Banking as we know it has changed since the introduction of computers and the birth of the internet. The financial landscape remains one of the fastest evolving spaces in the world, only behind the big tech – and it doesn’t look to be slowing down anytime soon. By leveraging modern technologies and taking cues from disruptive fintechs, banks have gotten smarter with products, customer data, and overall operational efficiency.
However, these changes are only the beginning. Newer technologies are being introduced or existing ones undergoing stunning improvements by the day. Although the traditional banking space has a history of slow adaptation to trending technologies, the need to stay competitive and ahead of the pack would drive these 10 banking technologies into further transforming how we bank in the coming years:
Digital Fiat Currency
It’s no longer news that digital fiat currencies are queued up to replace physical cash. Central Banks all over the world are exploring Central Bank Digital Currencies (CBDC) since 2019. A Bank for International Settlement (BIS) 2020 survey found that 86% of central banks were examining the advantages and disadvantages of launching CBDCs, 60% were working on “proof of concept” testing, and 14% launched pilot programs. As of 2021, 80 central banks are actively developing CBDC, up from the 35 as of 2020, with 5 countries already in pilot stages.
The opportunities as well as risks associated with digital currencies are enormous and might have the biggest impact on how financial institutions (FIs) and businesses transact on a large scale. For one, CBDC would lower transaction fees and improve cross-border remittance, but might also guide FIs and businesses to heavily invest in cyber and data security to protect against the risks associated with digital currencies.
Blockchain already occupies a fine seat in today’s banking space due to security and payment settlements advantages. It’s the core system of many neobanks today and making its way into the systems of banking giants across the world.
Using complex mathematical combinations, blockchain stores data in an impenetrable distributed network while keeping transactions verifiable. The outcome is a system so transparent outside yet highly secured inside. Given the sophistication of current banking systems and increased cybercrimes, more banks would be turning to this technology for a ton of uses. The success of bitcoin has already proven blockchain’s efficiency in handling payments and banks would be exploiting this feature also.
Extended Reality (XR)
Augmented and virtual reality is the technology that aims to thin the line between reality and computing, connecting the world closer than ever before. Users of this technology would interact with each other over a virtual space in real-time from anywhere they are in the world. In banking, the best fit for extended reality would be serving customers a real-world-like experience anywhere they are in the world over a virtual space. XR would equally transform the mode of work and improve the efficiency of remote working.
Even though this technology is yet to fully take off, extended reality can be the future of customer service for banks. At its peak, customers would be able to access whatever support they need and talk face to face with banking staff without having to visit the bank. In the bloom of XR, branch banking would be a thing of the past.
Artificial Intelligence (AI)
AI is poking its claws into almost every industry today and banking would not be different. The fact remains that nearly 40% of technologies on this list would rely on artificial intelligence to various degrees and in one form or another to fully operate.
Banks would utilize AI in many ways: from building simple tasks robots and market intelligence bots to enhancing security systems and improving how customers interact with products. Artificial intelligence is crucial for banking as it is expected to save the industry a stunning $447 billion by 2023.
Big Data & Analytics
‘Data is the new currency’, so the saying goes. In the coming years, however, data would be everything. The banking industry contributed over 13% of investments into big data and analytics solutions in recent years – and for good reasons. Due to the immense amount of customer data generated by financial institutions, making sense of this data would enable banks to learn more about customers and develop products and services around customers’ needs or preferences.
Banks would employ Big Data Analytics in market predictions and in calculating risks for investment decisions – both at corporate and product levels. Already we have a number of fintech apps relying on data analytics and artificial intelligence to inform users on market moves, potential risks, and possible returns.
Cybercrimes are the biggest threats to full digitized banking. There are just so many ways players in the banking ecosystem interact with money and data that total cyber protection is nearly impossible. This is why huge time and resources would be channelled into cybersecurity in the coming years. Cybersecurity is a priority if we are to have the dream global banking system.
Already there are breakthroughs in the form of biometrics, digital signatures, advanced KYC/AML and CFT, multi-factor authentication, and secured applications. However, financial institutions would need further advancement in cybersecurity to thwart any form of cyberattacks.
The typical banking system that focused on maintaining absolute control over everything is fast becoming a thing of the past. Banks have long since recognized the need to operate flexible systems using APIs which allows them to easily connect with the platforms of different service providers.
The financial world is becoming more interconnected with several other systems and networks operating open-source models. In the future, more banks and financial enterprises would operate open-ended systems, allowing easy integration with larger or smaller organisations, service providers and counterparts, and eCommerce businesses scattered across the world. FIs are aware that the more connected systems are, the more potential for growth and profits the better the banking ecosystem.
The best way to prepare for the coming banking revolution is to take advantage of existing technologies that ready your business for easy adaptations based on market trends. Small and medium digital banks and specialist financial institutions such as EMIs, loan managers, private banks, and the rest looking to leverage continuously improved agile banking technology like Spotbanc to build the banks of the future can get started here.