Technology-powered transformation, customer focus and broad trust are crucial ingredients of banking’s long-term success. However, banking’s current competitive environment is vast.
Financial inclusion programs cover everything from traditional checking and savings accounts, credit cards, e-commerce ecosystems, loyalty programs and financial inclusion programs for SMEs – and this market is fiercely contested among tech titans and nonbanks.
Digitalization in banking is quickly revolutionizing how customers access financial services. Today’s banking technology offers more convenient and accessible banking experiences to a diverse group of consumers from millennials to baby boomers.
This trend is marked by the increasing use of mobile apps, desktop banking platforms, chatbots and data-driven insights to provide banking services that meet customers’ needs and expectations.
Digitization helps banks serve more customers faster while cutting costs through automation and operational efficiencies. Neobanks have taken digitalization one step further by operating without physical branches – offering all services online instead.
Cloud computing, which helps enhance security and data accessibility, has become another banking technology trend in recent years. Banks such as Barclays have taken to adopting this trend by integrating it into their IT systems to streamline internal operations and provide superior customer service.
2. Artificial Intelligence (AI)
AI technology is revolutionising the financial industry. Banks that employ these tools can realize significant cost savings.
Banks were early adopters of machine learning technology and have found great success using it to improve risk management, efficiency gains and profit growth. Now they’re exploring more powerful generative AI capabilities which open up opportunities for innovation in areas like credit risk assessments and investment management.
Employing generative AI in banking requires considerable expertise and capacity. Furthermore, its use involves risks and responsibility: inaccurate AI information could negatively impact quotes, communication with clients or the processing of customer files – for instance. Banks’ legacy core technology systems or fragmented data reserves may prevent the effective deployment of generative AI into their operations, necessitating an innovative regulatory framework to promote innovation while at the same time assuring systemic stability.
3. Financial Inclusion
With cross-industrial platforms dismantling traditional industries, new forms of competition have emerged across five areas. These arenas include everyday banking, investment advisory services, complex financing products, mass wholesale intermediation and “banking as a service.” Therefore, banks must adjust their business models in order to compete against organizations who were never part of financial services industry before.
These organizations are increasing their reach by entering banking markets to serve previously unbanked populations, creating greater financial inclusion worldwide. One example is mobile money movement apps which have helped reduce extreme poverty in Bangladesh by enabling urban migrants to transfer income directly to rural families living outside cities.
Financial inclusion is also helping improve people’s lives by enabling them to invest in themselves and their communities, becoming more resilient against economic shocks while simultaneously creating a positive feedback loop that benefits all. That is why central banks worldwide have advocated for financial inclusion.
4. Cross-Industry Consolidation
As technology evolves, customers are becoming more comfortable conducting financial transactions online, necessitating banks to offer new digital services to meet customer demands. They might offer both physical and virtual banking services together for a more tailored customer experience – including biometric authentication or blockchain technology to protect customer data.
Banks must adopt a challenger mindset in order to effectively compete with agile new players who specialize in merging data and digital delivery to meet customer needs. Such innovative players use cutting-edge technologies such as artificial intelligence (AI) and machine learning (ML) to better understand customer behavior and customize experiences to individual customer profiles.
Cross-industry platformization is rapidly altering customer behaviors and creating ecosystems to satisfy customer needs in new ways. Banks that adopt a platform mindset will unlock immense value for shareholders and other stakeholders.