The banking ecosystem has charted an evolutional journey, although at a slower pace, in the last five years. As the indispensable presence of technology is palpable now, the reliability of financial services on technology is more than ever. Speed of innovation is the primary factor in digital transformation, and financial technology companies have efficiently tapped this trend.
To put it in a better perspective, let us all think about non-COVID-19 days where all of us used e-wallets for shopping online, sent money to a friend in a split second, scanned the QR codes to pay for a burger, split the bill at a bar using an app, checked our monthly budgets on another app to see if you can buy that expensive camera, or in the end called for an Uber and paid using credit card or bitcoin. All of this and more is fintech, and the new-age digital banking and millions more are using these innovative banking solutions since the pandemic.
You read about the trends in fintech in the previous post, now it is time to dig deeper into the new-age technologies that are revolutionizing the banking industry strategically and innovatively.
Cloud computing
Leading banks are using the cloud to access secure, resilient infrastructure with a pay-as-you-go model to build and scale robust solutions quickly. Cloud computing offers agility to the banking industry, multiplying the sector's innovation and enabling faster go-to-market speed for fintech companies. Moreover, banks rely on cloud computing to maintain business continuity, offer a high level of data protection, fault tolerance, and disaster recovery. In recent times, cloud computing has been in demand to enable 24/7 customer service for its clients, which is quite a competitive advantage in the evolving business dynamics.
Artificial intelligence
The banking industry uses artificial intelligence in intelligent chatbots, automatic credit scoring, and wealth management platforms. These functionalities enable seamless operations and adhere to the global regulatory compliance requirements by preventing fraud. As most banks rely on remote customer onboarding and verifications, AI-based solutions make customer enrollments possible through face recognition and enhanced OCR engines used for data extraction. Moreover, leading banks use AI to streamline customer service and allow their customers, all-time access to banking operations through mobile banking, with a robust layer of security to detect frauds.
Blockchain
First used in the cryptocurrency Bitcoin, blockchain technology became known as a transparent and verifiable way of making transactions. Recently, blockchain is backing cryptocurrency to store customer records and enable digital payments regardless of location and time. The Harvard Business Review predicts that blockchain will disrupt banks the way the Internet disrupted media – something that we can already see happening in our day-to-day banking transactions.
Blockchain is predominantly used in scaling operations and offering excellent customer experience as it helps in:
Acquiring user data through safe and secure channels
Storing it effectively on cloud databases with scalability
Allowing consumers to perform fast transactions
Reducing the risk of cyberattacks with the use of encryptions and no intermediaries involved
Robotic Process Automation (RPA)
Several financial institutions and banks are leveraging the RPA technology as it saves labor cost, involves less operational cost, and leaves the little scope of errors with the promise to offer a premium experience to the customers. Managing financial transactions is far more accessible now with RPA/automated systems taking over the manual and tedious tasks. Additionally, RPA has applications in data collection to compliance regulations to transaction management and email marketing via bots. Naturally, these benefits streamline the banking operations and deliver seamless services to its customers.
Big Data analytics
Managing data is the biggest challenge for banks and financial institutions. With Big Data analytics in view, intelligent models can process basic information derived from large sums of data to detect patterns and future predictions. Access to real-time actionable insights gives a competitive advantage to banks, helps them make informed decisions, and elevates the consumer experience. Data mining and its analytics help banks develop market strategies to the best of their customers’ interests and develop relevant solutions.
APIs
APIs (Application Programming Interface) enable new apps or implementation of new features and services to the existing apps. An increasing number of credit unions, payment processors, traditional banks, and fintech companies are now realizing the potential benefits of API banking. Many top banks have already launched their API services, and many more are planning to do so.
By opening their APIs, banks can connect other APIs in the market to extend their service offerings by integrating native fintech solutions in a plug-and-play manner. Banks can expect open banking APIs to offer them the opportunity to improve, inform, and advance the value of their analytics and data securely. Adopting open banking APIs adds to the bank's appeal and encourages its customers to innovatively engage with their financial data. This helps further customer engagement and improve customer satisfaction.
Since the pandemic, we have seen a series of trends emerging in the banking sector. But, creating a recession-proof and efficient banking business model, finding new ways to automate tedious tasks, upgrading the technology systems, and finding ways to be profitable top the list. Another important and upcoming trend in the offing is banking-fintech collaborations. Researchers believe that both players master and lack in few areas, and eventually, the association will lead to life-changing and innovative solutions in the coming years and will dictate how we bank or manage finances.
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