Digital Banking Trends
1. Radical Transparency And Open Banking
According to Raconteur’s research, trust is the second most considered factor when looking for financial products. Keeping in focus the current trends in banking and growing competition, banks need to build trust with their customers. This utmost need for trust has created the concept of radical transparency (open banking) — a tendency to create an open and honest environment for a customer. It is about being transparent about your business, communicating the truth, and accepting mistakes. Customers expect this.
According to the latest trends, a bank will need to focus more on openness and transparency instead of just relying on typical retail banking practices. For example, Monzo — a completely app-based online bank formed in the UK in 2015 — has more than five million users. Monzo has proven that with transparency, new financial organizations can quickly grab the market share of old-school financial institutions that have been present for centuries.
2. Data As A Predictable Personalization Tool
Big data, Artificial Intelligence (AI), and machine learning (ML) encourage financial marketers to offer more personalization to banking consumers. In this digital era, personalization doesn’t merely refer to fundamental data such as a customer’s name. Instead, it includes knowing your customers’ likes and dislikes and developing unique packages of banking products and services for each customer as per their requirements and desires. Each digital banks’ customer can get personalized financial trends.
According to Accenture, 74% of consumers say ”living profiles” with more detailed personal preferences would be useful if they were used to curate personalized digital banking experiences, products, offers, and banking solutions. Customers want organizations to understand their preferences quickly, especially when they have given complete data already. Personalized marketing for the best customer journey experience is the key. Traditional banks haven’t spoiled customers with such approaches, and now is the perfect time for this.
3. AI Providing More Targeted Services
The trends in the digital banking landscape for 2022 suggest using real-time AI-based bots to gather information about customer preferences. Financial marketers can leverage customer data and advanced analytics to provide predictable personalization and delight their customers.
With the help of artificial intelligence and ML, a bank can:
- Understand the needs of their customers more quickly in real-time.
- Identify and provide data-backed solutions for these problems.
- Perform faster analyses to become more efficient and productive.
- Develop key strategies for their business backed by valuable customer data.
4. Cloud Computing
There has been a massive growth in the use of cloud computing in digital banking innovation trends. Cloud computing is a concept in which computing services such as software, data warehouses, and digital networking tools are readily available on the Internet.
We can expect a massive shift towards cloud computing in the finance sector in 2022 because it provides banks with such benefits as:
- Cost efficiency
- Global scalability
- Increased productivity
- Speed
- Adequate security
- Reliability
- Convenience
Financial institutions can mitigate the risk of losing data in case of any physical disaster or calamity. In addition to that, cloud computing helps banks eradicate massive data silos. It also eliminates the need for physical servers, systems, and people to manage them.
5. Automation Using Time And Money Efficiently
There are still FinTech startups and banks out there that are doing heaps of manual data work. Unfortunately, upper management is busy checking manual work instead of formulating strategies.
Here’s how automation can change a bank’s internal business processes:
- Managers can plan and make decisions rather than manually writing and reading reports.
- Not having to produce manual reports and analysis means they have more time to focus on other valuable tasks.
- Automation and digital solutions can help reduce costs, increase efficiency, save time, and let banks focus on innovation.
We can expect more traditional banking institutions to implement automated systems for day-to-day tasks such as back-office services and customer support. For example, any financial institution can get rid of data entry tasks by implementing Optical Character Recognition (OCR) systems. Banks are also introducing Robotic Process Automation (RPA) that can help implement error-free automation. That shapes a new image of the finance industry.
6. No Downtime — Reliability Is Key
With the rise of digital banking users, a bank cannot afford to have faulty server downtime. Even a few minutes can destroy the reputation and goodwill they created over decades. For example, the State Bank of India’s system outage resulted in major revenue losses for the bank. More than 16,000 financial transactions take place on the platform every hour, so every minute counts.
These technical glitches have raised many concerns about the reputation and credibility of the institution. Thus, banks need to invest considerable time and money to ensure that their systems are always functioning error-free.
7. Security And Privacy
Banks and theft have a parallel relationship. With newer online banking products and services, customers are now more exposed to the threat of losing money. Cybersecurity is now becoming a major consumer demand for any digital bank.
According to a recent survey by CSIweb:
- 58% of people will stop using a financial institution’s services if they have faced a privacy breach.
- 28% of bank customers say that their bank accounts have been exposed to cyber-attacks at least once in a lifetime.
To ensure security and privacy, banks need to:
- Invest in security systems to avoid the risks of cyberattacks.
- Perform detailed and ongoing security audits of a bank’s system to mitigate its weaknesses and flaws.
- Protect their customers from phishing, through which anyone can steal money from customers’ accounts.
- Educate customers about cybersecurity and how they can safeguard themselves from any such attacks.
8. Speed And Reactivity
Every bank needs to increase the speed of its bureaucratic working systems. Speed is something that can provide a competitive edge to any bank. Businesses now need to make decisions more quickly, requiring a trustworthy and quick banking partner to channel their funds more efficiently and rapidly.
According to a survey by Mckinsey, 59% of the banks lack the ability to have speedy systems due to a lack of cross-functional collaboration.
9. Usability And Intuitive Design
User-friendly and intuitive application programming interfaces are now a vital service requirement. Tailored mobile banking super apps are more popular than limited functionality tools. Customers prefer graphs, infographics, and interactive modules instead of the typical Excel sheets. So we can expect newer features and functionality from mobile banking apps in 2021.
Today’s world dictates that banks work critically on their mobile apps and websites rather than their branches’ interior designs.
10. Importance Of Visualization As A Global Trend
The current generation is more appreciative of visualization in their day-to-day routine. User experience will now play a vital role in any financial institution’s competitive edge. Online banking needs to create visually appealing systems to retain their customers’ attention and focus.
We can expect the introduction of more visualized, attractive, and trendy mobile apps in future digital banking trends. Banks will now invest thoroughly in creating innovative mobile banking apps, as customers need enhanced user experiences along with functionality.
11. Cryptocurrency And Blockchain
Cryptocurrency and Blockchain technology will continue to dominate the landscape of digital banking in 2024. As of June 2023, the global cryptocurrency market boasts an impressive tally of 8,832 active digital currencies. According to the Economic Times, the adoption of blockchain technology within the financial sector has the potential to yield annual savings of up to $12 billion for financial institutions.
As the adoption of cryptocurrencies like Bitcoin and Ethereum accelerates, financial institutions are exploring ways to integrate these digital assets into their services. Blockchain, the underlying technology of cryptocurrencies, is being leveraged for its unparalleled security and transparency features, enhancing data protection and reducing fraud.
Cross-border transactions have become more efficient and cost-effective through cryptocurrencies and blockchain, reducing the need for traditional intermediaries. Central bank digital currencies (CBDCs) are also gaining prominence, offering governments and financial institutions greater control over monetary policy and financial stability.
Decentralized finance (DeFi) platforms, which rely heavily on blockchain, are redefining lending, borrowing, and investment in the digital banking sphere. Meanwhile, Non-Fungible Tokens (NFTs), often built on blockchain technology, are revolutionizing the concept of ownership and enabling unique digital asset trading.
Blockchain’s smart contract capabilities are automating various banking processes, streamlining loan origination, and simplifying compliance procedures. As digital banking trends evolve, the integration of cryptocurrency and blockchain is poised to redefine financial services, offering new levels of efficiency, transparency, and accessibility to users around the world.
12. Banking-As-A-Service
Modern banks are like grocery stores: a customer can come here and choose a product of his choice – a loan, an installment plan, a debit card, or a share in a mutual fund. For a long time, businesses teamed up with banks for mutual benefit – for example, in household appliance stores there were bank stands where you could make a purchase on credit. Today, large companies and fintech startups want to offer banking products directly to users. And this became possible thanks to the emergence of the Banking-as-a-Service (BaaS) concept.
In 2022, the BaaS market size was estimated at $390 billion, and by 2027 it is projected to grow to $1.56 trillion. European business leaders believe BaaS-based services will become mainstream within the next five years. The engine of this process will be the current crisis: the cost of living is rising, and saving at least a few percent on acquiring means providing customers with more competitive prices and getting more sales. Not to mention the enhanced customer experience & customer engagement, which provides a competitive edge over our rivals.
Expect A Thriving Digital Future Of Banking Industry
With many digital banking technology trends just around the corner or fully in development, it’s possible to spot some industry favorites. Here’s what you can expect in the years to come:
- AI will keep on growing.
Artificial intelligence can help banks to create a more secure system for its customers. It can be beneficial in identifying customers’ needs and can suggest personalized digital solutions in real-time.
A real-life example of how banks can create a competitive edge in the market by utilizing the power of AI is George — an AI-based digital banking system developed by Erste Bank. Its simple, unique, intelligent, and powerful features have managed to create a loyal customer base of more than 6 million users across Europe within a short time, and it’s gained a competitive advantage.
- Cyber security will become more important.
With the growing user base of digital banking, the importance of cybersecurity will continue to rise. Banks will try their best to build new systems to mitigate the risks of fraud and theft. Data privacy and protection are becoming key concerns for customers and regulatory authorities alike. Banks will need to be more proactive in the security of their systems.
- Customer service – a compassionate presence.
Customer service and support will become essential with the increasing trend of branchless mobile banking. As customers become more familiar with digital banking tools, they still need someone to answer their questions. This creates the need for a virtual, 24/7, quick, and effective customer service system.
Thankfully, AI-enabled chatbots can provide customers with 24/7, customized banking services in real time. AI-enabled chatbots can increase efficiency by 33% because they can solve the customer’s questions almost immediately and via a single mobile app.
Conclusion
To sum up, with the continuous and radical changes in digital technology, banks are also transforming themselves by taking advantage of new technologies. Covid-19 has disrupted every industry globally and forced enterprises to change their existing way of doing business. People and businesses are relying more on digital banking in their basic banking activities.
There are major banking industry trends that we can expect to reshape the banking landscape. Banks will start using advanced technologies such as AI, cloud computing, and machine learning to gain a competitive edge over others. The policies and standards of banks will become much more open and customized. Banks will introduce tailored products to cater to the new needs of their customers. New-age customer service and support are something banks will need to act on quickly. Visualization, privacy, and cybersecurity will gain much more importance in the upcoming months.
If you are considering implementing digital banking solutions or establishing an online bank, give us a call. At Geniusee, we facilitate companies by providing essential services to gain a competitive edge by utilizing these digital banking trends.