Digital transformation is shaping every industry, including the financial industry, and will do so for years to come. Banking has gone from standing in long-queues to a single-tap transaction. Now that the pandemic has accelerated changes in the expectations of customers, the banking industry is expected to further accelerate its transformation.
The banking industry is turning its attention towards digital transformation to prepare for a future that will be increasingly driven by technology.
Here are the five biggest banking industry software trends that will disrupt banking and financial services in 2021.
1. The Emergence of Artificial Intelligence
The Autonomous Research report predicted that AI technologies will reduce the operating costs of banks by 22%. It means AI could save trillions ahead, which has made banks embrace AI in the sector further. Most of the banks are already using AI in the form of chatbots to enhance the customer experience. Chatbot replaces human interactions with human-like interactions. Now, the customers can connect to the customer care instantly, and get answers to all their banking queries.
Thus, artificial intelligence allows banks to design and deliver rich, personalized experiences through automated customer journeys that will help build customer loyalty.
2. Cloud Computing is Becoming Extremely Important
Cloud computing technology is crucial for storing and processing vast amounts of data and providing computer services like networking, software, and more through the internet. The adoption of cloud computing by bank offers greater business agility, accelerates the internal processes, builds scalability, and offers customized capacities. Cloud computing also helps enhance operational efficiencies, handle security, compliances, and reduce costs without losing focus on their customer service.
According to Forbes, banks now recognize the many benefits of migrating to the cloud that can help them continue digitization initiatives and reap the benefits of emerging technologies like AI, Blockchain, and other banking software solutions. To put it another way, it is the cloud technology that can help banks to become fully digitized leaders of the economy in 2021.
Furthermore, in this pandemic, cloud computing has proved their mettle which has influenced banks to adopt the cloud. However, they will need a strategy before diving in, which in turn has led to increased tie-ups between banks and Banking Industry Software Services Provider Company.
3. The Growth of Open Banking
Open banking is a technology that has taken the banking industry by storm. It refers to banks opening up their APIs to third-parties, allowing them to access the bank’s data and functionality. Through open banking, customers can get access to data from multiple accounts or banking products on a same platform. For example, a customer can view his multiple bank account information through a single platform.
Open banking is often used interchangeably with API banking or ecosystem banking. As per the Juniper Research report, the number of open banking users is expected to increase from 18 million in 2020 to 40 million by 2021.
Open banking has given greater freedom and control to consumers and redefining the way they interact with their banking service providers. This trend of sharing their data securely with third parties has helped banks enhance service offerings and improve customer engagement. With more and more regulatory bodies requiring banks to adopt open banking, it is a technology that is not going to fade anytime soon.
Blockchain technology is sweeping the banking industry in revolutionary form. Blockchain is a distributed ledger of transactions that can be accessed by anyone. It can support banking in several ways. It offers a new form of decentralized finance, which eliminates the middleman and speeds up the underlying process. It forms the foundation for peer-to-peer lending, smart contracts, and digital payments.
The elimination of the middleman in the credit system, loans, clearance, and settlement systems makes the process quicker, more reliable, secure, and less expensive. Moreover, adding all transactions to a single, publicly available ledger eliminates the risk of errors and duplication.
Several banks have started exploring this technology in the hope of cutting costs and provide a reliable alternative to systems that depend on intermediaries.
5. Digital-Only Banks
Digital-Only Banks, also known as Neobanks, are redefining the future of the banking sector around the globe. It is due to the increasing cost of setting up a physical branch network as well as growing customers’ preferences towards digital channels. There are numerous advantages of digital-only banks that include no need to visit a brick and mortar bank, no more standing in long queues, and no tedious paperwork.
While some banks are launching Neobanks to collect deposits, others are using it to provide basic banking services as well as specialty services. Whatever the purpose is, the objective of such digital-only banks is to provide innovative customer experience and increase value to the consumer. An April 2020 Finder.com survey report states that 43% of Indian adults will have a digital-only bank account by 2025.
It is uncertain what else this year holds, but it’s certain that – over the years to come – the banking sector will continue to work to explore how technology can help them prosper. Technological change is happening more quickly than expected. The survivors will be those who took proactive measures to accept change, take risks, and alter the existing business model.
Therefore, banks will remain committed to investing in software technology and collaborating with Banking Software Solution Provider Company. The trends mentioned above are some of our predictions. The change is constant and we will keep you updated with the latest trends as they evolve.