Digital transformation has swept across the banking industry. As our industry adapts to the new digital demands of consumers, key trends have begun to emerge.
The banking industry is undergoing a technological transformation in the year 2021. Trends to expect this year include cloud migrations, the use of DevOps and omnichannel strategies, and greater use of AI. Each of these trends has transformative capabilities that are likely to shift the banking landscape.
Technological evolutions are reshaping how the world does business. For the financial industry, this means an even greater emphasis on FinTech and innovative solutions. In this article, I will outline what I believe to be the top 4 banking trends emerging in 2021.
Plus, I’ll cover how banks can properly prepare for and adapt to the digital age.
Technological Disruptions in the Banking Industry
No matter what the industry, new technologies can be highly disruptive.
Technology can be a double-sided sword. On one side, tech brings innovation and advancement to the financial industry. On the other, implementing digital solutions and overcoming the technological learning curve can be difficult.
For banking, the switch to digital services has been a drawn-out one. Banks have slowly been introducing new technologies to their business models over many years.
This is largely to do with the sensitive nature of finance. While a customer may adjust quickly to automatic checkout lines at the supermarket, accepting digital changes to banking processes takes more time.
There are three core issues for banks to be mindful of when adopting new technologies:
Customer Experience: No matter what activity a customer is performing, the process should be simple and straightforward. Additionally, financial tasks on the customer’s end should be available through all business channels.
Operational Costs: Using advanced technologies can be costly. Finding the right service providers to help keep costs within budget is key.
Digital Trust: Customers will inherently have questions and concerns about digital financial services. Ensuring the proper answers are given within appropriate response times is essential.
As technology continues to infiltrate finance, new trends will emerge to help tackle these three core issues.
The Rise of FinTech
Technologies used within finance are so widespread they form their own mini-industry – FinTech.
FinTech is a term used to describe the union of finance and technology. Professionals in the FinTech realm design, develop, and implement innovative banking solutions.
An August 2020 survey uncovered the top 3 priorities of financial service organizations worldwide:
Improving digital experiences for clients
Enhancing data analytics capabilities
Reducing operational costs
Each of these priorities are problems that can be directly addressed through FinTech solutions.
A core principle of most FinTech companies is to help financial institutions provide more customer-centric services. FinTech often leverages the best organizational practices and the most innovative technologies to achieve greater results.
When it comes to trends facing the banking industry in 2021, FinTech will likely have solutions for each.
Banking Trends Emerging from 2020
Leading up to March of 2020, adoption of FinTech solutions and technologies was slowly growing.
However, the first lockdown of the Covid-19 pandemic shook markets around the world. The year 2020 almost instantaneously became the year for technological advancements.
Though the pandemic is now slowing down significantly, many of the technological changes will persist. Major trends that emerged in 2020 in all industries include:
Remote Work Environments: Working from home became a widespread reality for many during the pandemic. For many businesses, remote work environments proved to be just as productive – if not more so – than traditional ones.
Heightened Financial Awareness: The pandemic caused many people financial stress and worry. This has resulted in customers being more interested and involved in their personal finance. Interactive and responsive digital banking systems thus rose even further in popularity.
Digital Misinformation: Being stuck at home resulted in more people than ever becoming more familiar with the internet. As a result, misinformation could more easily spread digitally on a wide variety of topics. To address this, banks need to establish themselves as digital authorities and provide the proper educational resources.
Keeping the trends of 2020 in mind is crucial for finding greater success in 2021. Banks can both learn from the mistakes of 2020 and compose innovative solutions for the present year.
The Top 4 Banking Trends in 2021
FinTech has come to the forefront of the financial industry. This puts the attention on digital banking more than ever.
The following four trends will be key players in the banking industry over the next year – and likely the next decade!
Centralized Location: All financial information is securely stored in one central location. The cloud exists in a digital space rather than a physical one. This allows authorized personnel to gain access anytime from anywhere, which enables remote work environments and greater efficiency.
