Digital Trends Transforming Banking in 2019 and Beyond

Sean Connell, Chief Technology Officer

Heavily-regulated industries like banking are typically slow to embrace digital transformation. It’s not for lack of interest. Rather, challenges with compliance, data protection, and legacy infrastructure make change difficult.

But make no mistake—the digital evolution of the banking industry is well underway. Already, mobile banking apps have become the third most used by consumers, with 91% saying they prefer the apps over physical branches. According to Alice Milligan, Chief Digital Client Experience Officer for Citi:

“Mobile banking use is skyrocketing as more consumers experience the benefits of greater convenience, speed and financial insights driven by new app features and upgrades. Over the past year we’ve witnessed this increase in engagement first-hand, with mobile use in North America increasing by almost 25%.”

Mobile banking has already gone mainstream, so in 2019 it’s imperative that you continue to innovate and differentiate those experiences.

Mobile isn’t the only digital trend driving the future of banking, though. To maintain competitive advantages, you need to embrace the newest trends that will shape your industry in 2019 and the years to come.

1. Artificial Intelligence

In the earliest days of digital banking, differentiating your experience could have been as simple as providing easy access to credit scores. Having a mobile app at all might have impressed customers.

These days are long gone. Now that digital banking has gone mainstream, you need to find new ways to stand out—and artificial intelligence can help you do just that. Many banks are already taking advantage of early AI use cases like chatbots. But as the technology matures and becomes easier to deploy in your IT environment, you’ll be able to use artificial intelligence for all kinds of functions, including:

  • Customer Service Automation: Studies show that AI could cut 1.2 million banking jobs, saving the industry $450 billion by 2030. Many of these automated jobs will exist in customer service as natural language processing technology becomes more sophisticated. But AI isn’t just about job displacement. It can be used to enhance human customer service reps by automating call routing and presenting the right information at the right time for interactions.
  • Personalization: Artificial intelligence will help you put your abundance of customer data to work. Once you’ve cleaned and structured the data within your organization, AI and machine learning can provide real-time insights that help you deliver personalized pricing packages, product offerings, and experiences at every stage of the buyer’s journey.
  • Fraud Prevention: The volume of transactions is too much for any internal team to analyze manually. The global cost of cybercrime is already $600 billion and digital banking will only increase that figure. However, AI can help you analyze massive volumes of transactional data and recognize patterns that indicate fraudulent activity. We may never be able to eradicate cybercrime, but Mastercard has already reduced “false declines” by 80% with AI solutions.

2. Blockchain

Blockchain technology gave the financial sector a major scare as Bitcoin experienced extreme highs and extreme lows in the span of just a few months. And while that has led to skepticism about the technology, you shouldn’t let the Bitcoin story keep you from capitalizing on this powerful trend.

Decentralization through blockchain technology can help cut out middlemen in the banking industry, streamlining operations and reducing costs. However, we’re only in the infancy of blockchain technology.

For now, the use cases seem endless, which is why many banks are slow to embrace it. But if you start to plan for blockchain now, you can take advantage of decentralization to facilitate faster payments, create smart contracts that automate manual compliance and claims processes, increase security in loan processing to lower interest rates, and more.

For now, the narrative around blockchain in banking is whether traditional institutions will embrace it or be replaced by it. If you want to maintain competitive advantages, don’t let blockchain pass you by. Now is the time to start planning.

3. Robotic Process Automation

For all the attention blockchain technology gets, robotic process automation (RPA) is growing just as quickly. In 2016, the market for RPA solutions was worth $250 million. But by 2021, analysts say the RPA industry will exceed $29 billion.

With RPA, you can automate many of the rules-based tasks that take resources away from your employees. Rather than wasting time on low-level processes, you can open up human resources for more valuable tasks.

In many ways, RPA solutions give you a bridge to the promises of artificial intelligence. When you use RPA to create a value chain of many operational steps, you’re taking advantage of intelligent automation—something that’s top of mind for just about every banking leader.

By taking advantage of no-code RPA solutions, you can quickly automate processes and lay the groundwork for a more agile banking business. In the coming years, the combination of RPA, machine learning, and artificial intelligence will help significantly reduce human error for many of your most tedious (though critical) tasks.

4. Open Banking APIs

While traditional banks and fintechs may seem at odds, the reality is that they’re better together. The incumbents bring a wealth of customer data and experience to the table while fintechs bring all of the latest innovative ideas. It may seem strange to partner with disruptive competitors, but open banking APIs are making it possible for both sides to share in the value.

Open APIs allow you to access fintech solutions without the backend development you might expect. Rather, it’s a plug-and-play scenario that can quickly deliver value to your customer experience.

But these open APIs aren’t just for connecting to potential competitors. They make it possible for all of your backend systems (legacy included) to connect with one another. As a result, even the simplest tasks like closing accounts or changing banks become much easier for your customers.

Embracing Digital Transformation as a Whole

The banking industry is fundamentally changing. It’s not enough to read articles at the beginning of each year about the upcoming trends you should look out for. Rather, you need to look at the entire landscape of digital trends and consider how they can come together to transform your business.

That means coming up with a strategy that will keep you ahead of digital transformation—not just in 2019, but in the years to come.

The digital trends mentioned here won’t completely change your business overnight. But you don’t want to be lulled into complacency by the slow crawl of transformation. Make the commitment in 2019 to change your approach to digital trends.

If you’re ready to embrace these banking industry trends (and others), contact us today and let us know how we can help with your strategic planning.