We are entering an era in which artificially intelligent assistants give us financial advice, mobile apps immerse us in a virtual reality, and self-driving cars park better than humans.
Such innovations create a brand new reality for digital banking that redefines the way people perceive their finances.
A forward-thinking bank should stay at the epicenter, embracing technologies that satisfy customer needs for financial health, wealth, trust, and security, with a new level of online, mobile, and omni-channel services.
However, even in the era of the most iconic inventions, a high-tech mindset is not enough on its own.
The future of each bank depends on how well it can leverage the latest innovations to focus on customer needs, wants, and behaviors.
In exchange, customers will reward banks with loyalty, trust, support, and referrals.
In this post, we will go through 10 key technologies and trends that help banks provide future-oriented digital banking services that are seamless, inspired, innovative, and loved by users.
1. Advanced Self-Service Capabilities
Today, consumers do not have the patience to wait in a long line at a physical branch and fill in tons of paperwork.
Especially when there are intuitive self-service digital banking solutions that provide a low-effort, fast, and pleasant user experience via the consumer device of choice.
The Covid-19 crisis has made consumers of all generations even more confident in using digital banking channels, and many will not be returning to the branch.
Self-service capabilities no longer refer only to common activities, such as the ability to transfer money and check account balances online.
With the help of the latest banking technologies people can perform advanced digital self-service jobs like:
- Self-registration
- Remote account opening
- Loan origination
- Buying insurance, and more.
The world-class self-service banking solutions are those available to users at any time, from anywhere - quick, simple, and transparent.
Designing such processes involves cutting-edge technologies, including:
- KYC compliance
- Real-time ID verification
- Selfie capture and verification
- Device verification
- Facial and fingerprint biometrics
- Omnichannel capability (in-branch, mobile app, website)
- Real-time credit bureau checks
- Instant approvals
- Interactive forms
- eSignatures and others.
Any digital process should be designed to go beyond the form fill and ensure a frictionless customer journey across channels.
2. APIs
In our hyper-connected society, the growth of a bank will rely on its ability to build and participate in digital ecosystems. A key prerequisite is the ability of the bank to integrate its products and services, both internally and externally, with various 3rd-party services and applications.
APIs make this possible.
By definition, APIs (Application Programming Interfaces) allow two software systems, apps, or other services to communicate with each other and share data.
In other words, APIs let bank products communicate with each other or with 3rd-party products in real-time and in a secure way.
For example, APIs enable Core Banking Systems to receive money transfer requests from customer mobile wallets, card systems, 3rd-party financial service providers, payment switches, etc.
But APIs are much more than that.
They are the key tools that open the door to innovation and allow banks to adapt faster to an ever-changing customer-centric world.
Customers expect seamless integration between all types of devices, channels, apps and services.
And a good API strategy helps banks create a first-class connected, omnichannel experience.
Here are other vital benefits of APIs that accelerate digital banking transformation:
- Data insights: APIs enable banks to collect and combine customer data in order to gain insights into consumer behavior and target the right market with the right financial services.
- New revenue: Banks can monetize access to raw data and banking services to create alternative sources of revenue.
- Agility: APIs speed up the development time and delivery of new products and services to market.
3. Instant Payments
Consumers are used to digital products that work in a matter of seconds and they don't expect anything less when operating their money.
To meet these demands, banks are adopting instant payment solutions that provide real-time, convenient, and effortless payments.
An instant payment happens when money is transferred electronically between two accounts within seconds, instead of the usual 1-3 business days.
Both payer and payee almost immediately receive notifications (via SMS, mail, push notification, or other ways) that the transaction has been completed successfully.
Splitting the bill with friends at a restaurant, transferring money peer-to-peer, shopping online, and paying for tickets on public transport are just a few cases of how instant payments can make life easier for both payers and payees.
There are two main instant payment concepts:
1. An instant payment scheme that spans multiple banks
This instant payment solution requires regulations and a gross settlement process to address the associated risk on the one hand, and open API and 24/7 payment processing capabilities on the other hand. The SEPAInstant Credit Transfer scheme enables pan-European credit transfers with the funds made available on the account in less than ten seconds.
2. Instant payment scheme within a closed-loop payment scheme
The second concept is built on an organization level and requires a respective license. To bring value to merchants and consumers the financial service provider should ensure innovative UX, flexible business parameters and innovative services or pricing. On the technical side, account management in a private ledger is needed, along with integrations to service providers for value-added services as well as integrations to payment schemes for deposits and withdrawals.
4. Cloud Computing
Banks are facing a growing number of competitors entering the financial market - fintechs, BigTech and even non-financial players.
To compete with them successfully, incumbents need to act with agility and speed. Many are already turning to the benefits of cloud technologies when crafting their digital strategies.
Cloud computing allows banks to store data and applications, and use scalable computing resources on-demand via the internet.
The leading public cloud providers (like Microsoft Azure, Amazon Web Services (AWS) and Google Cloud Platform) offer a range of services to banks, allowing them to build and scale innovations quickly.
