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Banking Trends That Are Going to Define 2018
CloudCherry | Featured | January 4, 2018
The retail banking industry has been dealing with massive upheaval for a while now, and things will continue in the same vein come 2018. Technological advancements continue to drive the disruption of the industry. However, FinTechs will also keep the pressure up on the industry due to their agility and constant innovation. Furthermore, consumers are beginning to trust these firms more and more, often to the detriment of traditional banks.
Here are some of the trends that will define 2018 for the banking industry.
The Open Banking Standard will allow the sharing of banking information via secure and open APIs. The goal is for customers to have greater control over their money. Thus, the standard will allow third parties to develop tools and services customers can use to manage their wealth more efficiently.
For example, many small and mid-sized companies use software for their bookkeeping but have to input their transaction information by hand. An API can be integrated with their software that would automate this process and ensure that these businesses could access their bank information in real-time, ensuring they have the most accurate data possible.
This endeavor will also ensure that customers can get the best possible deals on their loans as independent lenders would be able to access their historical financial data to work out the level of risk.
The Open Banking Standard will offer a wide range of benefits to forward-thinking banks. They will have the opportunity to create innovative environments that will result in much better customer experiences. It will also put them in a better position to stand up against massive FinTech firms. It will also offer excellent opportunities for mutually beneficial partnerships.
It won’t be long before most of the things we use every day, from cars to appliances, will be equipped with voice technology. MasterCard and Samsung have partnered to incorporate voice payments into their smart refrigerators, as have Amazon and LG. Thus, people will now be able to order their groceries and pay for them just with their voice. Car manufacturers have taken a similar approach.
For example, Daimler Financial Services recently purchased PayCash as part of their overarching plan to develop Mercedes Pay, an e-wallet. The goal is to use said electronic wallet to make car related payments, including for ride and car sharing. Of course, it will all be voice activated.
To keep up with the industry, banks will have to accelerate their plans to implement voice-enabled technologies, including payments. Regardless, voice tech will certainly change the way people do their banking in 2018.
Blockchain technology is mainly associated with Bitcoin and other cryptocurrencies. However, more and more banks are looking to this technology to improve the services they offer and the customer experience.
The main advantage of this technology is increased security, which will help make mobile payments safer. It will help reduce fraud, price gouging, and double spending. Blockchain will also help to build trust in the various forms of electronic payments that are constantly being developed thanks to things like multi-signature verification.
Another advantage is speed. Blockchain will make mobile payments practically instant, so the latency we currently associate with transactions will no longer be an issue. Blockchain technology will also help lower transaction costs, which will help banks offer under-served market segments more accessible services.
Banks will be working closer with FinTechs in the coming year to develop personalized offerings. In other words, customers will see the appearance of apps change depending on how they use it. The hope is that users will feel a closer connection with banks, but it will also help improve self-service, which has become highly important to consumers.
Even in our digital world, there are still hundreds of millions (if not more) people who don’t have access to online or mobile banking services. In fact, quite a few of these people don’t have access to banking services at all.
Thanks to the advancement of technology and the lower costs associated with it, more and more people will be joining the digital economy. This offers mainstream banks a unique opportunity to update their legacy offerings and provide outstanding services to previously under-served markets.
Furthermore, 2018 will see the expansion of digital coverage into corporate financial services as well. Thus far, the focus has been on retail services, however the new year will see a shift.
Banks can no longer rest on their laurels. Pretending to be ostriches when it comes to their legacy operating systems – some of which are a fair bit older than some of the organization’s employees – is no longer feasible.
While banks have certainly taken the digitization of their customer-facing services on board and have made changes at a relatively fast pace, the same cannot be said of the back office.
Employees still struggle with old systems, which not only affects their ability to deliver great service because the tech isn’t there to support them, but it also reduces employee engagement. The result is a terrible customer experience.
According to Forrester, quite a few financial services groups, including BBVA and Lloyds Banking Group, are investing heavily in digitizing the back-end. This not only ensures smoother customer-facing services and happier employees, it also improves the bank’s agility, thereby making them better able to respond quickly and effectively to the constantly changing marketplace and consumer.
A bank that doesn’t start working towards closing this gap now will find it almost prohibitively expensive to catch up to the competition at a later date.
In 2018 we are likely to see more partnerships between banks and large FinTechs. An increasing number of financial organizations are coming to understand that if they want to improve and reach new target markets, they will have to hook up with FinTechs.
However, most of these partnerships have thus far been with small firms. It’s likely that 2018 will see larger organizations, like Amazon and Facebook, partnering with banks to deliver better services to a wider market.
Consumers are valuing their personal time more and more, which means that they will be willing to spend less and less time on banking. It’s important to note that people don’t consider their finances less important. In fact, quite the opposite is true.
What they refuse to do is waste time. Thus, in 2018, we will see increasingly less in-person interaction between consumers and financial institutions.
However, the problem is that people are becoming used to improved services from retailers, much of which relies on contextual engagement. In other words, large retailers are better able to anticipate the needs of their customers than banks.
Of course, now that consumers are used to this level of service, it is what they will expect from their financial institutions. This means that the bank that is able to offer the best services and the personalization customers are expecting will pull ahead. Thus, banks will have to start imitating large online retailers, which will likely require new personnel and different training for those dealing with customers but also in their data analysis departments.
Artificial intelligence is the new buzzword and 2017 has definitely seen a lot of discussion around this technology. And the financial services industry has definitely been a quick adopter. Thus, more and more banks are turning to cognitive computing to assist them in improving business processes, but also to enable them to offer better customer experiences.
For example, Bank of America uses a bot to interact with customers via Facebook Messenger, while Capital One Financial has a chatbot providing customers with information on their accounts via text and helping them make payments with the credit cards via their phones.
Thanks to machine learning, banks will also be able to deliver improved offerings thanks to better insights into customer expectations, behavior and reactions. In other words, big data will be easier to process and will deliver real insights allowing banks to predict the needs of their customers and meet them more effectively.
Another area we will likely see AI taking a bigger role is the repetitive processes based on rules that large banks have to undergo constantly to compile the financial reports necessary for regulatory compliance. Robotic Process Automation is the perfect solution as it could save banks a lot in terms of compliance costs.
If any bank doesn’t get on board the train of change as soon as possible, they’ll end up being left behind in the dust. No matter what anyone thinks, the speed at which the world of financial services is changing will only increase. Consumers will expect more and better, while new technology will enable banks to meet these new expectations.
However, it will require banks to invest heavily in infrastructure, and moving away from their traditional and now outdated way of doing things is mandatory. Simply sticking their heads in the sand and hoping customers will be understanding that the bank is experiencing issues with their legacy operating system is not going to be a solution. In fact, it’s guaranteed to lead to an implosion.
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