Even though the banking sector is hard to call a game-changer, innovations that are already transforming the financial services industry, including the ways banking operations are handled, just might be.
The competition among banking institutions and big fintech giants to build winning strategies and increase business results have resulted in them embracing artificial intelligence, cloud computing, big data, blockchain, etc.
The question we want to pose is: How will global fintech trends reshape the future of the banking landscape in 2020? Let’s dig deeper and find out what we can uncover.
1. Artificial Intelligence (AI) in Banking
From enhancing the customer experience with chatbots and mobile check deposits to cost reduction and increased revenue for financial institutions; artificial intelligence (AI) has huge potential for the fintech industry regarding transforming and establishing entirely new business models in banking. What’s more, 52% of financial and banking executives are already investing in AI while 72% consider it a business advantage. AI in the banking industry can help achieve the highest level of results in terms of cost savings, which are projected to be $447 billion by 2023.
Financial services executives are justifiably concerned about security, fraud detection, and prevention. AI in banking can not only bolster these facets of the industry, but help with lending and credit risk-based decisions by evaluating the probability of a client failing to pay back a loan.
Also, there is a relationship between AI and other transformative technologies, including big data analytics, machine learning models, voice interfaces work, the Internet of Things (IoT) in the financial sector, robotic process automation, etc.
How is AI used in banking? Speaking specifically about chatbot solutions, financial institutions use them to reduce operating costs and provide customers with immediate service. This reduces redundancies, offers personalized conversational experiences, and can even replace emails or phone calls.
2. Big Data in Banking
The banking sector has been pouring in investments into big data analytics, simply because the tangible insights that are extracted from the date are priceless: Account balances, credit card transactions, deposit checks, ATM withdrawals, credit scores, etc. The amount of data recorded by the financial industry is skyrocketing.
How is big data used in banking? Financial institutions can use that data to establish a 360-degree customer view. The technology helps track and analyze customers’ spending habits, which allows bank employees to build detailed customer profiles and offer personalized products. With that being said, it is beneficial for upselling and cross-selling. For example, bank employees may review a customer transaction history and determine clients’ habits and interests. Let’s say, the client likes traveling. This information can become an upselling opportunity for an employee to target a customer with a marketing campaign for a travel rewards card. Big data can also help prevent risk and fraud as it allows banks to identify unusual customer behavior.
The future of big data in banking looks bright as 62% of banks consider big data to be critical to their success.
3. Blockchain in Banking
Famously used in Bitcoin, today more and more financial institutions have adopted blockchain in payments, remittances, provenance, and traceability. The technology decentralizes financial management from a central authority to a distributed database. Because blockchain helps record transactions efficiently and in a verifiable way, the technology seems to have already become mainstream. It also helps save money, and achieve higher customer satisfaction levels.
How is blockchain used in banking? Blockchain can transform the banking and financial services in a number of ways. As mentioned above, it can be used for payments. Another way to implement it is to tokenize assets like venture capital funds, bonds, real estate, and commodities. This can help remove the intermediaries in the loans and credit system, making borrowing more secure and made possible at lower interest rates.
Blockchain’s distributed ledger technology (DLT), helps remove manual data reconciliation and establishes better governance around data sharing and collaboration. Also, blockchain technology for banks changes the traditional ways of money exchanges through smart contracts operations.
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4. Robotic Process Automation (RPA) in Banking
RPA delivers an immediate and significant reduction in expenditure as robots can replace humans or work in tandem with them in completing repetitive and labor-intensive tasks. This saves time, operational costs, and minimizes errors.
How is RPA used in banking? RPA improves business efficiency, freeing up agents to deal with higher priority tasks. With customer service chatbots, banks can respond to general payment questions and solve low-priority queries from customers. RPA allows customers to get approved for their credit card application within a few hours or even seconds after they submit it.
Insurance companies use technology to automate their claims management processes. In terms of business functions, RPA ensures all areas of financial business are compliant, and optimizes the loan origination process.
5. Cloud Computing
Cloud computing enables businesses to get the job done on-the-go. It is used for delivering computing services, such as servers, storage, databases, networking, software, analytics, and intelligence over the internet. Cloud computing services are usually pay-as-you-go arrangements. It means if you want to use the cloud, you will pay a cloud provider based on usage.
How is cloud computing used in banking? Cloud computing offers flexibility and mobility. Customers can get 24/7 service including online payments or online transfers at any time, and from anywhere. What’s more, up-to-date strategists are already working on digital bankingOpens a new window and trying to shift away from traditional brick and mortar branches. The reason for this is clear: 45% of bank customers visit their local branch fewer than five times per year.
In addition, many cloud computing solutions provide tracking mechanisms, which makes scaling up faster.
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6. Cyber Security
Data and information breaches are common threats in the banking sector. It is already hard to imagine our life without mobile apps, websites, and social networks. Meanwhile, financial institutions deal with sensitive information and thus are among the most targeted businesses by cybercriminals. As such, the industry must stay on top of their security.
To prevent information, data, and money from getting stolen, financial businesses and banks should plan for how to minimize damages by preparing a solid and fully protocolled cybersecurity strategy that may ensure safety. For example, bank and financial executives should work with the public sector, share best practices, and educate bank employees and customers on their role in keeping personal data safe.
Wrapping Up
Whether it is taking extra measures to protect against cyberattacks or implementing AI and robotic process automation, financial institutions need to step up their game.
Today, businesses that do not implement the above-mentioned fintech solutions may be at risk; and the same goes for implementing them incorrectly. So it is best to contact digital transformation consultants to receive expert advice on fintech adoption.
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