According to Statista, the Digital Banks market is expected to witness a Net Interest Income of US$2.19 trillion in 2024. This underscores the imperative for financial institutions to undergo digital transformation and adapt to the preferences of modern customers.
An efficient digital banking platform can elevate customer loyalty, drive revenue growth, and streamline service costs for your company.
Before embarking on the development process, it’s crucial to ensure the legality of your operations. This involves obtaining specific licenses like payment or e-money licenses, fintech licenses, MSB licenses, or partnering as an agent with a BaaS provider.
Let’s delve into the 8 essential steps for successfully developing such a platform.
What is a digital banking platform & how does it work
A digital banking platform empowers customers to engage in a plethora of financial transactions through either a website or a mobile app. This includes tasks such as online account management, money transfers, bill payments, mobile banking, and additional financial services.
Digital banking platforms strive to offer a hassle-free and intuitive experience, enabling customers to conduct banking activities conveniently using their computers or mobile devices.
The surge in digital technologies and consumer inclinations, notably among millennials and Generation Z, who often prefer digital channels for financial transactions, serves as significant drivers of the digital banking market.
Financial companies can capitalize on this trend by providing convenient online banking services tailored to meet the demands of contemporary customers, thereby boosting revenues.
Indispensable features of digital banking platform
The fintech landscape has been greatly impacted by digital trends in recent years, marking it as a dynamic and evolving sector. The following underscores the crucial features to focus on when developing a banking platform:
· Account management
· Fund transfers
· Bill payments
· Mobile banking
· Card management
· Advanced security features
· Integration options
· Customer support
Evaluating the crucial features of a digital banking solution accentuates the primary emphasis on meeting customer needs. Hence, leveraging a customer-centric development approach is essential to distinguish your banking solution.
In the ensuing sections, we’ll dissect the 8 key steps necessary for the successful development of a digital banking platform that satisfies the requirements of both users and businesses. Alternatively, you could explore the option of adopting a ready-made digital core banking system like Macrobank by Advapay.
Step 1. Define precise objectives and requirements
Defining clear goals and requirements necessitates exhaustive market and consumer analysis to uncover the needs, preferences, behaviours, and motivations of potential customers. This pivotal step empowers you to optimize your solution’s revenue potential and streamline development efforts by understanding specific product requisites and user benefits. Moreover, you can devise project timelines and budget projections based on documented requirements.
Step 2. Choose the right technology stack
The criteria for a digital banking product can have a substantial impact on the technology stack chosen for its development. Given the management of sensitive financial data in digital banking platforms, stringent security measures are imperative, prompting the implementation of robust encryption protocols, secure APIs, and multi-factor authentication, all of which greatly influence technology selection. Choosing a technology stack for digital banking software depends on project requirements, scalability, security, and adherence to regulatory standards.
Step 3. Differentiate through a customer-oriented approach
A strong customer-centric approach prioritizes usability, accessibility, and intuitive design over superficial aesthetics. This leads to software that enhances customer satisfaction and fosters loyalty. Key components of customer-centric software development include:
· Flexibility: the digital banking platform adapts to changes in customer behaviours and needs.
· Scalability: the system delivers ongoing updates and incremental enhancements.
· Engagement: banking software involves customer expertise at various levels.
Step 4. Focus on security measures
Security is paramount in the development of FinTech products, especially when it comes to safeguarding sensitive financial data. Incorporating advanced encryption protocols like SSL/TLS is crucial to ensure secure communication between users and the banking platform. Additionally, regularly updating and monitoring the APIs used for integration is essential to mitigate potential vulnerabilities. Conducting regular security audits and penetration testing is necessary to identify and rectify vulnerabilities. These routine evaluations are essential for staying proactive against potential threats and ensuring ongoing security.
Step 5. Regulatory compliance
While digital banks pursue innovation and unconventional strategies, they are still required to comply with the regulatory requirements applicable to traditional banks. Regulatory compliance is imperative for mitigating risks and vulnerabilities within the industry. Financial institutions face three main risks: Data privacy, Money laundering activities, and Cyberattacks.
To protect users against potential threats and data breaches, financial institutions must adhere to the following regulations:
· PCI DSS (Payment Card Industry Data Security Standard) mandates security protocols for entities handling credit card information.
· PSD2 (Second Payment Services Directive) is an EU directive governing electronic payment services.
· GDPR (General Data Protection Regulation) oversees the gathering, usage, and retention of personal data by companies operating within the European Union.
· AML (Anti-Money Laundering) regulations aim to prevent and counteract money laundering and terrorism financing activities.
· KYC (Know Your Customer) procedures, a subset of AML regulations, necessitate institutions to authenticate the identities of their clientele.
Compliance with local laws is crucial for a successful launch of digital banking platforms, as regulatory frameworks vary significantly across different jurisdictions.
Step 6. Develop the platform
Software development assumes paramount importance in the establishment of a digital bank, acting as the cornerstone upon which the entire digital banking landscape is constructed. It encompasses frontend, backend development, and the seamless integration of data. Within this stage, the definitive structure of your product is delineated. Therefore, it is imperative to oversee the development process under the guidance of seasoned professionals with extensive expertise in the fintech sector. You have the option to assemble an internal development team or engage a software development team equipped with profound technical knowledge in the financial domain.
Step 7. Test and launch
Thorough testing is indispensable not only for identifying and rectifying issues but also for ensuring a flawless user experience and building trust in your digital banking solution. Employing various testing methodologies, including functional, security, and user acceptance tests, assesses the platform’s performance across different scenarios. While deployment signifies the final phase of the development process, it does not signify the end of your responsibilities. Continuously monitoring performance metrics, usage patterns, and user feedback using tools such as analytics, surveys, and reviews is essential. Additionally, promptly addressing any issues, concerns, or inquiries and providing ongoing support and guidance to your customers and users are crucial.
Step 8. Improve the application
The software launch signals the initiation of an ongoing process aimed at improving your financial platform for sustained success. Make continuous improvement a priority with these steps:
· Establish a user feedback mechanism
· Implement regular system updates
· Optimize performance
