Digital Disruptions in the Banking Industry Paper Example

Introduction

Digital disruptions are the changes that are experienced in the technology market causing fundamental experiences to be altered. It causes the transformation to the procedures that are used in a running business and the strategies relied upon by managers to interact with their customers. The disruption has been triggered by the emergence of issues like cloud computing, social media and mobile phones leading to the need to adopt measures that are geared towards the use of economic models. The data management technologies have played a significant role in the ability to maintain data that has assisted in businesses becoming customer-eccentric. The phenomenon is making firms to rethink the way they are operating for them to remain relevant in the market and avoid making losses or falling to bankruptcy. Therefore, there is a need to ensure that the disruptions caused by the phenomenon are identified and the right measures adopted (Wewege, 2017). By doing that, the organization will manage to continue evolving and moving with the changes in the market. UBS is a multinational company that is involved in the managing of financial operations and its headquarters are based in Switzerland, and it is one of the entities in the world that is known for strictness regarding the secrecy of banking cultures and bank-client confidentiality. It is one of the organizations that is being affected by the wave of digital disruptions, and the management must take the right measures to rethink their operational strategy to ensure that the entity remains active in the market. If the senior officers fail to undertake the right measures, the firm will lag, and it may experience cases like the reduced sales and earnings level. The management can rely on various strategies to curb the problem.

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UBS Business Model

The organization's business model is based on a transparent arrangement for the management believes that there is a great need to have clarity considering that some of the business activities are to manage wealth. The relationship that exists between the firm and the clients is solid, transparent and simple since they all understand what is expected of them and they all follow the set policies to the letter. UBS is one of the banks in the world that is known to be very secretive with its client's details, and it focuses on the investment strategies adopted by their clients and the independent designs which are provided through the provision of quality service. The firm works towards presenting its customers with the best services and products that they can utilize to execute their investment strategies. The organization's commitment towards the clients is depicted through the provision of custody and execution of facilities and services through the use of an easy technological platform. The UBS model of asset management involves working with the customers and entities that have a strong competitive position in the market, the long-term structural growth and are capital efficient. Capital strengths are crucial to the management of UBS for it offers the bank the competitive advantage in the market over the rival businesses (King, 2014). The model is capital-accretive and efficient and enables the organization to adjust and adopt to the regulatory changes in the market while managing to maintain growth and expansion. The organization has a high earnings capacity that enables it to deliver sustainable and improved capital returns to the various stakeholders that are interested in the affairs of the business.

How Digital Technologies are Disrupting Banking Sector

Financial technology (fintech) are the computer programs that are used in the process enabling the implementation and management of banking operations. It is one of the tools that have been known to disrupt the banking industry. In the past, fintech was used in the back-office activities through the process of leverage software that manages the bank accounts and the customers' database. However, the current world has experienced changes in the way businesses operate, and the programs are no longer being used in the back-office. They have taken center stage, and the programs have become indispensable in light of the various activities involving the customers (McMillan, 2014). All the digital transactions taking place in the different financial institutions rely on the technological systems, and the drivers of this fintech revolution are the adoption of smartphones that have enabled the consumers to interact with the banks easily. The online payment apps have managed to integrate with the bank accounts in addition to the security protocols that have made it possible to safeguard the customers' database (Arjunwadkar, 2018). Every business understands that it cannot stand still or remain at the same position forever. If it fails to change with times, it will become redundant and fail to achieve its goals and objectives. The rivals will take over their market share through the provision of high-quality goods at low prices an issue that will attract customers in the market.

Fintech has changed the banking industry activities in various ways that include the introduction of the chatbots for the customer service. The chatbots are software bits that relies on machine learning and natural language processing to learn human interactions. The tool is being used in streaming if the interactions with the customers like giving direction to the clients on the departments to contact when they have an issue or the handling of a query. The AI for fraud detection and machine learning programs is another tool that is being utilized in detection cases of fraudulent activities, and it involves a combination of software and people. Any virus attack or fraudulent transaction is detected, and the human investigators are notified to determine if the notification made is a real threat. The attacks are continually becoming sophisticated, and the time-consuming process can cost the bank millions of dollars leading to the loss of consumer's confidence, the development of brand reputation and data loss (Henderson, 2019). However, the adoption and use of the machine-learning driven model, data aggression platforms, and the process automation can be crucial in transforming the banks' operations by ensuring that the various operational processes are efficient.

