Health concerns over the pandemic and reduced access to brick-and-mortar locations encouraged a large portion of consumers to shift from in-person banking to online during 2020. Research indicates that around 75% of those who migrated to digital banking channels intend to keep using it indefinitely.
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In this rapidly evolving world, some things are still remaining the same. Research shows consumers crave a level of personalization in their banking, while the share of consumers who say they trust their banks has dropped from 2 years ago. This may indicate where the digital channel is failing some consumers by overlooking the human touch.
As per research from the Digital Banking Report, banks now rank themselves lower on the digital transformation maturity bar than they did in 2019, indicating that they understand there is a long way to go before achieving a fully mature digital banking system. As an effect the banking sector could see drastic changes.
Banking Preferences Between Generations
The closure of physical branches around the world during 2020 resulted in a dramatic digital shift in banking, but not all consumers embraced this change quickly. One study found that markets who fit the persona of tech-savvy risk takers tend to engage with digital and mobile platforms more willingly.
Another study indicated a generational divide in comfort levels with different banking channels. The study found that Generation Z and millennials prefer mobile banking apps, while Generation X favor online banking. Baby boomers and seniors were found to favor in-person banking by visiting a branch.
A growing number of banking executives believe that the traditional banking model may become obsolete soon, giving way to a fully digital system. This could lead to a scenario in which banking is treated as a simple commodity, in which price alone could determine success.
Blockchain empowers financial institutions to process cross border transactions in a fast and efficient manner. Payment giants like Mastercard and Visa are reportedly exploring blockchain implementations, with companies like Veem, an online wire transfer service, already reaping the benefits.
The banking industry has just started to pick up on this technology, as can be seen with Bank of America and HDFC partnering with Ripple. Knowing which banks are the best banks for small business can be tricky. Fortunately, resources for entrepreneurs such as The Really Great Information Company reviewed several banks in depth, helping to make researching banks for small businesses easier.
AI Fuelled Experiences, Data and Insights
With the help of IoT, banks can interconnect with devices allowing customers to operate their account from the comforts of home, or even via smartwatch. This equips banks with extensive data and insights into users’ lives, which can then be used to derive insights about consumer behavior.
With the help of AI these insights can then be used to customise chatbot responses, personalising interfaces and offerings as well as other communications. Data, insights and AI is ultimately expected to rule the industry and drive efficiency though cutting costs and automating repetitive tasks.
Open banking is the practice where legacy banks open their API’s to external parties. This allows them to integrate third-party services into their systems and enables third-parties to access the data and processes of the banks, blending services accordingly.
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The open banking model allows banks to connect with FinTech solutions and leverage their technology. This collaborative approach can be a driving factor for innovation and can help banks embrace digitisation without having to spend substantial resources.
Digitally native banks with no offline presence are known as neo banks and may add another dimension to open banking. Neo banks often excel in operating and managing front end channels and the user interface and experience, but face regulatory constraints when it comes to products and services due to their online-only nature.
However, open banking allows neo banks to tie up with legacy banks providing a more technologically rich banking model.
A Few Last Words
In conclusion, the digital banking industry may undergo a collaboration phase where legacy banks could collaborate with FinTech. As a result, open banking, neo banking and other forms of banking may grow in popularity.
While some legacy banks may retaliate by providing their own solutions, it would seem likely that the banking sector is set to undergo some interesting changes.