7 Technologies Influencing the Digital Banking Development
Banks quickly learned how to adapt in 2020 and many technology changes happened during last year. They have been maybe planned, discussed, or only thought of. Either way: new services and E-Channels emerged to connect with customers online. But will that reinforced shift of connecting remotely continue to grow and how willing are banks to become more digital?
The pandemic impacted banks in a way that challenged them to act more innovatively. There is no doubt that traditional institutions like retail banks, loaloansnsurance, and pension companies act more safely and cautiously when it comes to digital transformation. As we are living in the new normal now we believe that financial institutions will continue exploring their unused digital potential. Navigating through the next post-pandemic years we expect to see digital as the new way to go.
Having this established – let’s explore some of the technologies that banks can adopt in their digital development going forward:
Online-first Banking – the number of people using mobile devices rises every year so the demand for satisfying their banking needs online also has to be addressed. Starting with improving the current state of the existing set of digital products/services. Additional modifications could be increased loading speed and a better user experience. Many banking institutions are also considering moving the digital account opening completely online as well as developing P2P (Peer-to-peer) transactions. Connecting all digital touchpoints into a seamless online experience gives a competitive advantage.
Cloud Computing – many banks have already deployed cloud and saw their operating costs going down. Cloud also offers the most secure way for partnerships and collaborations. In addition to that, it successfully fulfills open banking obligations. Cloud-native core systems providers can help banks expand in multiple locations with limited marginal costs. Investing in cloud computing is no longer considered “emerging” and it has moved from “nice to have” to “have to have”.
Artificial Intelligence (AI) – in comparison to the adoption of the cloud, a few banks have invested in ML, chatbots, or other types of AI to date. The development of AI-based solutions enables better predictive money management that goes hand in hand with predictive insights regarding cash flow, potential investment options, and even risks. Personalizing the product optimization recommendation by AI-powered chatbot is also a turning point in customer engagement and personalization.
Big Data – banking companies accumulate so much data that they have to structure and understand so they practically need big data technologies to help them with this. Big data allows organizations to manage and analyze all types of data in a way that users can make sense of it. If we take for example the credit assessment process where fraud detection is very important – all the information gathered for an individual or enterprise that is seeking a loan has to be carefully analyzed. Other than that, banks gather a large variety of data such as the traditional information about balance, transaction history, and credit profiles. Additionally, there are web channels that accumulate info about location, clickstream, speech analysis from call centers, and even social networks statistics.
Robotic Process Automation (RPA) – bank employees certainly perform a lot of repetitive tasks daily. To eliminate, for example, money withdrawal in the past few decades ATMs did become a norm. But redirecting just one process to a machine is not enough for lifting the burden of recurring actions. This is where RPA steps in. Robotic process automation is a type of software technology that helps with building, deploying, and managing software robots that emulate humans’ actions interacting with digital systems and other software. Thanks to the integration of RPAs banks can accelerate their digital transformation, cut major costs, quickly match workload peaks with big demand spikes (like during the COVID-19 pandemic) and of course, manual errors will be reduced down to a minimum level. Employees will be more engaged and their productivity and happiness levels will increase which will be beneficial for the enterprise.
APIs – a portion of banks have already deployed APIs in their organizations as part of their digital modernization journey. APIs are arguably the glue to the other elements that are part of the digital transformation. APIs enable banks to choose between different business models while at the same time are so affordable technology. With the help of APIs, third parties can extract current/live information that is displayed on other relevant platforms like for example comparison websites.
Internet of Things (IoT) – while other components of human life are digitizing at a much faster pace, we predict that banks will show more interest in integrating IoT into their digitalization plan. It is a simple example of washing machines that can be operated via an app on users’ phones with the help of Wi-Fi. If banks are aware of one's need to buy a new washing machine they can pop up with an offer in similar moments of need with pre-approved offers. Thinking large scale: connected homes, cars, and even supply chains can take advantage of customized offers that are sent just on time when a need for insurance or additional financing occurs.
Banks are known for their safe approach towards innovations. They are certainly no early adopters and are more likely to be part of the Late Majority. But after the pandemic, we see that banking institutions are moving more towards the early majority. If this trend will continue – we will all get to know it in the coming few years.