While banks traditionally maintained a stronghold on innovation and efficiency in the financial sphere, catastrophic events like the Great Depression and subsequent recessions paved the way for fintech companies to disrupt the banking landscape for individual consumers and large corporations alike. At first, banks were resistant to adopting new technology because of the size of their existing infrastructure and all of the security and regulatory compliance issues that arise with changing the status quo of banking practices. However, banks have lately been embracing the changes ushered in by fintechs and have become originators of innovation in many ways. This has sped up the general rate of adopting new technology in banking and finance, which means that professionals in the industry can expect even more innovations in fintech in the coming years.
Banks are Targeting and Embracing Millennials
Millennials now fall into the age range of 23 to 38 years old and are capturing the attention of banks of all sizes as they compete for this customer demographic. This generation faces different financial challenges than their parents took on at a similar age, and banks are looking for new ways to help them take on major purchases, such as buying a home. The conversations around student loans and the rising cost of living reflect the reduced purchasing power that many Millennials face when trying to buy their first home or start accumulating wealth. Banks are modifying the way that they market to these customers and are getting creative in offering financing solutions to help them afford a new home purchase.
The Rise of Open Banking
Open banking refers to the ability of third parties to access consumer banking information from banks and other financial institutions through application programming interfaces (APIs). Industry leaders anticipate that this will be one of the most significant innovations in fintech because of the potential for convenient and immediate access to multiple sources of consumer financial data once a consumer has provided authorization to a third party. Instead of focusing on ways to centralize the collection and storage of customers’ financial and personal data, open banking creates a virtual network of access to important information that can be used for a variety of purposes.
In addition to allowing customers to complete financial transactions with outside payment companies, the customer data collected through open banking can be used to develop more effective marketing strategies based on customer profiles. Another use of networked bank accounts is that customers can quickly and easily decide what new banking products might be most useful to them after reviewing their overall transaction and banking history. This helps personalize the consumer’s banking experience and facilitates more efficient access to new bank accounts and transfers of accounts to new financial institutions.
Enabling Voice Search in Banking Applications
Speech recognition was one of the early developments in artificial intelligence (AI) technology that allows a computer to process voice commands as a prompt for searching and data input. Voice recognition is the next level of this technology because it involves the computer matching up a particular voice command with a specific user’s voice. This can add an extra layer of identity protection and security when a program is verifying a particular customer’s voice to access their account information. The most common use of this technology on the customer side will likely be the use of voice commands to instantly check a bank account balance.
Eventually, customers will be able to regularly rely on voice recognition technology to complete financial transactions. To implement this technology, many large banks are partnering with companies like Amazon and Apple because they have already embraced voice commands and recognition software into their existing programs. It would be an expensive and time-consuming project for banks to tackle rolling out this type of technology all on their own.
Relying on Blockchain in New and Existing Banking Software
Blockchain technology captured the attention of the banking industry because of its potential to reduce transaction costs and help consumers complete them more quickly and accurately. Digital ledger technology increases the capacity of each bank to handle more transactions and enables accurate account transfers. It also facilitates the ease of international transactions between customers across the world and companies that transact business with a different currency.
AI/ML-based Chatbots and Automated Customer Service
AI and machine learning are allowing banks to automate their customer service responses to customers who demand quicker response times. Machine learning involves the recognition of patterns and repeat tasks by computers to automate as many processes and responses to customers as possible. It is also allowing banks to keep pace with managing long-term customer relations and tracking the history of communications for a particular account. This can eventually help reduce fraud by giving customers increased access to valuable information about their accounts on a faster basis and outside of regular business hours.
Banks previously touted personal customer service from in-person representatives as an incentive for customers to stay or switch to that financial institution. This marketing tactic has fallen by the wayside because customers have recently expressed a desire to access automated customer service options as a way to exercise greater control over their banking experience. Customers now expect fast answers to most questions about transactions in their banking history and how to access certain financial products and services through their banks. They also cite convenience as a deciding factor in where they choose to bank, which can outweigh the perceived benefits of the more cumbersome process of showing up to a bank’s branch location to do business in person.
Final Thoughts on the Next Round of Fintech Trends
Financial software development is helping banks and other financial institutions respond to customer demands more efficiently and accurately. The upcoming fintech trends reveal an emphasis on automating information collection, management, and transfer to help facilitate more financial transactions and reduce the cost of sending payments to third parties. The ability to customize the software that fintech companies are using to manage customer data and access customers’ accounts will allow companies to streamline their operations and provide a more personalized and responsive customer service to existing and new customers.