The digital revolution has profoundly altered financial institutions' backend processes and interactions with their clients. Nowadays, for modern consumers, banking convenience includes conducting transactions whenever and wherever possible. This calls for an innovative solution that is robust, secure, optimized, and ready to fulfill the expectations of today's technologically savvy consumers.
Especially during Covid -19, the world had to take a giant leap for survival. Due to the increased prevalence of lockdowns that resulted in a decline in personal safety, more people turned to online banking to complete all of their financial needs with the touch of a finger. These scenarios have made the old banking methods obsolete, that required time, energy, and a considerable workforce. Also, future generations are already Internet pioneers and members of the digital ecosystem. To service these consumers in the future, banks must immediately initiate digital transformation. Thus undoubtedly, the solution to all these predicaments lies in digitalization, whose value lies in reduced labor and increased production.
If you are running a business in the banking sector, this article is for you. Firstly, a look at the growth of digitization in the banking industry.
Digital Banks and their provoking technologies
The process of digital transformation entails the replacement of antiquated systems with new ones that are centered on the needs of customers and make use of cloud computing. As a result, financial institutions can now provide enhanced omnichannel services, where customers may quickly move between in-branch and online interactions, that includes,
- Utilizing a mobile app, CRM, location services, or safe deposit boxes to stage a credit card replacement or generate a certified check.
- Meeting, navigating, or consulting with a specialist via remote means.
- Using tools like virtual help desks, questionnaires, and self-service kiosks to complete transactions independently.
The banking industry is encouraged to adopt the following cutting-edge technology to be future-proof for 2023.
Do you know
By 2025, the number of people who only use digital banking is expected to nearly treble, reaching over 40 million-highlighting the haste with which banking institutions must embrace digitalization.
Technologies in Banking Sector
Using IoT to analyze data in real-time can significantly improve the quality of service provided to customers. Customers can make immediate, contactless payments with the help of IoT and the smart communication it enables among devices. In addition, risk management, authorization processes (biometric sensors), and access to numerous platforms are also possible through the Internet of Things, which has revolutionized the financial ecosystem that is also ready for the future world.
Blockchain should be part of any conversation about the future of digital banking. The adoption of blockchain technology in the banking industry has led to safer data transfers, more precision, and a more user-friendly interface. Customers now have unwavering faith in blockchain technologies, which they see as having increased the reliability, security, and ease of all banking processes. One of the most notable developments in digital banking technology is the combination of blockchain with IoT (BIoT).
Blockchain will rule the domain; here is the proof.
1. KYC and other checks using blockchain
Blockchain will be used more in KYC and CDD (Customer Due Diligence) processes. With the rise of digital identities in the financial sector, financial institutions will move their KYC and client due diligence processes to decentralized platforms in 2023. These systems will likely leverage distributed ledgers to store client data, allowing more accurate KYC checks, cheaper data storage, and improved data security.
2. Securities issuance, trading and settlement
In 2023, blockchain will be employed in the securities industry for issuance, trading, and settlement. Tokenized assets will soon be able to participate in conventional financial markets because of new securities legislation.
3. Blockchain-based digital currencies.
More companies will likely be aiming to break into the industry in 2023, leading to greater cooperation and uniformity among regulators. The group will work together to establish rules that make it possible for digital currencies based on blockchain technology to exist alongside fiat currency issued by governments.
Big data will allow banks to prioritize customer behavior. They can offer more personalized services and enhance income with predictive analytics. Future bank digital transitions will depend on consumer feedback. Future consumer acquisition, market segmentation, and cross-selling will rely heavily on analytics. Banks will have more information about clients' spending habits, allowing them to customize products and services. Closed-loop systems, which rely on constant feedback, will become more prevalent in 2023 due to faster data collection and user-friendliness. By doing so, financial institutions can better serve their clients by interacting with them using relevant offers and promotions.
Artificial intelligence (AI) and machine learning (ML)
The adaptability of chatbots and virtual assistants make finance more interesting and valuable. Users of chatbots will receive prompt responses to a wide range of questions with the help of AI. A chatbot may, for instance, be trained to analyze a user's financial information and make recommendations based on that, such as a new credit card or savings account.
Many financial institutions will become pure technology corporations in 2023, offering digital solutions using their vast customer base and distribution channels. Banks can't compete with pure technology companies that can analyze vast volumes of data, even for fraud detection and compliance. So by the end of 2023, most organizations will communicate with clients using NLP. This tech could impress customers, where banks save money by lowering call center calls, freeing up personnel for more productive work, and providing automated solutions to frequently asked inquiries.
Modern financial institutions must construct "banking stacks" that position them as a platform for clients and third-party service providers to connect to provide a highly customizable and adaptable service to the end user. This is possible because of application programming interface (API) banking platforms. The API Banking Platform is meant to function through application programming interfaces (APIs) that are positioned between the backend execution of the bank and the frontend experiences supplied by the bank or its partners. This paves the way for low-risk exploration of cutting-edge technologies like blockchain, enabling banks to implement novel business models and use cases (such as facilitating pay advances). APIs also help banks prepare for the future by decoupling their systems' front and back ends.
The demand for speedy responses is one of the most substantial difficulties the digital age has brought to the banking industry. Banks must be highly adaptable since they operate in a constantly changing market. Faster resolution of business issues requires their ability to distribute resources across the organization swiftly.
