The banking sector has been dramatically disrupted over the last year. Digital innovation has always been active in the business sphere, and the recent pandemic has undoubtedly accelerated it.
In addition, financial services have been forced to respond quickly to changing customer habits due to the pandemic.
These days, technology is transforming the finance and banking industries. Rapidly advancing technological developments generate entirely new market proposals. The crisis had caused a shift in the economic regime, necessitating drastic changes in the way business and governance were conducted. For a long time, banks have been reluctant to update their systems. The current systems that they use are the product of continued innovation to meet immediate customer requirements. However, as technology moves fast, many banking sectors are now finding ways to incorporate technological innovations.
How Technology Impacts The Banking Sector
Here are some ways how technology impacts the finance and banking sector these days.
Blockchain’s shared infrastructure ensures the integrity of information, making it easier for banks to detect and eliminate risks. As a result, blockchain can reduce operational costs while improving efficiencies, making it a game-changer in the near future.
It enables multiple parties to access the same data at the same time while also ensuring the integrity and immutability of the records stored in the database. Currently, leading banks worldwide are investigating proof-of-concept projects in a variety of banking and financial services areas. The first significant implementation is likely to occur in the areas of clearing and settlement.
2. Artificial Intelligence
Acceptance pressure can be reduced by sourcing and recruiting AI vendors who can assist financial institutions in developing local skills and awareness. This development is critical to the strategic extension of AI solutions and will be the path forward. As conversational AI has advanced rapidly in recent years, financial institutions have made significant investments in understanding how and when technology is used. However, most of these investments have been sitting in laboratories for years, awaiting acceptance.
3. Customer Service and Engagement
The dream of digital banking has never been fully realized, owing to consumer resistance and a lack of appealing digital solutions. Nonetheless, the pandemic has accelerated digital penetration across all goods and population segments. As a result, mobile banking registration has increased by 200% in the last year. Furthermore, banks would benefit if more of their clients switched to digital-only self-service interfaces, which would result in significant cost savings.
4. Business Process
With the rise of the digital economy, the volume of unstructured data that the bank must process is increasing exponentially. That includes banking transaction data and other behavioral data that could help banks improve business productivity and innovate customer experiences.
That has made bankers realize the importance of developing technologies that can mimic human action and judgment faster, larger scale, and in higher quality. The solution has emerged in various technologies that enable cognitive and robotic process automation in banking. These technologies consist of robotic process automation, natural language processing, chatbots, and smart analytics in banking that allow improvements in any existing business process.
5. Digital Experience
Digital experiences continue to reach the banking sector at an incredibly fast pace. To become an industry leader, finance and banking institutions will need to launch the best technologies in their sleeves. At the beginning of this year, central banks are expected to see innovative digital experiences roll out, setting higher standards for consumer needs around the board.
More dynamic financial services experiences necessitate more intelligence and raise the bar for consumer expectations. When it comes to data-driven AI, detailed comparison and widespread adoption will result in a flood of information that could enrich and encourage the relationship between the banking industries and their customers. Consumer behavior and patterns shift this past year. Inasmuch, technology will assist the banking sector in meeting emerging demands and succeeding in an increasingly digital experience for their clients.
6. Fraud Detection
The nature of cyber threats is rapidly changing and getting complex in time. As a result, traditional approaches to risk management are rendered obsolete. It is now clear that organizations cannot eliminate all potential sources of cyber threats. Limiting the attack footprint as soon as possible is the best way to deal with these. Moreover, banks will need to be agile in their approach to cybersecurity.
Banks are increasingly deploying advanced analytics, real-time monitoring, and AI to detect threats and prevent them from disrupting systems. Prescriptive security refers to using big data analysis techniques to detect threats earlier and act to prevent them from occurring. While the disruption caused by implementing the new approach may increase vulnerability, this is the only way to stop the ever-increasing data breaches reported by various organizations.
Customers’ payment expectations have shifted dramatically as the world transitions to a cashless economy. Customers and businesses alike expect payments to be made instantly, where instant payment systems come in. If online payments are to replace cash transactions, they must be instantaneous. As a result, banks worldwide are figuring out how to offer their customers instant payment options even when the infrastructure required for the service is lacking.
8. Smart Assistants
You may have heard about the Bank of America’s Erica as a virtual assistant specifically for their banking operations. This smart assistant can provide personalized guidance and proactive insights into your everyday banking. It is an AI-driven technology that helps BofA mobile app users view their balance details, schedule meetings, and transfer funds.
Along with other intelligent assistants, they are now beginning to serve as digital concierges for customers when interacting with banks. Additionally, banks need to invest in this innovation in digital engagement to ensure long-term customer relationships. Customers will gravitate toward banks that are easiest to work with when they use technologies to which they are accustomed.
Business is more complicated than ever before. Therefore, technology-enabled decision-making is essential for remaining competitive and surviving the tight landscape. Moreover, the unpredictability of the current situation emphasizes the importance of being diligent in keeping on track with technological innovations.
Furthermore, timely and efficient risk management can assist the banking sector in navigating these difficult times with minimal losses. Technology-enabled business processes have become critical in helping banks mitigate the pandemic’s impact and follow the rapid change the world is experiencing.