The e-commerce frontier: are banks pioneering or lagging behind? 

The banking sector is grappling with a surge in online data and transactions. Simultaneously, there’s an urgent need for banks to expedite cross-border retail transfers. All of this is happening amidst mounting pressure from fintechs and digital banks. Thus, the question arises: how to maintain competitiveness in the era of e-commerce? 

Read on to learn: 

• how the rise of e-commerce is impacting the banking sector,
• the challenges posed to banks by the increasing volume of data and the demand for faster retail transactions,
• how banks are adjusting their operations and infrastructure to accommodate e-commerce,
• the strategies banks are employing to tackle these challenges,
• the potential benefits of successful adaptation for banks. 

Electronic commerce is revolutionizing the way clients manage their finances. However, the impact of e-commerce on the banking sector extends beyond just online payment options or banking applications. Traditional financial institutions face a plethora of challenges. 

How e-commerce habits impact banks 

Banks are grappling with a tremendous surge in data volume. Retail payment systems in the Eurozone primarily handle transactions made by individuals. These are transactions of relatively low value but high volume. According to the ECB, in 2021, approximately 50 billion transactions were processed, totaling 41.1 trillion euros. That’s over 95 thousand transactions per second! They must be processed while maintaining the highest standards of integrity. After all, banks are institutions of public trust. We discussed on our blog what this means for banking complaints. 

Adding to this is the accelerating pace of transactions in the online realm. Customers are demanding instant payments. However, the speed of traditional electronic bank transfers varies based on each country’s infrastructure. Typically, they’re processed in batches, usually once a day, and not during nighttime or weekends. 

In 2020, MasterCard conducted a survey across six markets on three continents. Respondents lauded real-time payments for their convenience and accuracy. What’s even more intriguing is that they rated real-time payments as equally or more important than (1) internet access, (2) next-day delivery or (3) daily utilities. Three out of four survey participants expressed a desire for all digital payments to occur in real-time. That’s quite a high standard to meet. 

Banks responding to agile competition 

Competition from startups, fintech companies, and digital banks deepens the challenges facing traditional banks. Competitors are more flexible and adapt to new technologies more quickly. Traditional financial institutions must accelerate their pace to keep up with them. 

Banks are now aware of the necessity of having an effective strategy to meet the expectations of customers accustomed to e-commerce standards. In e-commerce, it’s data that enables quick and efficient responses to changing trends and customer needs. That’s why banks are increasingly investing in digital strategies and innovative technologies. It’s their way of providing fast, efficient, and flexible financial services that can compete with e-commerce companies. 

A well-thought-out strategy as a chance for pole position 

A key element of the strategy for many banks has been investing in digital infrastructure. This is aimed at enhancing online banking services and facilitating e-commerce transactions. A strong presence in the digital space is no longer just an option; it’s a necessity to meet the expectations of an increasingly digital society. Innovative approaches and strategic partnerships are shaping the future of the financial sector. They underscore the importance of adaptation and pioneering solutions in the digital era. Here are a few examples: 

1. Investments in digital infrastructure: investing in digital technologies and platforms to enhance online banking services and facilitate e-commerce transactions. 

Case study: Chase Bank (JPMorgan Chase & Co.)  

Chase Bank has successfully adapted to the principles of electronic commerce. They have invested in digital banking platforms and innovative payment solutions. They offer a user-friendly mobile banking application and internet banking services. Chase Pay (the bank’s digital wallet) enables customers to make secure online payments and streamlines the transaction process on e-commerce websites and mobile apps. Chase has also partnered with major e-commerce platforms such as Amazon and PayPal. They offer rewards and discounts to customers who use their Chase credit or debit cards for online transactions. 

2. Collaborating with fintech companies to leverage innovative solutions in e-commerce payments, fraud detection, and customer support. 

Case study: HSBC 

The bank has partnered with the fintech company Bud Financial to expand its digital offerings. Bud Financial provides a platform that integrates various financial services, enabling HSBC to tailor its offerings to individual customer needs. The bank gains access to Bud’s open banking aggregation services, data analysis, and application programming interface (API). 

3. Enhanced security measures to safeguard customers’ financial data in e-commerce transactions. 

Case study: Citibank 

Citi has partnered with Forter, a company specializing in fraud detection in e-commerce. The bank can leverage advanced data analysis tools and artificial intelligence to identify suspicious transactions and prevent financial fraud in real-time. 

4. Increased compliance with regulations. 

Case study: EQ Bank 

The Canadian bank is collaborating with Trulioo, a fintech startup offering online identity verification services. Through this partnership, EQ can more effectively verify the identity of customers and meet compliance requirements regarding electronic commerce. Simultaneously, it ensures their privacy and data security. 

Adaptation pays off for banks 

A bank that thrives in an environment like e-commerce can expect significant benefits: 

1. Opening up new revenue-generating opportunities through digital channels like internet banking platforms and mobile applications. 

2. Utilizing e-commerce technologies allows the bank to enhance customer satisfaction. Customers will appreciate personalized service offerings, real-time transaction monitoring, and round-the-clock access to financial services. This not only strengthens customer loyalty but also improves retention rates. 

3. Streamlined operations, reduced costs and enhanced efficiency through process automation and digitization. The bank can better compete in the digital arena and distinguish itself from competitors. 

Data-driven change 

Strategy and data management are crucial for staying agile amidst increasing customer demands. Harnessing the power of data offers invaluable insights for informed decision-making and rapid adaptation to market shifts. If your organization is seeking to optimize data management, let’s connect. Reach out today to explore the untapped potential of data in your company and devise strategies for even greater success.