Successful financial institutions have found that deploying a hybrid cloud throughout their organization is the most cost-effective option. They can take advantage of public and private sector solutions to problems like data security, governance, and compliance and quickly mobilize significant resources.
Quantum computing, robotic process automation (RPA), and voice banking are the technologies many large financial institutions are now evaluating. So soon, we could see them playing a big part in FinTech.
Do you know
The Bank of America division responsible for banking operations has already created a virtual assistant named Erica. To a growing extent, these intelligent devices also serve as digital concierges for customers when they deal with banking firms.
New Era of Neobanks
Neobanks are a new type of bank that exists solely in the digital realm. To put it simply, neobanks are online-only financial institutions. They are not present in the physical world in any way. A transaction at a conventional bank may demand considerable time and effort from the customer. By adding a digital and experiential layer to traditional banking, neobanks aims to create a frictionless digital banking experience. Their reliance on technology means users can sign up for an account without assistance and immediately begin taking advantage of the company's services. They offer payment, transfer, lending, and other monetary benefits optimized for mobile devices.
Do you know
According to Grand View Research, the global neobanking market was worth $34.7 billion in 2020. The analysis predicts that between 2021 and 2028, the new industry will expand at a CAGR of 47.7 percent.
The following characteristics of neobanks set them apart from traditional banking institutions.
Customer wait times at physical banks often seem interminable. Because of their internet presence, neobanks make it simple for users to open savings accounts, complete with plastic debit cards.
Since conventional banks are hesitant to provide banking services to emerging businesses, neobanks are quickly gaining popularity as an alternative. Offers on credit cards are supposedly quite attractive from neobanks. Regarding company success, some neobanks even provide unsecured credit cards with substantial spending limits.
Personal and business loans
Neobanks provide services, such as personal and business loans, to reach unbanked populations. By filling this void, neobanks are helping to close the gap between big banks, consumers, and small companies across the country.
Do you know
Chime is one of the most successful neobanks in the United States, and it serves more than 13 million customers with personal banking services. With their mobile banking software, Chime makes it simple and potent to keep track of finances, pay pals, and save money.
However, neobanks have got its own pros and cons as displayed below.
Migrating Banking Towards Digital Transformation- An Advisory
A bank's specific needs must be balanced against the level of disruption brought by each option, as well as the necessary technology, skills, financing, and personnel. Here are presented the three most prevalent digital transformation strategies.
Scrap and replace
This technique is precisely what seems like a total rewrite of a bank's core system and legacy infrastructure. In response to market pressure or the failure to recruit and maintain digital-first clients, many CIOs and CEOs resort to this technique, although it is a massive task. After researching the time, effort, and cost involved in thoroughly revamping their core systems, many financial institutions decide against making the switch.
Developing a bank within a bank
Developing a digital banking service within an existing bank's framework could be a more manageable and less disruptive solution. It could also enhance revenue for established financial institutions by assisting them in attracting and retaining more digital natives and reassuring their less tech-savvy customers. As opposed to neobanks, they can rely on internal safeguards, licenses, and funding rather than engaging in time-consuming and expensive relationship development with external institutions.
Progressive modernization is the third strategy that is favored among banks. Instead of constructing a new bank, they frequently develop a specialized product as a springboard for their digital journey. The procedure can be implemented in months or over an extended period to limit risk and align expenses with business success. Numerous banks have found success by designing new digital offerings around significant financial occasions in users' lives. If banks choose this strategy, they can maintain their current infrastructure while testing the digital model and then migrate to a complete digital architecture once decision-makers are on board.
Migrate slowly to begin adding value to your business.
So why wait? Businesses implementing the latest digital technologies instantly position themselves at a competitive advantage in their respective markets. Your company will have complete control over all of its front- and backend activities after you digitize them, in addition to improved usability and consistency.
To Begin with
1. Build Mobile Banking Apps
The banking app has evolved into a "smart digital assistant" that "understands" the user's wants and needs by analyzing their past transactions. Rather than waiting for the consumer to express interest, the intelligent assistant initiates contact and makes suggestions based on their interests. In 2023, banking apps will have progressed from simple self-service tools to fully-fledged customer relationship management platforms. These platforms will anticipate and meet the demands of individuals with exhilarating user interfaces, allowing them to experience an entirely digital banking service.
Is it the case that you intend to improve an existing mobile app by adding functionality?
You've come in at the perfect spot. Next-gen technologies have always been a hallmark of our mobile and web applications with exquisite UX/UI designs.
2. Collaborate with FinTech
Fintech companies were early adopters of digital innovation regarding monetary transactions such as payments, loans, and wire transfers. New solution providers such as Robo-advisors, P2P lending platforms, and digital wealth management tools have arisen to address client demand as traditional financial services organizations undergo digital transformation. Open banking application programming interfaces (APIs) have been a primary motivator of these efforts, as they quickly enable consumers to manage multiple accounts through digital self-service channels. Banks have already begun creating relationships with fintech companies to aid in their digital transformation initiatives and maintain pace with startups successfully disrupting the financial industry.
The transition of your company to a digital model is now obligatory if you desire to satisfy the expectations of your clientele and provide them with an entirely digital experience.
Set up a Free Discovery call with Performix to discuss your needs to Go Digital with secure client retention banking software and apps.