‘Technological innovation’ – these two words are so embedded in our day-to-day life that we have almost forgotten how we used to live without mobile phones or internet or even online banking. We take it as a joke that the banking services were limited to a brick and mortar building which we called ‘bank’ within a time-period of 9 a.m. to 4 p.m. There settlements would take multiple days to clear, the day-to-day transactions were cut-off mid-afternoon and there used to be batch processing.
With digital transformation, banking services are now available 24/7, and the transaction settlement is mostly done in real time. Mobile and online banking are dominating how a customer interacts with a bank, especially in Southeast Asia, where brick-and-mortar banking could never really take off. According to a research done by Deloitte, while 41% of the internet users in rest of the world are accustomed to online banking , in Thailand a whopping 71% of internet users use online banking.
Social, mobile, analytics, and cloud (SMAC) technologies drove a 29% transformational impact on banking according to a study done by Accenture. The SMAC technologies have moved beyond the adoption phase in the banking industry and are now a core technology running the sector.
Here are the top 3 trends out of the 7 which we think are going to drive digital transformation in banking:
The driving force behind open banking is PSD2, the EU directive designed to transform the banking and payment industry radically. For decades now, banks were aiming to be the only vertical offering financial services from top to bottom. With the introduction of open banking, the fintech startups and established institutions have found a way to enter the sector and build services ‘horizontally’. Apart from Europe, HongKong, Singapore, Australia, and Canada are all in the phase of fragmenting traditional retail assets as well as liabilities. In the UK, Yolt is transforming account aggregation whereas Clear Bank is eyeing the back office enablement. There are currently 62 registered third-party providers in the UK who are trying to take advantage of the fragmented value chain.
Know more about open banking and how it will push innovation here.
Bank of America is using a chatbot ‘Erica’ who passes advice to their customers about their expenditures. In the future, banks are likely to tell you that you are spending more money than required for utilities or in case you are burdened with high mortgage payments. Asset management institutions are highly relying on machine learning and artificial intelligence to make intelligent, real-time investment decisions for their investors as well as clients. Not only that, with the help of AI, banks are likely to recommend customized financial products, like auto loans, home loans, as well as interest rates, loan durations, etc. With the enhanced accessibility and intuitiveness added to the banking industry, customers are likely to benefit in more ways than thought.
While the entire banking industry couldn’t develop an affinity towards cryptocurrency, their love for blockchain didn’t remain hidden. Blockchain as an emerging technology is proving to be beneficial wherever digital payments, escrow services, loan processing is involved. When the world was introduced with the idea of stablecoins, banks couldn’t resist the temptation of adopting these digital tokens to secure and fasten the payment system. JP Morgan is the second bank which is going to introduce a dollar-backed JPM coin, the first being Signature Bank with Signet as the stablecoin. Goldman Sachs CEO also made a statement recently stating that the bank might issue a stablecoin similar to JPM Coin in the future.
We have just given you a glimpse of the top 3 trends; read our next blog to know about the rest four trends driving digital transformation in the banking industry.