The last few years have seen great upheaval within the financial services and banking industry. From the Covid-19 pandemic – which disrupted business practices and ways of working – to ever-evolving technological advances and the agility and success of tech-driven start-ups, changes have been both fast and far-reaching.
The immediate future is not set to stabilise just yet: during this critical period it will be sink or swim for many financial institutions as they seek to adapt to this new landscape. Pre-pandemic, change for the majority of the world’s leading banks was cautious and incremental; post-pandemic, it is characterised by digital readiness and an ability to overcome traditional business models. While the future is yet to be determined, the requirement for providers to capitalise on customer experience, innovation and operational transformation is certain.
The sector has already seen widespread acceptance and advancement of technologies in a range of areas: innovation opportunities in the payment space; open banking, open finance and open data; embedded finance; digital transformation and platformisation; and cloud banking.
According to Forbes, and their forecast of financial services industry trends and developments over the coming year, both new and existing technologies are set to expand:
- Mobile banking
- Banking in the cloud
- Artificial intelligence and machine learning
- Improving customer experience with technology
Let us look at these key areas in more detail.
Mobile banking and improving customer experience with technology
Innovative technologies, such as API advancements, are at their most powerful when used in relation to financial providers’ most-important asset: their customers.
The number of customers who expect to access financial services instantly, and from anywhere in the world, is ever-growing. For most of us, digitisation means our lives are now organised through our phones and related devices – from mobile payments to purchasing to real-time digital banking. Statista estimates that, by 2024, 2.5 billion people worldwide will be using banking apps and online banking services.
Having fulfilled a primary objective of allowing individuals to access banking services 24/7, and from any location, the stage is now set for service providers to enhance and differentiate the digital experience in other ways. Personalisation is a hot topic in banking – from presenting users with the most-relevant financial products and helping them manage their finances by highlighting spending patterns and suggesting efficiencies, to virtual assistants and voice interfaces.
2022 looks set to see further expansion across existing mobile banking trends, including:
- Cashless, cardless banking and ATM withdrawals
- Chatbots and remote professional consultancy
- Personalised communications and offers
Increased use of apps offers benefits to the sector: they are cheaper; they prioritise customer experience and convenience; and they offer data insights into behaviour and lifestyle that can assist with cross-selling and designing bespoke service packages. All this makes mobile banking one of the critical digital assets that financial service providers should focus on and invest in.
Banking in the cloud
Cloud banking uses the cloud to store and access data. Deloitte reports that implementing cloud technology can:
- Synchronise the enterprise
- Build resilient operations
- Drive business innovation
- Enhance IT and cybersecurity
- Unleash new talent and ways of working
Thanks to these benefits, multi-cloud infrastructure and hybrid cloud use are increasingly used throughout the sector. Cloud banking also supports businesses to meet environmental, social and governance (ESG) targets, from increased sustainability to decarbonisation.
Artificial intelligence (AI) and machine learning
In the face of competition from the likes of Amazon, Apple and Google – whose services and market share now deviate from strict e-commerce, to those more traditionally the remit of banks, insurance providers and credit unions – the finance sector must do more with its AI. While process automation is already well-established throughout the sector, a smart, data-driven tech must now be applied to new areas – for example, designing bespoke service packages that can be sold to customers.
Algorithms can have a transformative influence in the usage of credit applications. By identifying biases within the process, equal treatment of applicants may be ensured, resulting in a more equitable system of approving loans and financing options for customers.
The financial ecosystem is in the midst of multiple, simultaneous financial revolutions including: Fintech, the advent of cryptocurrency, and open banking. While each is a paradigm shift in its own right, these ground-breaking new technologies are not evolving in isolation; those at the forefront are collaborating, exchanging ideas, and forging partnerships.
In essence, blockchains are databases with certain characteristics:
- They are distributed – stored across many different computers with no one person in overall control.
- They are encrypted – only those with cryptographic keys can alter or update them.
- They are governed by consensus – all stakeholders must agree in order for any changes to the data to be actioned.
For traditional banks – where ownership is centralised, and governed by bank owners and regulatory bodies – the nature of blockchain is disruptive. At the same time, blockchain offers a number of benefits: greater transparency; greater security; fraud prevention; streamlined infrastructure; and greater transactional speed.
Transformational blockchain technology is already evident in use cases throughout the banking and insurance industries. For example, assisting with crypto payments, supporting foreign exchange trades, and enabling instant customer payments.
Capitalising on digital transformation in the sector
It is clear there is plenty of scope – and plenty of opportunity – for traditional banks, fintech start-ups and neobanks to embrace new banking solutions, providing benefits to both customers and themselves.
The banking space has already pivoted in response to disruption: now, it is well-placed to further advance, combining the trust customers place in traditional financial services with the transformative personalisation and convenience that technology and digital platforms afford.
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