Like other major industries, 21st-century banking has been dramatically transformed by technology, big data and analytics, and innovation. For an industry that is intrinsically unsteady and cyclical in nature, this technology-driven change is the one constant, and most experts agree that industry-shaking shifts are unlikely to disappear in the immediate future. In fact, 2020 and beyond will bring even greater changes, as the digital revolution, the need for greater compliance and regulation, mounting competition from non-traditional avenues, and an ever-evolving consumer base force banks to fundamentally alter traditional banking and the ways they do business to meet customer expectations. Here are 5 of the biggest trends that banks must embrace to stay competitive in the coming decades:
- Digitization across the entire organization
Traditionally, the banking industry digitized their front-end operations, with the back and middle offices of a financial institution remaining nothing more than an afterthought. But this approach carries significant drawbacks, and banks must go beyond window dressing and the appearance of outward efficiency to address how they operate from the inside-out. Many back-end processes for traditional banking are still paper-based and manual in nature. They are firmly entrenched in legacy systems and technology, powering processes that are slow, time-consuming, unadaptable to innovations, and incapable of providing the seamless experience that customers demand. While not being able to meet customer expectations, these legacy systems are also costly to maintain, absorbing up to 75% of the IT budget, according to a study conducted by Science Direct. Banks must make a concerted effort to clean up inefficient back and middle-office protocols given the large impact they can have on the customer experience and ultimately, the bottom-line.
- An artificially intelligent Center of Excellence (CoE)
Entering this next decade, a bank faces a myriad of complex challenges. Digitally-empowered consumers are choice-driven and tech-savvy, even those consumers within the banking industry. Their loyalty can no longer be taken for granted. At the same time, calls for greater regulation and transparency are increasing, placing a greater burden on the financial services industry as a whole. And non-traditional financial operators are emerging, creating more competition and making the previous two challenges even more acute. Therefore, the need of the hour is to create operating frameworks that provide exhaustive capabilities in the form of real-time business intelligence and innovative technologies. That way, banks can keep up with a highly disruptive digital environment. Combined with the need for regulatory compliance, these factors require the creation of an Artificial Intelligence (AI) CoE. An AI-enabled CoE takes a financial services organization’s strategy one step further by providing increased agility at a fraction of the cost. It does so with minimal disruption while facilitating management’s ability to focus on potential opportunities, make decisions based on real-time intelligence, and enhance speed to market.
- The adoption of open banking
The current global marketplace is progressing incrementally toward a shared economy model, with open banking one of its more organic outcomes. The key concerns continue to be consumer data protection and privacy and regulatory frameworks thereof, risk mitigation and fraud prevention, standardization of the API process, and the maintaining of a mutually beneficial relationship between banks and third-party providers (TPPs). With consumers becoming increasingly choice-driven and the need for product differentiation and innovation omnipresent, banks can no longer afford to stay stagnant. Open banking is a growing trend, one that shows no signs of abating any time soon.
- Leveraging the data explosion powered by 5G, IoT, and Cloud technologies
5G, IoT (Internet of Things) and cloud technologies allow banks to use and leverage data in exciting, innovative ways. 5G offers high-speed, real-time data transmission, which, together with IoT within a Cloud infrastructure, has the potential for multiple applications within the context of banking services. For example, these cutting-edge technologies enable remote account management from virtually any digital touchpoint, smarter management of collaterals, automated payment through things, and seamless onboarding of customers and their know your customer (KYC) information.
- The leadership of workforce transformation
While people will continue to be the dominant force behind the bank’s core operational activities, the next decade is set to see a larger integration of digitization in the way employees are hired, managed, and ultimately, perform. Systems will be deployed to improve efficiency, thus elimina ting the need for employees to deal with low-level repetitive tasks and shifting their focus to people-oriented assignments. The onus will be on banks to lead workforce transformations that blend people, processes, and emerging technology in a seamless fashion with the goal of fulfilling and aligning more squarely with organizational objectives. Solid investments in this area can help create a performance-oriented culture and provide banks with a formidable competitive advantage moving forward.
With the ever-growing tech company industry and capabilities, traditional banking is not immune to the changes of our world. The future of banking technology 2020 is a much different landscape than what we saw a few years, or even a few months ago. Online banking and mobile banking usage rise as the big data and analytics usage to manage actions these customers take rise as well. Let Sutherland help you stay current and competitive with the latest in banking.