The dynamic market needs and advancement of technologies facilitating business operations have drastically transformed the banking industry. Regulatory pressure has always been the greatest challenge for the banking industry. The intense competition from financial technology companies and non-financial companies, boundless elevation of technologies, and skyrocketing expectations of the customers have propelled exceptional changes obligating banks to formulate new strategies. With major technology companies like Amazon, Google, Facebook, and many others enterprising into retail banking retail banking industry are leveraging open banking to deliver modernistic services in collaboration with third-parties leading to bolster API-led economy.
Adoption of chatbots and Distributed Ledger Technology (DLT) helps banks enhance overall efficiency while delivering improved user experience cost-effectively. Use of data science technologies such as data analytics, artificial intelligence (AI) and machine learning is contributing to improving processes and service delivery seamlessly.
This article proclaims the top eight trends for the current year in retail banking.
1. Digital Transformation is the master key
The digital transformation of the banking services is the most critical requirement of retail banking. As BigTechs and FinTechs penetrating with new age service delivery models, employing futuristic technologies like Artificial Intelligence, deep learning and data analytics has become the need of the hour for banks. Digital transformation contributes towards process automation, streamlining, delivering better customer experience, and accelerating overall performance. Digital technologies help banks understand customer behaviour better, cross-sell, strengthen customer relationship and anticipate frauds effectively.
A report on the digital transformation of retail banking in 2018 reflects that 90% of the financial service companies have already embraced digital transformation services and 30% of these activities have yielded significant results.
2. Swift adoption of Cloud
Digitisation of banking services, boundless use of smart devices and customers’ expectation of anytime anywhere accessibility has made the cloud adoption one of the eminent trends for 2019. Volumes of data generated every fraction of second worldwide through interconnected devices needs highly scalable storage involving huge investment and maintenance cost while restricting banks to serve only a specific size of customer base. Adopting cloud not only addresses the scalability and accessibility issues but also relieves banks to invest hugely in resources, storage and infrastructure with Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Software as a Subscription (SaaS) models. Banks can focus on their core operations with enhanced performance and optimise more opportunities with cloud adoption.
A report reflected that cloud adoption has helped at least 75% of bankers creating new revenue streams, deliver improved customer experience and expanding product and services portfolio.
3. Artificial Intelligence (AI) takes a front seat
AI enables banks to personalise customer experience based on the collected data and automating diverse services using pre-defined algorithms. All domain of banks including front office and back office can leverage AI enabled technologies such as chatbots to devise biometrics, authentication, anti-fraud processes, identifying risks, defining legal and compliance workflows, and credit underwriting’s.
A market prediction reflects that around 20% of the operating expenditure would be reduced with AI implementation in retail banking by 2030.
4. Voice assistants channelizing improved service delivery
Use of chatbots or voice assistants has taken the retail banking to the next level. Voice assistants help boosting customer interactions and are capable enough to engage customers by answering their queries rapidly with personalised assistance. Use of voice assistance helps to bolster customer relationship while assisting right customers with right services thereby improving the lead conversion rates generating more business opportunities.
A growth of 145% in the installation of smart speakers by the customers has been observed from 2017 to 2018. According to a prediction, by 2021 the adoption of voice assistants is projected to reach 1.83 billion at the CAGR of over 29%.
5. BigTechs- the potential threat to banking companies
Though big technological companies are not directly getting into banking functions, with the digitisation of economies companies like Amazon, Google, Apple, Tencent and Ant Financial are empowering SMEs to deliver services beyond their conventional offerings. The commoditisation of services involves advanced technology and data-driven approach. These BigTech firms are empowering extensive lending services to facilitate small and medium enterprises leverage hassle-free loan and payment offerings to boost their e-commerce businesses discouraging users to continue with retail banking as the distribution channel. BigTechs offer user-friendly, easy to use and access platform to allow transactions thereby rendering captivating customer experiences.
According to a recent report, only 45% of the online UK banks’ customers said that they are comfortable using the banks’ websites to perform all banking functions indicating that customers are choosing digital channels offered by BigTechs over conventional way of banking.
6. Open banking APIs gaining momentum
Open banking is the new game changer in retail banking. The advancement of technology and soaring adoption of digital channels by customers have made banks use open Application Programming Interfaces (APIs) to connect with third-party vendors. Collaborating with FinTechs, banks can seamlessly deliver enhanced customer experience by creating newer revenues streams and enhanced service offerings. Open banking calls for sharing crucial customer data such as account and transaction details with third-party providers raising threats along with enormous opportunities to create an ecosystem for delivering all-round banking and financial services. Data sharing and protection concerns are the most focused areas for the banking industry that can be addressed with standardisation.
According to recent research, 9% of people in only UK have adopted open banking services by the end of 2018 and the trend is projected to continue at a greater pace.
7. Distributed Ledger Technology sets the stage to success
Distributed ledger technology (DLT) is a system to record transactions carried out across various sites or countries concurrently without any centralised data storage or administrator. DLT helps banks cater to the most pinching concerns with more transparency, rapid processing, robust security, and unalterable transactions in real-time. DLT offers a dexterous architecture constituting cryptography and shared databases to allow accessibility of immutable digital ledger by multiple entities simultaneously. Distributed ledger technology offers utmost security to the customer data collected through various sources and helps banks in fraud detection and overcome privacy challenges making DLT one of the most hyped trend of the retail banking this and upcoming years.
8. Data security and compliance drive business modelling
The most crucial trend to watch out for 2019 is data security and compliance standards that would drive retail banking service modelling. Skyrocketing cyber threats and data hacking incidents have become the most serious concern for the banking industry during recent years. Banks strive to invest hugely in safeguarding security architectures and preventing crucial data from malicious hackers. Hiring skilled security professionals, standardising and following appropriate regulatory compliance has become the foremost concern for the banks over the past few years. GDPR enforced in May 2018 has also increased the responsibility of banks to implement sound security policies and procedures in protecting user data.
Retail banking is undergoing a radical transition from conventional to futuristic way to deliver service offerings. Dynamic customer requirements and interests are sometimes unpredictable. Considering all facts and figures, the digital transformation of retail banking must be anticipated with all other trending technology aspects. The mentioned trends are the observations made based on the collected data through various sources and may add to elevate overall retail banking services. Watching these trends and strategising functions based on the given trends may lead the entire retail banking to serve customers better and creating digitised economy holistically.