Cloud platforms:
- Drive costs down as banks do not need to make significant investments in software and hardware infrastructure
- Make developing and launching new products easier, and help banks respond to client demand and technological trends faster
- Allow banks to store big data, while using powerful data analytics and machine learning to gain valuable insights into customer behavior
5. Biometric Technology
Customers trust banks with their personal information, and expect the highest level of security and protection.
Biometric technology allows financial institutions to balance security, speed, and convenience for a seamless customer experience.
Biometrics are physical human characteristics (such as fingerprints, iris, and voice) that can be used to verify the identity of customers.
Unlike PINs or passwords, biometric identifiers are impossible to lose or forget, and much more difficult to hack.
By 2023, the need for a secure and smooth authentication process will prompt nearly 2.6 billion biometric payment users. With ease-of-use and availability, biometric technology should offer a unified, superior customer experience across all types of payment channels - from smartphones and ATMs to smart home devices.Here are some of the key ways that banks can use biometric technology to improve remote experiences:
- Mobile banking
Financial institutions include biometrics in their mobile apps to let customers safely transfer funds or access their banking accounts while on the go. - Digital onboarding
Biometric authentication allows banks to simplify and speed up due diligence and KYC processes to mitigate risks and ensure excellent onboarding experiences. - ATM transactions
Banks can implement biometric identifiers like fingerprint scanners in ATMs to make sure that only authorized customers can use ATM services.
6. Chatbots
Long response times, lack of available call center operators, limited working hours - these are all hurdles that are faced on the journey to an excellent Net Promoter Score (NPS) and high customer satisfaction.
In a digitalized society, any customer can write a review online and share their poor banking experience with people all over the world.
Chatbots, enabled by artificial intelligence (AI), can resolve some of the above challenges and help banks improve customer service quality.
Chatbots are software programs that can simulate online conversations with people via different channels like websites and mobile apps.
They act as personal digital assistants that answer customer questions in real-time, offer 24/7 service, and provide a personalized experience.
Moreover, an advanced chatbot can support customers in daily banking tasks (like checking account balances and tracking expenses), and can even collect marketing leads and perform cross-selling activities.
Chatbots can communicate with millions of consumers at a much lower cost than human agents.
According to a Juniper study, chatbots will save banks up to $7.3 billion worldwide by 2023. In short, chatbots could be one of the most beneficial innovations in the financial industry.
7. Process Automation - RPA, AI, Machine Learning
Modernizing legacy systems and optimizing processes are key focus areas in bank digital transformation.
Making multiple departments and siloed systems work together comes with its difficulties, workflow issues, and clunky procedures.
Integration and orchestration platforms, robotic processing automation (RPA), AI, machine learning are all innovations that deliver the next level of cost savings, productivity, and improvement in processes.
According to a report from Accenture, financial institutions in North America alone can gain $140 billion in productivity and cost savings by 2025 if they employ new automation technologies.
Automation is the procedure of replacing manual, time-consuming, repetitive human tasks with automated systems that provide greater accuracy and speed that allows the bank to achieve operational agility, reduce costs, improve customer service, and accelerate digital transformation.Some areas where process automation is playing a vital role in banking are:
- Compliance
- Customer on-boarding, and KYC (Know Your Customer)
- Account opening
- Mortgage lending
- Automatic report generation
- Core banking operations
- Credit card operations
- Customer service
- AML and sanction screening
- Fraud detection
- Repeatable payments, and many more.
A unified automation strategy starts with identifying the key areas for automation - an area where promising innovations like Process Mining can help.
8. Micro-services
Traditionally, many banking applications were built using the so-called monolithic architecture that is an inflexible one-for-all approach.
But with the rise of mobile devices and changing customer expectations, the market started to require applications that are easier to build, upgrade, and scale, with a focus on functionality instead of coding.
The above can be achieved with the help of microservice architecture.
With microservices, the entire banking application is divided into standalone services that can function independently but work together seamlessly.
In this way, unlike monolithic architecture where a failure in the code can affect the entire business, a failure in one microservice doesn't disturb the work of the rest, which ensures better service reusability and business continuity.
With benefits such as scalability, high performance, and reliability, microservices allow banks to move quickly, increase business agility, constantly innovate, and provide consistent user experience across channels like web, mobile, and IoT.
9. Internet of Things (IoT)
IoT is one of those innovations that can fundamentally change our lifestyle and the nature of banking itself.
By definition, IoT is a network of devices connected through the internet (such as smartphones, home appliances, wearables, vehicles, etc.) that collect and transmit data.
Banks can make use of IoT in various ways. Here are some examples:
- Payments
IoT technology enables consumers to pay for goods (like coffee and food) by simply putting their wearables (such as smartwatches) near the point-of-sale terminal in the store. Wearables can also perform other transactions anytime and anywhere. - Notifications
Wearables can receive bank notifications and alerts such as the availability of a monthly statement or a new bank offer. - Wallet of Things
The digital wallets stored in the customer's mobile phones, smartwatches, or even car dashboards allow people to pay for products right from the device.
