2027
Artificial intelligence and big data are playing an increasingly important role in the personalization of financial services. These technologies enable institutions to analyze large volumes of data to better understand customers' needs and behaviors, which in turn allows them to offer products and services more tailored to their preferences.
A Gartner report estimates that by 2027, more than 60% of global banks will use artificial intelligence to improve operational efficiency and personalize customer interactions. This personalization is key to increasing customer retention and improving conversion. Banks that use AI and big data to personalize their offerings are 45% more likely to retain customers in the long term, according to a study by Accenture.
Future of banking and microfinance
The banking and microfinance industry is at a crossroads. The need to comply with strict regulations and the growing threat of digital fraud require institutions to adopt robust security solutions. However, modern customers also demand seamless and personalized user experiences. The key to success lies in finding the right balance between both priorities.
Companies leading this transformation, such as Tecalis and Moventi, have demonstrated that it is possible to deliver an exceptional user experience without compromising security or regulatory compliance. As technologies such as artificial intelligence, biometrics and big data continue to evolve, the future of banking is shaping up to be one in which innovation and security go hand in hand, enabling institutions to not only survive, but thrive in an increasingly competitive environment.
