5 Banking Trends That Will Revolutionize The Industry
In 2021 every modern individual and business wants convenience, high-quality services, and fast operations and each player in the banking sector strive to live up to those high demands. With emerging FinTechs as powerful competitors and increased popularity of technology-driven solutions, traditional banks need to revise and adjust their success strategy to ensure their market positions remain intact.
From my experience working in a bespoke software development company, I learned that a strategic partnership with innovative technological partners is a crucial element for success.
Dreamix helps both traditional financial institutions and FinTech startups develop products and services that are client-centric and thus relevant to their current needs. Let’s now take a closer look into the top five banking trends bound to revolutionize the industry.
1. Open Banking Shifts to Open Finance
In 2021, open banking is certainly a global trend and a game-changer in the financial world. Open Banking essentially improves consumer experiences by rising transaction approval rates, increasing brand confidence and protection, and enhancing payment experiences. The PSD2 regulations obligate EU countries to share their APIs and allow third-party providers (non-banks, FinTechs, apps etc.) access to customer and transaction data.
There are currently no mandatory regulations for US banks, but financial institutions there take market-driven initiatives to stay competitive. Recently, the UK’s Financial Conduct Authority (FCA) took the initiative to widen the use of open banking and implement it into other financial products like investments, insurance, pension funds etc. to stimulate innovative thinking and healthy competition that benefits the market. The new model is called Open Finance and is said to be a new trend for banks worldwide.
Especially during the Covid-19 pandemic, it became clear how much our global community needs innovative financial solutions that help us financial stability even during uncertain times. On the other hand, this unprecedented modern history health crisis significantly accelerated digitisation initiatives worldwide. Today, consumers demand accessibility and real-time cashless payments and thanks to open banking, this becomes a reality. Future challenges that persist are privacy concerns, such as potential fraud risks, which can be addressed with MFA (multi-factor authentication) and other security measures.
2. Frictionless Payments Are The New Normal
Many financial experts claim that physical money (banknotes and coins) is destined to become obsolete at some point in the near future. Our increasingly digital society certainly gives multiple indications that this prediction will happen. Nowadays, the majority of users prefer to pay friction-free with payment platforms that require just one click to authorise transactions.
Some innovative financial vendors make efforts to completely eliminate intermediaries such as POS terminal or gateways for payments. Instead, they aim to offer convenient real-time digital transactions. Additionally, companies like Uber go into direct competition with banks and introduce e-wallet, pre-funding, special discounts, loyalty bonuses etc. This trend means that traditional banks should also be making payment processes as friction-free as possible and thus more appealing to customers. Having loyalty deals for long-term customers as well as initial offers to target newcomers is undoubtedly a promising strategy. Still, banks also need stable and reliable apps, and they need to remain open to collaborate with FinTechs.
3. Further Automation of Banking Services
Intelligent automation is one of the core processes staying behind digital banking. Most banking services nowadays already harness the power of artificial intelligence (AI) for their process automation. This changes the realities for both bank clerks and bank clients as automation introduces an entirely new customer experience. For many bank employees, this trend brings job uncertainty because AI reduces operational costs and puts a client in charge of his or her payments.
Even better, an algorithm can take control of their automatic payments. The financial giant JPMorgan Chase looks towards automation as one of the three most impactful trends for 2021. From now on, every financial service will be all about convenience, and that is why many banks offer AI-driven solutions that help with financial goal setting, manage saving accounts, create investment strategies and much more.
4. Crypto Banking Is On The Rise
For a couple of years, cryptocurrencies have been making international headlines almost on a daily basis. More and more players are now entering the dynamic crypto world as various currencies find their use cases. Some of the most mainstream financial applications of crypto are DeFi (Decentralized Finance), crypto lending and trading etc. Also, many investors prefer stablecoins that track US-dollar, Euro or gold value and thus guarantee stability.
The crypto possibilities seem abundant, and banks should find a way to implement blockchain technology into their products as it enables real-time, transparent and secure transactions. In particular, stablecoins and their intersection with fiat money (traditional government-issued currencies) urge banks to consider optimizing their payment pipeline and using cryptocurrencies as additional powerful assets.
5. Enormous Efforts Go Into Personalization
There has been a trend that more and more ordinary people start to invest online without any previous experience with digital wallets, crypto, socks or any other financial instruments. The availability of options is here to show us that the majority of young individuals, e.g. millennials (the mid-90s to early 2000s) & Generation Z (born between mid-to-late 90s and 2012) are ready to dive into the financial world and benefit from what it has to offer earlier than previous age cohorts. Moreover, they want simple digital solutions that provide a high degree of personalized services to meet their exact financial needs. That is why customer-centricity is so essential.
What was inevitably destined to happen was only accelerated by the pandemic and the overwhelming digitisation of products and services. Bank customers and especially the younger population increasingly use digital financial management apps in order to make informed decisions regarding their money. For them to extract meaningful information, digital solutions should aim to personalize customer experience so that each individual client finds suitable options and chooses one platform or app over another. That is why banks should also strive to offer personalized deals and products that appeal to clients.
Aleksandrina is a Content Creator at Dreamix, a custom software development company, and is keen on innovative technological solutions with a positive impact on our world. Her teaching background, mixed with interest in psychology, drives her to share knowledge. She is an avid reader and enthusiastic blogger, always looking for the next inspiration.
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