Embracing the Future: How Technology Trends are Shaping the Banking Industry
In today’s dynamic financial landscape, the symbiotic relationship between technology and banking has paved the way for transformative shifts in customer interactions and services. As the traditional paradigm of banking evolves, a diverse array of trends is shaping the industry’s trajectory. From harnessing the power of conversational interfaces to open banking’s impact on customer experience, discover how AI, machine learning, cloud adoption, and microservices are revolutionizing the industry. By embracing these trends, banks can unlock growth and elevate customer services for a dynamic and digital era.
Here are some of the trends:
Conversational Engagements with Customers:
Banks are increasingly seeking to engage with their customers through conversational interfaces, going beyond voice commands. Predictive modeling techniques are being used to initiate touchpoints with customers, creating personalized interactions that enhance customer experience. According to a study by Juniper Research, the adoption of chatbots and virtual assistants in the banking sector is expected to save banks $7.3 billion annually by 2023, showcasing the significant potential of this technology. A key to the growth and acceptance of these conversational engagements will be the ability to engage with the right information, the right context, and the right “language”; very similar to how we, as people, communicate with each other.
Digital Corporate Banking Improvements:
The demand for digital corporate banking improvements is rising, aiming to make business banking experiences akin to retail banking. Small and medium-sized businesses (SMB/SME) are particularly seeking advanced digital user experience (UX) enhancements. A report by Accenture highlights that 72% of businesses expect their banks to provide the same level of customer experience as leading consumer brands, indicating the growing need for better digital services in the corporate banking sector. In many countries, this sector also includes the rapid growth of inclusion of micro-SMEs into the banking system. These categories of business customers need more of a retail type of experience than the traditional “business” experience.
Open Banking and API Integration:
The demand for open banking is driving banks to provide and consume Application Programming Interfaces (APIs) that can be used across multiple customer touchpoint systems and external partner systems. Asia, in particular, has witnessed a growing trend where customers perform banking services at non-traditional outlets like 7-Eleven stores. According to a survey by Accenture, 86% of banks believe that adopting open banking will help them improve customer experience and create new revenue streams.
Banking-as-a-Service:
Core banking providers are increasingly offering “banking as a service” solutions, particularly targeting Tier 2, 3, and 4 banks. This allows banks to modernize their host systems with lower initial costs and shift to an operational expenditure (OPEX) model where they pay for the services they use. According to a study by McKinsey, 85% of banks are expected to collaborate with banking as a service provider by 2025, indicating a significant shift towards this approach.
AI and Machine Learning in Banking:
Artificial Intelligence (AI) and Machine Learning (ML) models are rapidly gaining traction in the banking industry. They are being used for various purposes, such as digital electronic Know Your Customer (eKYC) for face matching and predicting customer behavior. According to a report by Deloitte, 77% of financial institutions are planning to increase their spending on AI and ML technologies, showcasing the widespread adoption of these technologies. As mentioned in the earlier note about conversational engagement, AI and Machine Learning will be key technologies to support conversational engagement.
Banking on the Cloud and Microservices:
Cloud adoption and microservices architecture continue to be focal points for banks. As regulatory requirements evolve to allow banks to leverage cloud services securely, they are moving away from traditional infrastructure investment. According to a study by IDC, cloud spending in the banking sector is projected to reach $53.5 billion by 2024. Microservices allow banks to respond quickly to increased activity in targeted functional areas, making them a preferred choice for modern banking systems. Equally as important to scale on demand is that a micro-services-based architecture also gives the bank deployment choices that could optimize a blend of cloud capabilities and on-premise infrastructure so bank’s can optimize their infrastructure spend.
