The entire industry of financial services in 2021 is undergoing massive digitalization. New technologies allow for better personalization for customers and effective optimization of internal processes, helping businesses grow faster and target more audiences. In fact, experts estimate the financial industry to hit $26.5 trillion by 2022.
Innovative changes in the banking sector might hold back organizations that still rely on legacy operations, but they also give banks an opportunity to step up their game. By turning their attention to mobile apps and analytical technologies, such as artificial intelligence, banks can better meet new customer expectations and take full advantage of emerging technological possibilities.
Let’s take a brief look at what the future of banking technology holds and how you can adopt winning practices to enhance your organization.
Why build solutions for mobile banking?
Both current and upcoming innovations in the banking sector hold promises for enabling banks to provide more convenient, omnichannel services to their customers while optimizing the institution’s processes.
Responding to new client needs is particularly crucial in the wake of the COVID-19 pandemic. Back in 2020, 80% of surveyed financial companies stated that enhancing their customers’ digital experience was a priority. A year later, the world is slowly returning to offline operations, but digital payments, insurance technology, and online loans are not about to lose their appeal.
Digital banking is faster and simpler than going to a physical bank. Customers, and younger generations, in particular, also prefer handling finances through their phones, so creating a secure mobile banking app can be a profitable venture with the right strategy.
Analytics and optimization opportunities present another huge benefit of banking solutions. By exploring the use of big data in banking, institutions can better understand their customers’ interests and market fluctuations, as well as identify weak spots in corporate processes. Ultimately, the role of digitization in banking is to provide the right tools for banks to thrive in the highly competitive environment of the fintech market.
Banking technologies that drive transformation
The most rapidly advancing trends in fintech revolve around handling data more efficiently and securely, both to the benefit of a bank and its customers. Here are four of the latest technologies in the banking sector that set the pace for the evolution of the whole industry.
Artificial intelligence is arguably the best banking technology to learn for the future. Banks can utilize finance artificial intelligence technology to improve virtually any part of their operations.
In addition to being a strong analytical tool, AI in finance offers accurate forecasts, delivers data-driven suggestions for a company’s operations, enables better decision making, and boosts the levels of customer satisfaction. Other AI use cases in banking may include fraud prevention and better risk mitigation.
Blockchain technology in banking is surging as clients feel more confident working with cryptocurrencies. In fact, as of April 2021, there are nearly 71.4 million blockchain wallet owners worldwide.
Blockchain financial services rely on a specific kind of information-storing system, designed to withstand hacking attacks and unauthorized changes. Banks using blockchain can benefit from safer authentication mechanisms, secure transactions, and more cost-efficient key processes, such as KYC.
The use of big data in the banking industry is nearly mandatory in 2021. All fintech service providers, including banks, gather enormous quantities of data over time, and, coupled with historical and real-time data from the competition, this information can be extremely useful.
Leveraging big data analytics in banking can help achieve better customer segmentation and personalization, automate internal processes, boost employee productivity, and instill effective up-to-date security mechanisms.
Cybersecurity in banking is another area that technology can greatly improve. Blockchain smart contracts and specialized AI solutions help make user identification more reliable. Artificial intelligence in bank IT security is also suitable for on-site facial recognition, enabling stronger data encryption, and analyzing payment flows to detect fraudulent activity.
Integrating banking tech into your business
Adopting innovations in the banking sector is a complex endeavor, but you can navigate the process by following these 5 key steps:
Step 1: Identify the problem
Whether you want to start a fintech business or enhance your existing organization with technology, it’s important to determine which challenges smart banking can help you resolve. The first step towards digitalization is to examine your processes and pinpoint the areas that could be optimized. In addition to surveying internal procedures, compare your services and results to those of your competitors and take notice of the uncovered gaps.
Step 2: Design metrics of success
Once you know which direction you want your digital banking innovation to go, design metrics that will allow you to assess how well new technologies are performing.
Having a framework to analyze the results of digitalization is crucial. It helps not only determine whether the transformation is successful but understand how the technology functions in the long run, and what the correlation between resource use and benefits are. If certain thresholds are not met, you can immediately revise your strategy and choose a better approach.
Step 3: Choose the technologies
At this stage, you should take a look at the emerging trends in banking as well as more well-established technologies. Start by identifying solutions that target the general problem you’re trying to solve. Then, begin narrowing the search down by your budget, features offered, time for implementation, infrastructure requirements, and your specific business needs. Pay attention to how scalable and secure your chosen solution is.
If you opt for custom development, consider the tech stack companies offer. Banking applications are typically built using the following:
- programming languages: Java, C/C++, Python, PHP, and Ruby;
- databases: MongoDB, MySQL, and Redis;
- frameworks: Node.js, Django, React, and Ruby on Rails.
Step 4: Develop and implement new solutions
During the development stage, communication with your team is paramount. Whether you outsource or keep it local, maintaining open communication channels and encouraging collaboration will help your organization stay within deadlines and receive a high-quality product in the end.
If you are unsure how to handle the integration process after the development is done, consider working with a company like Eastern Peak. Such software developers have a comprehensive understanding of the technology used in banking, and they will provide guidance throughout the whole process to ensure you get your target results.
Step 5: Analyze the results
After you’ve integrated new solutions into your operations, monitor their technical performance, KPIs, and how well they correspond to your success metrics. Technological development in the banking sector relies on iterative improvement. If the results are not satisfactory or the functioning is not smooth enough, it’s beneficial to analyze problem areas. Sometimes, difficulties dissipate after an adjustment period. In other cases, you might need to modify or replace part of the solution to avoid further complications.
Where is banking technology headed next?
The impact of technology in the banking sector in 2021 is unprecedented: advancements in AI and cloud tech, already widely used by fintech companies, have set a new high bar for traditional banks. Despite being disruptive, banking technology will steadily push the industry towards better processes and models in the next few years.
Overall, banking tech focuses on improving customer experience, making digital operations a priority, reducing operating costs for banks, and supplying actionable business intelligence. As more and more fintech startups enter the market, embracing technology and leveraging the emerging trends in banking will become decisive for many organizations.
About the Author
As CEO at Eastern Peak, a professional software consulting and development company, Alexey Chalimov ensures top quality and cost-effective services to clients from all over the world. Alexey is also a founder and technology evangelist at several technology companies. Previously, as a CEO of the Gett (GetTaxi) technology company, Alexey was in charge of developing the revolutionary Gett service from ground up and deploying the operation across the globe from London to Moscow and Tel Aviv.