Visibly or not, Covid-19 has disrupted almost every industry globally and transformed existing ways of doing business for enterprises. The banking industry is no exception to this shift. Banks are making a transformation by shifting to new business models and introducing fully digital banking services to keep up with the digital banking trends of 2021.
In this article, we’ll go over the trends you should expect from the banking industry and which trends you should consider incorporating into your digital products.
Digital Banking Trends: A Brief Overview
Did you know that more than half of adult Americans access their financial services via laptops and PCs? And why wouldn’t they choose digital mobility, control, and convenience over the time spent driving to a bank and waiting in line? That and the development of more secure technologies are good enough reasons to digitize banks — banks need automation, and customers need online services.
The answer to bank automation might lie in AI and cloud computing. These technologies can help transform digital banking, branchless banking, digital account opening facilities, and so on – digitizing the usual bank services and creating new ones.
For example, in the wake of the Covid-19 pandemic, many businesses will need steady cash flow to fight the aftermath. With the help of AI and digital transformation, banks can develop new products to simplify the process of acquiring funds to pay their employees' wages on time.
However, that doesn’t mean that customers can make do without the physical banking services, rather some of them still require the concrete structure of a bank, and others need a mix of physical and digital services. Introducing the concept of Phygital Services and Alternate Delivery Channels (ADCs), which can satisfy both types of customers. An example of the former is a specialized kiosk where customers can perform their routine tasks quickly and efficiently using digital services in a specific physical space.
All in all, clients and businesses are becoming more dependent on digital banking services, and the recent trends in digital banking reflect that. The general direction is to:
Provide financial ease and authority.
Facilitate using banking on the go and accepting payments from other parts of the world with just a click.
Reduce time and resources used for financial transactions.
Operate across the globe and increase their acceptability, resulting in more significant business growth.
The Top Trends in Digital Banking
The latest digital banking trends can help banks make improvements and serve their customers' needs successfully.
Let's discuss some of the current trends in banking in more detail.
1. Radical Transparency and Open Banking
According to Raconteur research, trust is the second most considered factor while looking for financial products. Keeping in focus the current trends in banking and growing competition, banks need to build trust with their customers. This utmost need for trust has created the concept of radical transparency — a tendency to create an open and honest environment for a customer. It is about being transparent about your business, communicating the truth, and accepting mistakes.
According to the latest digital banking trends, a bank will need to focus more on openness and transparency instead of just relying on the typical retail banking practices. For example, Monzo — a completely app-based online bank formed in the UK in 2015 — has more than five million users. Monzo has proven that with transparency, new financial institutions can quickly grab the market share of old-school financial institutions that have been present for centuries.
2. Data as a Predictable Personalization Tool
AI and machine learning (ML) encourage financial marketers to offer more personalization to consumers. In this digital era, personalization doesn't merely refer to fundamental data such as a customer's name. Instead, it includes knowing your customers' likes and dislikes and developing unique packages for each customer as per their requirements and desires.
According to Accenture, 74% of consumers say “living profiles” with more detailed personal preferences would be useful if they were used to curate personalized experiences, products, and offers. Customers want organizations to understand their preferences quickly, especially when they have given complete data already.
3. AI Providing More Targeted Services
The trends in digital banking for 2021 suggest using real-time AI-based bots to gather information about customer preferences. Financial marketers can leverage this data and advanced analytics to provide predictable personalization and delight their customers.
With the help of AI and ML a bank can:
Understand the needs of their customers more quickly in real time.
Identify and provide data-backed solutions for these problems.
Perform faster analyses to become more efficient and productive.
Develop key strategies for their business backed by useful data.
4. Cloud Computing
There has been a massive growth in the use of cloud computing in digital banking innovation trends. Cloud computing is a concept in which computing services such as software, data warehouses, and networking tools are readily available on the internet.
We can expect a massive shift towards cloud computing in the banking industry for 2021 because it provides banks with such benefits as:
In addition to that, cloud computing helps banks in eradicating massive data silos. Banks can mitigate the risk of losing data in case of any physical disaster or calamity. It also eliminates the need for physical servers, systems, and people to manage them.
5. Automation Using Time and Money Efficiently
There are still companies and banks out there that are doing heaps of manual data work. Unfortunately, upper management is busy checking manual work instead of formulating strategies.
Here’s how automation can change a bank’s internal processes:
Managers can plan and make decisions rather than manually writing and reading reports.
Not having to produce manual reports and analysis means they have more time to focus on other valuable tasks.
Automation can help reduce costs, increase efficiency, save time, and let the banks focus on innovation.
We can expect more banks to implement automated systems for day-to-day tasks such as back-office services and customer support. For example, any financial institution can get rid of data entry tasks by implementing Optical Character Recognition (OCR) systems. Banks are also introducing Robotic Process Automation (RPA) that can help implement error-free automation.
6. No Downtime – Reliability Is Key
With a rise in digital banking users, a bank cannot afford to have faulty server downtime. Even a few minutes can destroy the reputation and goodwill they created over decades. For example, State Bank of India’s system outage resulted in major revenue losses for the bank. More than 16,000 transactions take place on the platform every hour, so every minute counts.
These technical glitches have raised many concerns about the reputation and credibility of the institution. Thus, banks need to invest a considerable amount of time and money to ensure that their systems are always functioning error-free.
7. Security and Privacy
Banks and theft has a parallel relationship. With newer digital banking products and services, customers are now more exposed to the threat of losing money. Cybersecurity is now becoming a major customer demand for any digital bank.
According to a recent survey by CSIweb:
58% of people will stop using a financial institution's services if they have faced a privacy breach.
28% of the customers say that their bank accounts have been exposed to a cyber attack at least once in a lifetime.
To ensure security and privacy banks need to:
Invest in security systems to avoid the risks of cyberattacks.
Perform detailed and ongoing security audits of a bank’s system to mitigate its weaknesses and flaws.
Protect their customers from phishing through which anyone can steal money from customers' accounts.
Educate customers regarding cybersecurity and how customers can safeguard themselves from any such attacks.
8. Speed and Reactivity
Every bank needs to increase the speed of their bureaucratic working systems. Speed is something that can provide a competitive edge to any bank. Businesses now need to make decisions more quickly, requiring a trustworthy and quick banking partner to channel their funds more efficiently and rapidly.
According to a survey by Mckinsey, 59% of the banks lack the ability to have speedy systems due to a lack of cross-functional collaboration.
9. Usability and Intuitive Design
A user-friendly and intuitive graphics interface is now a major requirement of any service. Tailored super apps are more popular than limited functionality tools. Customers prefer graphs, infographics, and interactive modules instead of the typical Excel sheets. So we can expect newer features and functionality from banking apps in 2021.
Today’s world dictates that banks work critically on their apps and websites rather than their branches' interior designs.
10. Importance of Visualization as a Global Trend
The current generation is more appreciative of visualization in their day-to-day routine. User experience will now play a vital role in any financial institution's competitive edge. Digital banking needs to create visually appealing systems to retain their customers' attention and focus.
We can expect the introduction of more visualized, attractive, and trendy applications in future digital banking trends. Banks will now invest thoroughly in creating innovative applications, as customers need enhanced user experiences, along with functionality.
Expect a Thriving Digital Future for the Banking Industry
With many digital trends just around the corner or fully in development, it’s possible to spot some industry favorites. Here’s what you can expect in the years to come:
AI will keep on growing.
AI can help a bank create a more secure system for its customers. It can be beneficial in identifying customers' needs and can suggest solutions in real time.
A real-life example of how banks can create a competitive edge in the market by utilizing the power of AI is George — an AI-based digital banking system developed by Erste Bank. Its simple, unique, intelligent, and powerful features have managed to create a loyal customer base of more than 6 million users across Europe within a short time, and it’s gained a competitive advantage.
Cyber security will become more important.
With the growing user base of digital banking, the importance of cybersecurity will continue to rise. Banks will try their best to build new systems that can mitigate the risks of fraud and theft. Data privacy and protection are becoming a key concern for customers and regulatory authorities alike. Banks will need to be more proactive on the security of their systems.
Customer service – a compassionate presence.
Customer service and support will become essential with the increasing trend of branchless banking. As customers become more familiar with digital banking systems, they still need someone to answer their questions. This creates the need for a virtual, 24/7,, quick, and effective customer service system.
Thankfully, AI-enabled chatbots can provide 24/7, customized service to customers in real time. AI-enabled chatbots can increase efficiency by 33% because they can solve the customer’s questions almost immediately.
To sum up, with the continuous and radical changes in technology, banks are also transforming themselves by taking advantage of technology. Covid-19 has disrupted every industry globally and forced enterprises to change their existing way of doing business. People and businesses are relying more on digital banking in their daily activities.
There are major banking industry trends that we can expect to reshape the banking landscape. Banks will start using advanced technologies such as AI, cloud computing, and machine learning to gain a competitive edge over others. The policies and standards of banks will become much more open and customized. Banks will introduce tailored products to cater to the new needs of their customers. New age customer service and support is something banks will need to act on quickly. Visualization, privacy, and cybersecurity will gain much more importance in the upcoming months.
If you are considering implementing digital banking solutions or establishing an online bank, give us a call. At Geniusee, we facilitate companies by providing essential services to gain a competitive edge by utilizing these digital banking trends.