The Future of Banking – Exciting Times Ahead
Updated On : September 2020
In an increasingly fast changing world taken over by technology, new trends in finance are revolutionising the industry. We examine these changes which will have the customer at the heart in banking of the future. Here, we look at Forrester's view and others who have put forward their predictions about the next decade of retail banking.
Technology has become the biggest game changer, with smart devices and applications delivering banking experience and even ride sharing apps supplying loans. Going into the future, customer expectations will change, there will be emerging technologies and new business models; and banks need to prepare for banking in the next decade with new strategies.
It has become clear that to be successful, banks will need to leverage emerging technology, adopt evolving business models, and place their customers at the centre of every strategy.
In the last decade, we have been witnessing to banking apps on smartphones making it possible for people to manage their finances anytime, anywhere. In the next decade, newer technologies are set to bring in hyper-personalised services.
Let's take a quick look at some of the directions where the future of banking is headed.
- With digital ID profiles, customers will have more control of their personal data. While banks will aim to manage, develop and safeguard these digital IDs and access to them by third-party services outside financial services, like utilities and retailers. A research by the Boston Consulting Group shows that banks are already equipped to do this as 80% people trust banks to manage their data securely in comparison to 5% who trust consumer-technology businesses.
- With AI being hugely successful in mastering new data sources and analytical technologies, banks understand customers' needs better and also create new revenue streams. In the next decade, this could lead to banking becoming largely friction less for customers.
- Incorporating new technologies like augmented reality and voice activation in mobile-banking services will prove to be revolutionary with every information available from finance related to details about local services and taxes, easily on a phone banking app.
- A large part of the future of banking customer experience lies in the development of technologies that at present do not have much application in finance, like 5G. This could dramatically increase the volume and speed of data crunching and boost the creation of data-driven models in banking. Quantum computing, with its transition from theory to reality, can bring in major benefits in the future.
According to Forrester, by 2030, banks will be invisible, connected, insights-driven and purposeful.
- Invisible. Technology will be used by leading banks along with deep customer insight to provide financial services to customer when they need, while brand visibility may disappear. Distribution models are evolving to make use of marketplaces and technologies like open APIs and 5G to connect finance with homes, machinery, vehicles, and other devices. This becomes challenging for a lot of banks as their retail brands become increasingly invisible to the end consumer.
- Connected. The only way for banks to remain relevant, is to be present in the ecosystems and products that customers use. This is possible if banks accept partnerships and intermediation of their brand. They will put together constellations of value, which are interoperable with trusted environments that enable collaborators beyond banking to add value into frictionless, rich customer journeys. "Trusted advisor" status is what will differentiate banks from all other touchpoints that offer embedded financial services.
- Insights-driven. With the immense insight from data, banks will build a very valuable asset - higher level of consumer trust. Their expanded role around consent and identity will allow customers to have finite control of their financial and digital lives. Banks will need to step up firmly with sound advice and create financial intimacy with their customers, who expect "RoC" (return on consent) for that trust.
- Purposeful. Consumers will opt for banks which are in sync with their environmental and social values in a more purposeful age, with local and cooperative principles aligning to matters of global responsibility. Leaders, building value-driven ecosystems will be set apart by open cultures that build and curate communities. As a result, open innovation and engagement through code, content, and knowledge will create communities driven by a common purpose, generating collective product development benefitting everyone.
Going on to further examine the future of banking from three perspectives; that of the bank, the customer and the collaborator, Forrester's study points out that each of these will have a key role in determining the future of banking. While some banks may turn into the platform and rails that other firms run on; other larger banks will compete with the tech giants for customer prevalence and engagement; and some banks will focus on doing both. Carrying the responsibility of customer trust, banks will have to carefully choose their key battlegrounds.
Today, with COVID 19 bringing in changes and innovations, some leading banks are already turning and restructuring their strategy to set their course for the next decade.
The horizon does look bright for the future of banking.
- Technology is inventing new ways of keeping people and the financial system safe. Automated programs can swiftly carry out security checks accurately, and identify criminal activity, combat fraud and ensure product suitability.
- Artificial intelligence helps to make the right product recommendations by conducting timely and thorough post-sale quality checks.
- Banks are already investing heavily in technology to take care of data privacy, helping to keep customers' personal information safe. Banks of the future will help their customers prove their identity safely to other organizations online.
Fundamentally, banking is based on trust. Customers want their money and personal information to be safe. They want banks to help them make the right decisions. So, banks have to find the correct balance between taking advantage of technology and data to meet customers' expectations while taking care of the risks involved and protecting the financial system. They have to use new technologies like AI and big data ethically, making sure customers are always communicated about the use of their information and consent secured.
A lot of standardizing work still remains in AI with greater coordination to truly take advantage of borderless new technologies.
Summing up, all these advances will make it an exciting time for banking. However, while technology will offer unprecedented speed and convenience in banking, the banks that will rule in the future are without a doubt, the ones that will match technology with efficient risk management and excellent customer experiences.
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