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 transforming digitally by shifting to new business models and introducing fully digital banking services to keep up with the trends of 2024.
In this article, we'll go over the latest digital banking trends you should expect from the financial services industry and which trends you should consider incorporating into your digital products, such as banking apps, etc.
In this article:
Digital Banking Trends A Brief Overview
Did you know that more than half of adult Americans access their banking 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 digitally active customers need online services and mobile banking.
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, FinTech companies can use banking software development 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 physical financial 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 and mobile payments in a specific physical space.
All in all, clients and businesses are becoming more dependent on digital banking services, and the recent digital trends in banking reflect that. The general direction of digital banking transformation is to:
- Provide financial services with ease and authority.
- Facilitate using mobile banking on the go and accepting real-time mobile payments from other parts of the world with just a click.
- Reduce time and resources used for financial transactions.
- Operate globally and increase their acceptability, resulting in more significant business growth.
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Traditional Banking vs. Digital Banking Comparison
E-banks banks are becoming increasingly popular. Also known as online banks, they are trying to innovate the financial industry by making it easier to access financial accounts through different digital channels (mobile phones, tablets, laptops).
Online banks give clients flexibility, accessibility, and control over their money, but most importantly, they are always available. Digital bank accounts provide the security of FDIC insurance, offer free verification, and are very flexible. They offer many services physical banks don't, including better savings account rates, higher interest rates on loans, and lower checking account fees. And they do all this without charging a monthly maintenance fee or requiring a minimum balance.
Internet banks offer better services than traditional banks because they use technology and automation, so everything is done online or through an app on your phone instead of having to deal with human interaction in most cases.
This means customers no longer have to queue at branches, no longer have to pay monthly fees, and no longer have to receive bad customer service from cashiers when they go to a physical bank. In addition, e-banks will save you money by offering great interest rates on savings accounts and low-interest loans compared to what traditional banks charge you for it.
Differences Between Digital Banks and Traditional Banks
Digital banks offer online banking, which means users can manage their finances in their commonly used digital channels, anytime. Moreover, they are always open. While physical banks have limited hours of operation or may be closed on certain holidays unless they are in malls that stay open until nightfall, online banks never close. Online banks also offer 24/7 customer experience support by phone and online chat.
Digital banks do not require monthly service fees or minimum balances from customers, which can save consumers money over time. They are secure, have an easy-to-use website, and do not require hidden fees. Online banks do not charge late fees and do not require a minimum balance, so this banks are a better fit for consumers who need to plan their money.
Assistance in Making a Financial Decision
Digital banks promote financial wellness by helping customers make responsible financial decisions for themselves and their families through features such as daily balance alerts that let you know when your account balance is getting low or online bill payment that makes managing your finances convenient. Virtual banks even provide graphical statements or alerts that indicate when a payment is credited to an account.
Online banks also offer higher interest rates on savings accounts, which is another advantage over conventional banks. They also offer lower interest rates on loans for people with good credit. This banks can help you save more money over time as well as earn interest, so it grows faster than a traditional bank.
Digital banks are keeping up with the latest technological advances that traditional banks simply cannot compete with when it comes to customer service and convenience. They do not have a physical bank location, which means digital banking is great for people who are constantly on the go or don't enjoy human contact.
Virtual banks are very secure, which ensures consumers that online banks use the most up-to-date encryption technologies to protect their information. Online banking customers can access their accounts from any computer, tablet, or phone, making it convenient for consumers.
Digital banks provide enhanced security compared to traditional offices. They are FDIC insured just like conventional banks, so depositors don't have to worry about the safety of their money. Online Banking also offers several different security measures, including two-factor authentication and alerts if activity on your account is suspicious. They provide enhanced access to funds and easy payment options that traditional banks do not provide.
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Ease of Transactions
Digital banking is even available through mobile apps, so you can check balances, transfer money between accounts, or pay bills wherever you are, as long as you have your phone. They also offer video teller services where customers can chat with their bank in real time as if they were talking to someone in person, except that the conversation is via a webcam.
Customer service plays a big role, at least from the customer's point of view. Online banks can offer better customer service than traditional banks because their customers can communicate using bank websites, mobile apps, and social media. Online banking provides more ways to contact support than legacy banks, which only provide one way to contact their customer service department.
Traditional banks can take three days or more to transfer money from one account to another; Internet banks have a much faster transfer system that transfers money instantly. Digital platform users can transfer to another account in just one day.
Online banks offer more ways to deposit and withdraw money than traditional banks. Their users also don't have to wait in long lines like traditional financial institutions.
Statistics on Digital Banking
Let's look at the most interesting statistics of online banks for 2022.
Nearly 65 percent of US citizens use online banking services in 2022 (Statista)
The number of consumers in the US who use digital banking increased from 196.8 million in 2021 to 203 million in 2022. (Statista)
About 27 percent of Americans use digital-only banks. (Insider Intelligence)
Almost 80 percent of US millennials used online banking in 2022 (Statista)
The number of users who choose digital banking has increased by 4% since 2018. (Statista)
Only 66 percent of consumers report being satisfied with traditional banks. (PYMNTS and Treasury Prime)
Americans have 5.3 bank accounts across financial institutions on average. (Bankrate)
Approximately 5.9 million American households (5%) don’t have bank accounts. (FDIC)
About 41% of consumers who use mobile banking also reported having fewer concerns about their finances. (Citigroup)
The Top Digital Banking Trends 2024
The latest trends in the banking industry can help many 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's research, trust is the second most considered factor when 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 (open banking) — 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. Customers expect this.
According to the latest trends, a bank will need to focus more on openness and transparency instead of just relying on 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 organizations can quickly grab the market share of old-school financial institutions that have been present for centuries.
2. Data as a predictable personalization tool
Big data, Artificial Intelligence (AI), and machine learning (ML) encourage financial marketers to offer more personalization to banking 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 of banking products and services for each customer as per their requirements and desires. Each digital banks' customer can get personalized financial trends.
According to Accenture, 74% of consumers say ''living profiles'' with more detailed personal preferences would be useful if they were used to curate personalized digital banking experiences, products, offers, and banking solutions. Customers want organizations to understand their preferences quickly, especially when they have given complete data already. Personalized marketing for the best customer journey experience is the key. Traditional banks haven't spoiled customers with such approaches, and now is the perfect time for this.
3. AI providing more targeted services
The trends in the digital banking landscape for 2022 suggest using real-time AI-based bots to gather information about customer preferences. Financial marketers can leverage customer data and advanced analytics to provide predictable personalization and delight their customers.
With the help of artificial intelligence 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 valuable customer 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 digital networking tools are readily available on the Internet.
We can expect a massive shift towards cloud computing in the finance sector in 2022 because it provides banks with such benefits as:
- Cost efficiency
- Global scalability
- Increased productivity
- Adequate security
Financial institutions can mitigate the risk of losing data in case of any physical disaster or calamity. In addition to that, cloud computing helps banks eradicate massive data silos. It also eliminates the need for physical servers, systems, and people to manage them.
5. Automation using time and money efficiently
There are still FinTech startups 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 business 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 and digital solutions can help reduce costs, increase efficiency, save time, and let banks focus on innovation.
We can expect more traditional banking institutions 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. That shapes a new image of the finance industry.
6. No downtime — reliability is key
With the rise of 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, the State Bank of India's system outage resulted in major revenue losses for the bank. More than 16,000 financial 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 considerable time and money to ensure that their systems are always functioning error-free.
7. Security and privacy
Banks and theft have a parallel relationship. With newer online banking products and services, customers are now more exposed to the threat of losing money. Cybersecurity is now becoming a major consumer 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 bank customers say that their bank accounts have been exposed to cyber-attacks 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 about cybersecurity and how they can safeguard themselves from any such attacks.
8. Speed and reactivity
Every bank needs to increase the speed of its 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
User-friendly and intuitive application programming interfaces are now a vital service requirement. Tailored mobile banking 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 mobile banking apps in 2021.
Today's world dictates that banks work critically on their mobile 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. Online 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 mobile apps in future banking trends. Banks will now invest thoroughly in creating innovative mobile banking apps, as customers need enhanced user experiences along with functionality.
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11. Cryptocurrency and blockchain
Cryptocurrency and Blockchain technology will continue to dominate the landscape of digital banking in 2024. As of June 2023, the global cryptocurrency market boasts an impressive tally of 8,832 active digital currencies. According to the Economic Times, the adoption of blockchain technology within the financial sector has the potential to yield annual savings of up to $12 billion for financial institutions.
As the adoption of cryptocurrencies like Bitcoin and Ethereum accelerates, financial institutions are exploring ways to integrate these digital assets into their services. Blockchain, the underlying technology of cryptocurrencies, is being leveraged for its unparalleled security and transparency features, enhancing data protection and reducing fraud.
Cross-border transactions have become more efficient and cost-effective through cryptocurrencies and blockchain, reducing the need for traditional intermediaries. Central bank digital currencies (CBDCs) are also gaining prominence, offering governments and financial institutions greater control over monetary policy and financial stability.
Decentralized finance (DeFi) platforms, which rely heavily on blockchain, are redefining lending, borrowing, and investment in the digital banking sphere. Meanwhile, Non-Fungible Tokens (NFTs), often built on blockchain technology, are revolutionizing the concept of ownership and enabling unique digital asset trading.
Blockchain's smart contract capabilities are automating various banking processes, streamlining loan origination, and simplifying compliance procedures. As trends evolve, the integration of cryptocurrency and blockchain is poised to redefine financial services, offering new levels of efficiency, transparency, and accessibility to users around the world.
Modern banks are like grocery stores: a customer can come here and choose a product of his choice – a loan, an installment plan, a debit card, or a share in a mutual fund. For a long time, businesses teamed up with banks for mutual benefit – for example, in household appliance stores there were bank stands where you could make a purchase on credit. Today, large companies and fintech startups want to offer banking products directly to users. And this became possible thanks to the emergence of the Banking-as-a-Service (BaaS) concept.
In 2022, the BaaS market size was estimated at $390 billion, and by 2027 it is projected to grow to $1.56 trillion. European business leaders believe BaaS-based services will become mainstream within the next five years. The engine of this process will be the current crisis: the cost of living is rising, and saving at least a few percent on acquiring means providing customers with more competitive prices and getting more sales. Not to mention the enhanced customer experience & customer engagement, which provides a competitive edge over our rivals.
Expect a Thriving Digital Future of Banking Industry
With many digital banking technology 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.
Artificial intelligence can help banks to create a more secure system for its customers. It can be beneficial in identifying customers' needs and can suggest personalized digital 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 to mitigate the risks of fraud and theft. Data privacy and protection are becoming key concerns for customers and regulatory authorities alike. Banks will need to be more proactive in the security of their systems.
- Customer service – a compassionate presence.
Customer service and support will become essential with the increasing trend of branchless mobile banking. As customers become more familiar with digital banking tools, 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 customers with 24/7, customized banking services in real time. AI-enabled chatbots can increase efficiency by 33% because they can solve the customer's questions almost immediately and via a single mobile app.
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To sum up, with the continuous and radical changes in digital technology, banks are also transforming themselves by taking advantage of new technologies. 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 basic banking 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 are 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 trends.