Banks and other financial institutions should now have the means to explore and make the switch to the new digital age, while still being able to comply with regulatory demands and security threats. On this page, you’ll discover the key trends and technologies in digital banking. What does the future of digital banking look like?
To provide customers with excellence in experience and to cope with regulation, existing investments, and cost structure, a full digitization switch is key. Banks need to take digitization as their leading strategy, which is why it is still a key trend in digital banking.
Undergoing a digitization process in banking does not simply mean to automate an existing process: banks must reinvent the entire business process with updated goals, such as:
Digitization in banking is more than a technology-based change. It also has an impact on the business side to meet the reinvented processes, market, and regulatory needs. The existing knowledge has to be adapted and immersed in technology standards without being lost. Also, on the technical part, data models, reports, and interfaces should be adjusted and rebuilt to enable better decision making.
The change from paper and manual processes to automatic processes combined with the ability to collect data to understand customers better, cost drivers and risks is a business enabler for the years to come. The benefits of digitization in banking are enormous and a definite requirement to keep a place in a highly competitive and evolving market.
Banks should invest heavily in processes and methods that derive value and insights from their data to deliver true customer experience. This is a huge task for some banks as many have built their core operations on fragmented systems aligned to products or they rely on legacy core systems.
This fragmented systems paradigm has created a situation where customer data is distributed across multiple platforms that don’t directly support new technologies, such as open APIs, cloud computing or artificial intelligence.
As a result, banks should develop strategies to build an Enterprise Data Architecture which rationalizes and cleans their fragmented data stores to switch to a business model based on service offerings. This allows banks to undertake a full digitization, target growth in select markets and invest in technologies that enhance customer experience and simplifies operations.
Today’s banking requires banking services to be agile, adaptive and scalable. To ensure this, the use of cognitive computing systems will increase. These systems can learn real-time as data and information changes and requirements evolve. They can easily interact with other devices, data sources and users to adapt.
Unlike legacy systems that were modeled under preconfigured calculations and rules, cognitive banking systems are dynamic and learn from the information that is available to them. Cognitive systems are helping banks to be agiler, so that they can manage the ever-changing demands of customers, security, and regulation.
Cognitive banking has several benefits:
Collaboration between banks and fintechs becomes increasingly important for banks to retain a competitive place in the market. Banks who’ve already embraced this have improved customer experience while reducing operational costs.
We will see an increase of banks who incorporate partner fintechs or their pre-existing outsourced shared services into the direct management sphere via the creation of challenges projects.
Collaboration between banks and fintechs will focus on the following areas:
In 2018, GDPR and PSD2 — and with them, major changes in processes, data management, and customer relations — will go live in the European Union. By resulting on a combination of technical and legal needs, GDPR and PSD2 will be dominant subjects regarding challenges for banks.
Taken that PSD2 is focused on driving competition between the payment providers by opening up their APIs, allowing Third Party Providers. On the other hand, GDPR aims to strengthen and consolidate data protection for all individuals by giving them more control of personal data. Banks will have to be able to adopt both, coping with the promotion of data sharing coming from PSD2 and the management of data privacy forced by GDPR.
Since PSD2 promotes competition as it favors payments via non-bank financial service providers, banks face an additional challenge. They not only need to adapt to it but they also need to take into account new competitors.
Learn how to respond and what the best time is to start planning
The blockchain technology gains more and more ground in the banking industry. Not just because of the explosion of ICOs and cryptocurrency usage and trade, but also due to the increasing effort for developing blockchain standards. The promise of blockchain as a trustless, disintermediated technology will continue its influence in several areas of banking and fintech, including:
Zürich, Amsterdam, Hong Kong, Abu Dhabi, Berlin, Singapore and Silicon Valley are all examples of fintech hub ecosystems that continue to evolve rapidly around the globe. We expect to see the competition between these hubs increase.
Mainly because hubs will compete for investment by offering open and supportive regulation en legislation, better financial services infrastructures, access to prospective clients and especially access to funding (in many cases backed by governmental policies).
With the introduction of new regulation like PSD2 and new technology like blockchain, there’s going to change a lot around mobile payments. These are the topics to watch out for:
Cybersecurity will continue to play a major underlying role as digitalization, real-time processing, automated decision and other machine related functionalities still increase. The things we expect to see aren’t very different from what we have witnessed over the last years: