9 Core banking technology predictions for 2022

Updated On : February 2022

With the pandemic, the importance of deploying modern technology has become the need of the hour to elevate the digital customer experience, build new business models and transform to a customer-centric culture. Following are the predictions for the year ahead about how financial institutions will be leveraging new technology to transform the financial services market.

The Covid 19 pandemic has changed the way people live, the way they work, and the way they buy. Consumers needed to rethink new ways to access and use financial services. This has impacted banks and financial institutions driving them to identify new solutions to provide smooth and uninterrupted services.

In the year ahead and beyond, banks and other financial institutions will prepare themselves to be more agile, efficient, secure, and innovative by using modern technologies. New-age technologies are helping financial institutions achieve high efficiencies by introducing new products and services and improving customer experiences.

Here are 9 core banking technology predictions for 2022

  • Expansion of Open Banking APIs
    The dependency on digital payments and self-service banking during the pandemic brought forth the need for digital banks. It also proved how well institutions could bring technology and digital delivery together to meet consumer needs. Open banking has been a major driving factor in digital banking transformation, impacting technology investments, strategies, fintech partnerships, etc.
    Banks will further prepare for a shift in the way banking will be done in the future, by determining a suitable business model for their future business objectives. Institutions will assess the capabilities required for the model selected and build third-party partnerships to make the strategy successful.
    Open banking can help streamline and automate back-office processes, build a stronger innovation culture and provide relevant, timely, and personalized experiences to customers and save them time and money.
  • Embracing the Cloud
    Today 91% of financial institutions actively use cloud services but only 9% of mission-critical regulated banking workloads have shifted to a public cloud environment. A large number of financial institutions have yet to move core systems to the cloud because of complexity and concerns over security, risk, governance and control.
    In 2022, more banks will solve the need for capacity and speed by moving to the cloud to store data and support applied analytics. This will increase customer insights, improve efficiency, enhance innovation, agility, and reduce the risk of security or business continuity breaches. Cloud solutions can increase human productivity, provide insights to take care of front-office and back-office transformation.
    Financial institutions will replace outdated on-premise infrastructure and bring in flexible, scalable efficient solutions.
  • Increased Focus on Cybersecurity
    The pandemic introduced remote working and drove banking transformation initiatives. This significantly led to cyberthreats becoming more common with the use of mobile technologies and online data transmission. It has become crucial to protect customer information and critical infrastructure from cyber threats.
    One major trend will be the elimination of passwords with the introduction of authenticator apps, Windows Hello, and SSO solutions. There will be increasing use of biometrics to provide an additional layer of security.
  • Rise of Digital/Neo banks
    Banking traditionally had difficult barriers when it came to market entry. But with the relaxation of regulations in countries worldwide, neobanks have emerged, promising lower fees, convenient mobile banking and improved customer experience eliminating in-store banking. The 30+ billion-dollarNeobanking sector is projected to grow phenomenally.Neobanks are attracting customers, including the unbanked, with a combined purchasing power of $1.2 trillion. In the future, with more of the world’s population getting online, digital banking to set to move far ahead.
  • Real-time cross border payments
    In the US alone, approximately 40% of large organisations use real-time payments with the number set to rise. In other parts of the world, research shows approximately 50 real-time payment schemes are now up and running. There is a high demand for settling payment immediately as it brings in a competitive advantage for businesses, reducing the risk for payment failure and improving efficiency in cash flow greatly. As domestic schemes gain popularity, the coming year is set to facilitate real-time capabilities to extend to cross-border payments.
  • Artificial Intelligence & Machine Learning
    Machine learning applications have come to be widely used in banking as they help to process large amounts of data sets and reach valuable conclusions. Analysing patterns in real-time helps quick decisioning and brings in effectiveness and efficiency including time saving opportunities.
    Financial services applications today use AI/ML for various critical purposes such as fraud detection, lending approvals, risk monitoring, investment predictions, etc. With ML constantly evolving, 2022 will see banking leverage and benefit hugely from the power of AI/ML.
  • Emergence of Banking-as-a-Services
    Banking-as-a-Service (BaaS) platforms and services deliver financial services efficiently and cost effectively using open banking concepts. BaaS is an important factor for financial institutions on their digital transformation journey. To deliver new and innovative services, banks need to move towards a service-oriented approach. In 2022, a lot of legacy financial institutions will be using BaaS services to collaborate with FinTechs and bring inhouse innovative technology to enhance their offerings.
  • Intelligent Process Automation
    In the coming decades, about half of all work activities will be automated, thanks to next-level process automation and virtualization. Robots, automation, 3D-printing, will all generate around 79.4 zettabytes of data per year bringing in opportunities for more efficiencies and enhanced data which will lead to making better decisions.
    In 2022, process automation tools like robotic process automation (RPA) and digital process automation (DPA) are predicted to steadily grow with financial institutions realizing the benefits beyond improved efficiency. A digital-first back-office for banks also deliversan excellent digital customer experience.
  • From Embedded Banking to Embedded Finance
    Embedded banking provides an easy and seamless way to transact without leaving a non-financial company’s app. In 2022 financial institutions will be set to launch embedded financial services to retain customers and increase the overall value of the relationship. Leading financial institutions are working with financial firms to provide banking-as-a-service (BaaS) offerings.

Over the next year as new technologies come in and market mature, these core trends will help to create further innovation and facilitate the emergence of new business models in the finance industry. These are also the trends that will create opportunities for banks and FinTechs globally.

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