Another way that the digital disruption affect the banking industry is through the Omni-channel banking processes and obsolescence of the bank branches. It can be noted that the banks are shifting from the issue of being branch-specific to entities that permeates the various digital channels, such as the online, social and mobile leading to a decrease in the need to have the brick-and-mortar bank offices (Chishti & Barberis, 2016). The financial institutions in the world have been reducing the number of branches worldwide due to the advancement in technology.

Biometrics has enabled the organizations to improve their security systems with the banks relying on facial recognition, vocal patterns, thumbprints and irises platform with the move to have an extra authentication layer. The programs enable quick authentication eliminating the need to keep remembering many passwords. The organizations have been using forward-facing cameras that are relying on the customer's iris before allowing them access to their accounts. The Blockchain for the digital transactions is another way that depicted the digital disruptions that are experienced by the banking industry due to the establishment of the financial technological systems. Cryptocurrencies are enabling the clients in the market to transact in a faster and easier manner. The notable application of the blockchain has been in the transformation of the payment system be lowering the time and costs involved in transferring money. The building of inherent trust leads to the blockchain building trading platforms that makes it possible to facilitate the securities exchange through minimizing possible risks, ensuring there is transparency, reduction of the transactional fees and human errors.

In the past, new entrant found it hard to break into the banking industry, but things have changed, and this is all due to the financial technological devices and disruptors. The organizations that are entering the market are particularly interested in specific innovative technology, and they have been attacking the firms that are profitable in the banking industry. The incumbents are feeling the pinch considering that for an extended duration of time, they have been subsidizing the crucial but less profitable services.

Recommendations on the Way Banks Should Respond to Digital Disruptions

UBS and the other banks in the market must find ways through they can manage the disruption in the industry to ensure that they continue to operate. There exist different measures that they can adopt which include open innovations which involve opening the organization's IP, engaging assets and knowledge capital, tapping new areas of growth and transformation of all processes to digital. The collaboration process will be essential in managing the disruptions considering that traditional the banks partnered only within the sector for the process of improvements and innovation. In the present world, they now have to build ties and work with other industries to ensure that they have an understanding of other ways that they can utilize in generating revenue. They can use the accelerators through the utilization of the venture capital investments in the startups to ensure that they are innovative enough and they can meet the prevailing demand in the market. The changes in the consumer behavior have led to the desire to ensure that their desires are met for this is the only way that can guarantee sales.

The use of the blockchain supply models is another strategy that the banks can adopt when settling the various customer transactions without the need to rely on the authorities. The trusted ledger can be used by the participants in the supply chain with the desire to lower the time and expenses that are needed in the management of payments. With a single source of the trusted information, the process of documentation will become easier and limited cases of fraudsters accessing the system (Skinner, 2014). The supply model should be in line with the latest strategies that are being used in the market for this will ensure that the businesses are running their activities based in the present procedures that are effective.

The banks can decide to adopt the innovation models that are customer-centric considering that in the present world, companies must find a way of making customers part of their innovation model failure to which will lead to the clients triggering innovations around the business. Becoming capital efficient in critical for the process helps in leverage of "other people's money" through the use of smart devices and the social media platforms (Schaeffer, 2017). The creation of the two-speed model is also useful in managing the disruptions caused by the digital innovations considering that the data that is being received from equipment is crucial than the equipment itself. This realization will make the bank to find ways through which they can deliver value to their clients (Ramdani, 2018). They have to recruit workers that are geared towards the realization of the stated goals and objectives and the firm's mission. The institutions should have infrastructure that should allow and support the process of experimentation.

The banks should work towards discovering the power of data by relying on analytics to make identification of the available business opportunities and understand the weaknesses in the market. It will become easier t...