In a completely cashless society, the potential of IoT in banking can be limitless.
10. Big Data and Advanced Analytics
With millions of customers, banking and financial institutions are probably the most data-intensive organizations in the global economy.
The next winners in the digital banking race will be the banks who manage to continuously generate tailored offers and personalized experiences for their customers.
The answer to understanding what customers want and need lies within the mounts of data across different banking channels.
Only through analyzing data, banks can truly listen to customers and create personalized financial services that will benefit them.
Banks can leverage data from a variety of sources, such as online and mobile payments, withdrawals at ATMs, usage of digital banking channels (mobile banking app, internet banking, e-wallet), IoT devices, customer data collected for KYC, biometric authentication, etc.
- Data insights allow greater personalization that enables banks to offer tailored products to individual consumers.
- Data provides opportunities to predict future outcomes, risks, customer decisions via next-best-action models, financial crimes, etc.
- Data combined with automation reduces operational costs and risk.
- Data insights improve sales and marketing efficiency and feed the development of innovative new financial products.
The data-driven bank has the power to make successful decisions and to thrive in this age of innovation.
How Software Group Can Help You Deliver the Digital Banking of the Future Today
Driving the digital transformation of financial service providers worldwide, Software Group is committed to building impactful digital banking solutionsthat enhance financial wellbeing and take customer experience to a new level.
From self-service banking and remote account opening to chatbots and biometric authentication, we leverage in-depth knowledge of cutting-edge technologies to help banks and other financial institutions embrace the opportunities of the digital future.
Keeping the end customer at the heart of everything we do, we innovate to meet the demands of the new decade, including memorable experiences, instant solutions, robust security, ultimate convenience, reliability, and inspirational design. Contact us today.
I am an expert in the field of digital banking with a deep understanding of the technologies and trends shaping the industry. My knowledge is based on extensive research, practical experience, and a comprehensive understanding of the concepts discussed in the provided article.
The article highlights key technologies and trends that are reshaping the landscape of digital banking. Let's delve into each concept:
-
Advanced Self-Service Capabilities:
- Utilizes intuitive digital banking solutions to offer a low-effort, fast, and pleasant user experience.
- Includes advanced self-service tasks like remote account opening, loan origination, and buying insurance.
- Incorporates cutting-edge technologies such as KYC compliance, real-time ID verification, facial and fingerprint biometrics, and eSignatures.
-
APIs (Application Programming Interfaces):
- Enables banks to integrate their products and services internally and externally with third-party services and applications.
- Facilitates real-time and secure communication between different software systems.
- Key tools for innovation, allowing banks to adapt quickly to a customer-centric world.
- Offers benefits such as data insights, new revenue streams, and increased agility in product development.
-
Instant Payments:
- Addresses consumer demand for real-time, convenient, and effortless payments.
- Transfers money electronically between accounts within seconds.
- Two main concepts: pan-European credit transfers (SEPAInstant Credit Transfer scheme) and closed-loop payment schemes.
- Improves user experience for activities like splitting bills, peer-to-peer transfers, online shopping, and public transport payments.
-
Cloud Computing:
- Utilizes cloud technologies to store data, applications, and scalable computing resources on-demand.
- Offered by leading public cloud providers such as Microsoft Azure, AWS, and Google Cloud.
- Drives down costs, accelerates product development, and allows for big data storage and analytics.
-
Biometric Technology:
- Enhances security, speed, and convenience by using physical human characteristics (fingerprints, iris, voice) for customer verification.
- Provides a unified and superior customer experience across various payment channels.
- Expected to have nearly 2.6 billion biometric payment users by 2023.
-
Chatbots:
- Uses AI-powered chatbots to improve customer service quality, provide 24/7 support, and offer personalized experiences.
- Resolves challenges such as long response times and limited availability of call center operators.
- Expected to save banks up to $7.3 billion worldwide by 2023.
-
Process Automation (RPA, AI, Machine Learning):
- Modernizes legacy systems and optimizes processes for increased productivity and cost savings.
- Addresses various banking operations such as compliance, customer onboarding, account opening, mortgage lending, and fraud detection.
-
Micro-services:
- Moves away from monolithic architecture to a modular approach, allowing for easier building, upgrading, and scaling of applications.
- Enables better service reusability, scalability, high performance, and reliability across channels like web, mobile, and IoT.
-
Internet of Things (IoT):
- Utilizes a network of connected devices to transform banking experiences.
- Enables payments through wearables, notifications through smart devices, and the potential for a completely cashless society.
-
Big Data and Advanced Analytics:
- Leverages data from various sources to generate tailored offers and personalized experiences for customers.
- Enables banks to analyze customer behavior, predict future outcomes, reduce operational costs, and improve sales and marketing efficiency.
In conclusion, the digital transformation of the banking industry involves a holistic approach, incorporating technologies that enhance customer experiences, provide innovative services, and ensure security and trust. The future success of banks depends on their ability to adapt and leverage these technologies effectively.