Scalability: Using onsite equipment to protect sensitive financial information can be costly. This is especially true when business and demand scale up. With the cloud, your platform scales automatically and can handle heavy workloads.
24/7 Accessibility: Due to being in a central and virtual space, the cloud offers 24/7 access. For employees, this means more freedom in their work environments. For customers, this means accessing accounts and viewing financial information whenever desired.
Additionally, cloud migrations allow banks to lower operational costs and working from the cloud enables employees to work remotely. As a result, the costs to run an office space can be reduced significantly.
Embracing financial technologies can be difficult for traditional banks. This is due to digital tools requiring regular and time consuming software development.
A DevOps strategy comes from both philosophical and technical practices. DevOps prioritizes speed of delivery without sacrificing quality. This method requires continuous development and testing.
DevOps offers a myriad of benefits for banks, including:
Continuous Deliveries: A key objective of DevOps is to provide continuous software deliveries. This also includes continuous development and updating.
Automation: DevOps enables the automation of many technical aspects and maintenance tasks. This helps to boost overall productivity levels.
Increased Collaboration: DevOps utilizes professionals in many departments, encouraging collaborative behavior.
Time for Innovation: DevOps helps free up more of your team’s time. This free time allows your team to spend more time being innovative. As a result, your team will have more time to commit to major projects and new innovations.
The banking industry only continues to move towards total digitization. Having a strong DevOps team will be key to developing successful software in the future.
3. Artificial Intelligence
Artificial intelligence, or AI, is a very useful technology for the banking industry.
Popular use cases for AI in banking include:
Customer Identification and Authorization: AI helps to automate authorization tasks. These can include entering passcodes or using biometric security measures.
Front Office Banking: AI helps create responsive and conversational interfaces. This often comes in the form of chatbots and can serve as an important touchpoint for customers. Chatbots often help customers navigate a site and acquire services or products.
Fraud and Risk Management: AI offers analytical and predictive capabilities along with automation. These work together to prevent fraud and assess risk more efficiently.
A recent eMarketer report found that 56 percent of financial companies implemented AI for risk management. This makes risk management the most common use for AI in the financial industry.
Other real-life applications of AI include:
Generation of new revenue potential
4. Omnichannel Strategy
As banks increase their digital presence, they must keep accessibility as a priority.
Omnichannel is offering the same services and products through all business channels. This can include online, in-person, or over-the-phone business.
An omnichannel approach helps provide customers with a personalized experience. This not only strengthens customer loyalty but also helps to provide extra value.
The importance of mobile accessibility is more crucial than ever. Customers expect access to most services from the convenience of their smartphones. This means that now is the time for banks to embrace digital platforms that allow for mobile service.
Banks struggling to unify their departments and provide a strong digital voice will have difficulty finding success amongst younger generations. Luckily, the rise of omnichannel strategies will provide great assistance in this unification.
How Banks Can Adapt to Digital Trends
Knowing about upcoming banking trends is one thing. Taking the right actions to prepare your financial institution for the future is another.
When looking to the future of banking, financial professionals must consider how they will adapt to new digital needs of customers.
To begin a digital transformation, financial institutions must take inventory of what digital strategies they already have in place. From there, they can begin to seek out the talent they need to achieve their goals.
Finding Reliable Partners: More than likely, banks will need to team up with outside talent. This can include software developers, web designers, programmers, and many more. Seek out reliable partners with solid portfolios and proven track records.
Utilizing Managed Services: Many FinTech companies – including CPQi – offer managed services and other digital transformation services. Using a managed services provider can help banks to ensure all their digital needs are met.
Embracing Collaboration: Financial technologies offer great opportunities for creativity and collaboration. Embracing and implementing digital trends will help grow teams in the right way.
Throughout 2021 and the coming years, technology will continue to be a disruptive presence in the financial industry.
As banks develop a deeper understanding of technologies, it is imperative to pay close attention to digital trends.
Remember, the four major banking trends of 2021 are:
The future of banking is in tech. Embracing upcoming trends is essential for financial institutions to find success in 2021.
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