The financial services industry was already evolving at a rapid speed even before the COVID-19 outbreak, driven by the advent of digital banking technology, changing customer expectation, evolving regulations, and heightened competitions from new entrants.
However, despite these trends, customer’s willingness to adopt – and organizations’ wiliness to invest in – digital technologies was not consistent across markets and services.
In a matter of weeks, the COVID-19 outbreak intensified pressure on banks around the world to accelerate their digitalization strategies and forced radical changes in customer behavior, moving a significant portion of the economy online and increasing customers’ willingness to engage digitally. Digitally-mature financial institutions have shown resilience and agility in the aftermath of the coronavirus crisis.
Top 10 digital banking trends for 2020
The global digital banking platform market is expected to reach $9 billion by 2026
1) Mobile-only banking
A large number of people have been rapidly using digital channels for their banking activities due to a variety of factors including limited mobility, shelter-in-place orders, as well as convenience and accessibility. In the United State, banks are experiencing all-time highs in the number of mobile logins and check deposits. 35% of customers have increased their online banking transactions during the COVID-19. The trend is not limited to retail clients, institutional clients as well adopting online and mobile banking services. Goldman Sachs, for example, witnessed a 25% increase in the number of active users on its institutional platform over the past several months.
Legacy banks have also been forced to increase their presence in the mobile banking sphere due to increasing requirements of their clients. Irrespective of the size or model of a business, mobile-only banking is going to be one of the most important features of the financial services industry in the near future.
2) Chatbot client servicing
Mobile banking apps along with digital cloud banking browser services are witnessing an influx of chatbots. Few community-based financial institutions have deployed chatbot and machine learning (ML) technologies. The global chatbot market size is expected to reach nearly USD 15 billion by 2025, rising at market growth of nearly 30% CAGR during the forecast period 2018-2025. As far as 2020 is concerned, 4% of the institutions surveyed by Cornerstone have already implemented chatbot – twice as many as had deployed in 2019.
|Technology||Already deployed||Plans to deploy in future|
Source: CORNERSTONE ADVISORS
There was a double growth in the percentage of organizations that deployed chatbot from 2% in 2019 to 4% in 2020. And for 2020, another 18% are expected to deploy chatbots 2020.
3) AI-Driven Security
Given the rise in digital banking due to the more accessible and versatile nature of digital banking, cyber frauds and social engineering hacks are bound to increase. However, implementation of AI algorithms which will alarm the users or bank executives about any and all access attempts, transactions being made with their account can help detect the fraud.
Banks and financial institutions are implementing modern solutions and advanced data models offered by AI and machine learning. AI algorithms could instantly identify which use patterns are commonly associated with any given user and customer behaviour patterns that are out of the ordinary. AI serves as a cyber barrier for digital banking to ensure safety of user data more than any other automated system.
4) Blockchain Data Management
Initially used to track cryptocurrency exchange, blockchain has gained popularity across industries and cloud platforms. Its unique application in data tracking and information management makes it viable for increased banking safety of clients across the globe.
The growing presence of blockchain can be seen in both traditional banks and FinTech startups. Implementation of blockchain will help establish a safer, more transparent transaction market, allowing both B2B and B2C stakeholders to take the full advantage of banking platforms.
5) No-card transactions
Although cash utilization has decreased today as compared to a decade ago, cards are still being used significantly. However, credit card utilization can mark as possible social engineering flaws and lead to illegal account access attempts.
Hence, card-less banking will enable the users to execute POP and POS transactions via QR codes. As a result, banking businesses will go green and focus on their mobile banking services without physical cards for client servicing.
- Biometric identification
Biometric identification will have a widespread presence in the banking industry to minimise illegitimate banking access. Major biometric methods include fingerprint, eye as well as facial scanning, which can be integrated into mobile banking apps.
This will effectively help in curbing any social engineering or brute force attacks and allow much higher level of safety even if a device like phone or a laptop is lost or stolen. The biometric identification method will also make passwords outdated, making it a perfect solution for digital banking businesses with a varied clientele sphere.
- AI-driven decision making
Banks across the globe have been automating their business processes. Regulators are also favoring the adoption of advanced technologies like ML and AI in various areas of operations. For example, Hong Kong Monetary Authority has incorporated revolutionary guidelines for automation and analytics that will retain banks under its jurisdiction over next-generation banking through AI-driven automated system. Adoption of AI in decision-making saves significant time as decisions are made in real time, especially on auto financing, retail loan and credit cards, where the volume of transactions is distinctly high.
ACT21 Software provides firms with a new-age and responsive interface for smarter decision-making. The company is an implementation champion of world-class decision automation solutions like Drools, RedHat, Fico, Actico GmbH, etc. to help financial institutions successfully discover, govern and implement business rules, mitigate risk and streamline operations to enhance real-time decision-making process and augment business agility.
8) Digital onboarding
Heightened disruptions from new entrants and the COVID-19 pandemic have forced banks to increase investments in digital customer onboarding. Banks have started to reimage a few critical use cases of digital technologies for data origination, KYC, credit checks and fraud detection. Banks like ICICI Bank, Axis Bank, DBS, etc. have already implemented digital customer onboarding processes.
9) Streamlined Client Billing
Analogue and paper-based nature of obligations like bills, taxes and life expenses is becoming outdated every day. Digital banking can possibly allow users to simply pay for any bills and taxes on platforms of their choice with a click of a button. Just like credit cards, this would also promote the green factory by making printed paper obsolete while simplifying the process and offering much more convenience for clients.
10) Voice-Assisted Banking
Digital banking and its accessibility have been a challenging interface for technologically handicapped users. Voice-assisted banking features can effectively fill that gap by allowing users to use their voices in navigation, chatbot interaction and transactions. This would make touch-screen platforms more user friendly for technologically challenged and elderly people. What’s more, voice-assisted banking can also be voice-locked, allowing only the clients and their own commands to improve the security features of any given digital banking portal.
Due to disruption from fintech companies and COVID-19 outbreak, banks and other financial institutions have shown speed and agility in rewriting their business rules and re-inventing their ways of working rapidly-changing customer and marketplace requirements. In 2020, digital technologies like artificial intelligence and machine learning have been enthusiastically adopted by the financial industry to address challenges posed by the COVID-19 crisis. Looking forward, organizations must harness these changes to customer behavior brought on by the crisis to accelerate their digital transformation journeys and thrive in the new normal.