Technological Advances to influence Digital Banking Transformation, 2022
The concept of banking at your fingertips has spawned a new competitive environment that has redefined the purpose of physical branches and ultimately prompted the digital transformation of all aspects of banking. To combat the competition, the banking sector has embraced the change by abandoning antiquated practices, shifting from paper-based to digital solutions, and adopting a customer-centric approach.
Digital business models will determine the banking industry's future. Digitalization is already influencing client preferences and behavior for several traditional financial services. Established service companies have also experienced increased competitiveness due to digital transformation. Banks are under growing pressure to transform into "digital-first" enterprises to remain competitive.
In 2022, many banks will transform into pure technology firms that offer digital solutions by capitalizing on their vast client base and distribution networks.
Which technological advances in digital banking will determine the future of digital transformation in banking? Here are our forecasts:
More customers will favor digital channels over traditional interaction techniques.
When selecting a financial provider, many consumers value digital alternatives. In addition to seeing what items are available, customers prefer digital channels (e.g., online/mobile banking) over contact methods (e.g., in-branch or by phone).
This trend toward digital banking will continue to accelerate shortly, causing many banks to close large swaths of their branch networks as their "digital maturity" increases.
The banking business is becoming increasingly experience-based
Client experience is anticipated to be a crucial distinction for financial services firms in brand and customer acquisition and retention.
Many banks place a premium on the customer experience during their digital transformation, ensuring that the solutions they build satisfy all client requirements for ease, security, comfort, and engagement.
Customers already anticipate more tailored offerings, including incorporating their opinions and preferences into developing a service with even greater ease. In 2022, banks will be distinguished from their competitors by anticipating customers' requirements and delivering exceptional experiences.
Advanced analytics to customer experience improves service quality while decreasing expenses. Soon, advanced analytics will enhance banks' consumer knowledge to the point that they will personalize offerings, anticipate client wants, and improve service quality.
Financial institutions cannot afford to lag in this digital banking revolution. They must convert into institutions centered on the customer experience that can motivate consumers to remain loyal and reward them with their business.
Open banking intensifies competitive forces.
Open API banking is still in its infancy, yet it can revolutionize banking as we know it. Open APIs enable banks to exchange data with "fintech" third-party service providers. These applications make transactions simpler, quicker, and more secure through digital platforms.
Some pioneering U.S. and European banks have already used Open Banking APIs, with spectacular outcomes. As the distinctions between banking and other financial services providers continue to melt, APIs will become a useful tool for establishing new cross-selling products or transaction opportunities.
It is anticipated that open APIs would facilitate data exchange between financial institutions, third-party service providers, and clients. The connection may result in speedier innovation and improved customer experiences for banks and their clients.
However, security will be a significant obstacle for open APIs, as financial institutions must guarantee they can offer the appropriate protection for consumer data without delaying the API operation. Adding time-consuming human verification stages to the API process, for instance, would demand extra security measures to avoid hackers.
Open APIs will likely remain the favored option for banks and third-party service providers in 2022. However, developers may also find it advantageous to focus on closed or hybrid APIs to prevent third parties' exposure to their data. Closer cooperation between financial institutions and developers is anticipated to aid both parties in determining the optimal method for integrating their respective technology.
With chatbots and virtual assistants, AI will make banking smarter.
In 2022, many banks will transform into pure technology firms that offer digital solutions by capitalizing on their vast client base and distribution networks. Even in fraud detection and compliance, banks cannot compete with pure technology firms with access to powerful analytics and can process massive amounts of data.
In 2022, natural language processing will become the standard for consumer interactions. The rise of chatbots and virtual assistants is already causing ripples throughout businesses, but their adaptability makes them particularly helpful in banking.
Banks could consider utilizing this technology to deliver a remarkable client experience. They can provide clients with automatic responses to frequently asked questions, reduce contact center load, and free up staff time for other useful work. By 2022, these technologies will be standard in most banking apps, including those for smartphones and tablets.
Today, around ten banks have already deployed their chatbots. In China, banking chatbots have exploded in popularity, with several banks employing them for routine operations.
In many countries, several banks have piloted a virtual assistant for their online platform, enabling the bank to keep up with evolving client expectations and preferences. It was viewed as an effort to improve digital consumer experiences. In Latin America, the virtual assistant of the Spanish bank BBVA has proven enormously popular with the younger generation.
A new wave of competition will result from digital transformation.
The digital revolution of conventional financial services providers has resulted in the emergence of several new firms offering AI-based advisors, peer-to-peer (P2P) lending platforms, and digital wealth management tools. The open banking APIs that allow clients to manage multiple accounts through digital self-service channels have bolstered these initiatives.
Fintech businesses were among the first to use digital innovation in various domains, including payments, loans, and money transfers. As a result of their expansion of services and clientele, many of these startups have become formidable competitors to banks.
Banks are already cooperating with fintech firms to enhance their digital transformation efforts and keep pace with startups that effectively disrupt the banking sector.
The bottom line:
Clearly, the banking sector is undergoing a digital transformation. Changes in the banking industry have already begun, and there is no better time to adopt innovative technologies in order to keep up with the times and meet rising customer expectations.
With swipe cards, ATMs, card readers, and sensors already in use, the time for new digital banking trends have arrived. Please contact us if you have any suggestions for technical enhancements to your current banking services. As a dependable banking software development partner, Datavision banking solutions make advancing to the next level of offering financial services simple and rewarding for both businesses and their customers.
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