Over the next five years banking is going to change dramatically and will be nothing like we know it today. The changes will come due to technology and will provide financial institutions with both opportunities and challenges.
The global recession put a spotlight on banks; these institutions were largely responsible for the near-collapse of economies and although they have weathered the storm, people’s trust in them has not been restored.
Out of the failure of financial institutions came the bitcoin protocol and blockchain technology. This was followed by the arrival of fintech startups and neobanks, both of which threaten the consumer account monopoly enjoyed by retail banks, which is referred to as ‘legacy’ in the financial media. According to various consultancies, new players could capture up to a third of incumbent banks’ revenues in the next 2–3 years. If banks don’t respond to this, they are in danger of disappearing.
However, there is good news for the traditional banks: the new technologies that are threatening the banking industry also present significant opportunities. They can leverage big data and advanced analytics to improve customer experience, as well as build trust, loyalty and revenues. Dan Cohen, SVP at Atos, said: “Banks are at a crossroads. Continuous fintech innovation and new technologies such as blockchain are disrupting the market. While it creates threats, it also opens multiple opportunities for financial services to reinvent themselves and thrive.”
Here are five of the technologies that will advance fintechs and potentially cause more disruption in the banking sector, unless the banks are agile enough to incorporate them.
1. A hybrid cloud
Cloud computing tech has gone mainstream in banks pretty fast. It was found that at least 75% of bankers said their most successful cloud initiatives had already achieved expansion into new industries, creation of new revenue streams, and expansion of their product/services portfolio.
The combination of open platform banking and open APIs will change the entire banking ecosystem in its current state. In this scenario, the bank will serve as a platform, on top of which third-party companies can build their own applications using the bank’s data.
3. Robotic process automation
Robotic process automation (RPA) has helped banks and credit unions accelerate growth by executing pre-programmed rules across a range of structured and unstructured data.
4. Instant payments
Consumer demand for instant payments is on the increase. With instant payments, more transactions will be made digitally instead of in cash, which means that payments will become less expensive and more user friendly.
5. Artificial Intelligence (AI)
The benefits of AI in banks and credit unions are widespread, reaching back office operations, compliance, customer experience, product delivery, risk management and marketing to name a few