Prior to the pandemic, banks had not been in a hurry to digitize, but now they are rushing to do so. As a result, technology in the financial sector has grown rapidly, and banks provide various types of online services. Some started following crypto platforms’ examples and represent payment gateway for crypto purchases.
In fact, increasing demand for Fintech services might seem to put banks at a loss. Responding to this trend, incumbent banks will be forced to either build new solutions more quickly or partner with organizations that can help in this process.
What are the implications of this trend? Will physical bank branches begin to disappear? Let’s discover.
Banks Digital transformation
Video banking refers to a variety of banking services using video for customer assistance. With the help of AI programs, these functions can be improved using modern technologies, such as machine learning (ML).
Chatbots make use of these technologies particularly effectively. They recognize client requests using natural language processing. Each interaction becomes more personalized as a result.
While these technologies have been around for over a decade, bank executives have focused on cutting digital spending instead of leveraging them to grow their businesses. Adopting digital platforms seemed prohibitively expensive and would need intensive training.
The majority of CFOs said that digital expenditures were the number one priority before the pandemic. 90% of those surveyed plan on upgrading technology solutions, investing in digital business models, and implementing them by October 2020.
Does the future belong to banks?
Banking institutions can access information and know-how that Fintechs can’t because of their deep industry insight. The banks have used the knowledge they have gained to enhance their analytics, AI, and machine-learning capabilities.
Furthermore, when in-house innovation is not sufficient, banks have the option of partnering with or even acquiring Fintech startups to enhance services.
Banks have been exploring individual financial services, wealth management solutions, innovative lending options, and also blockchain technologies.
Is there still room for growth acceleration in Fintech?
Usually, when we hear the term “fintech”, we think of startups. As of now, they have taken advantage of the dissatisfaction caused by dated infrastructure used by traditional banks. The drawback is that it is outdated. A major issue with fintech is eliminating legacy infrastructure and assets due to how banks operate.
Over time, banks will innovate, resulting in an improvement in their position. The banks’ cooperation with Fintechs may also become more reciprocal as time goes by (Toptal’s data shows 63% of banks invest in startups or set up accelerators). In contrast, banks can restrict Fintech growth if it proves more beneficial to do so.
According to some industry experts, banks should do exactly that. Fintech companies will not be required in such a scenario because banks can handle all innovations in the finance sector. But it’s nearly impossible to tell which model (internal innovation or Fintech partnerships) will win. Research estimates that the global Fintech market will be worth $127.66 billion to the sector by 2022.
The banking industry and innovation
Adapting to the future requires banks to be flexible. Over the next decade, banks will have to undergo four major changes, according to Forrester. First, as banking continues to evolve, it will require powerful insights derived from customer data gathered through deep relationships of trust. Over the next few years, banks might be able to serve as the guarantors of online identities for customers. To make trusting a bank worthwhile, banks will need to offer users financial intimacy and personalized advice.
Then, banks must gain deeper insight into their customers by becoming invisible. By using this approach, you’re addressing customers at their moment of need, as well as through multiple channels like smart homes and automobiles. The downside of this shift is lower brand visibility.
Jacob Morgan, Senior Analyst at Forrester, provides one interesting comparison of future banking solutions to Tesla’s vehicle innovations. ‘Autonomous finance’ may replace banks altogether, Morgan said. Users’ cash flow and financial relationships will instead be managed by a new solution, primarily through automation. Transactions could take place automatically if the Internet of Things is added. Using sensor data, a car might negotiate better rates for various services.
As a final note, banks need to be deliberate about the actions they take and the values they represent. Consumers are becoming more and more aware of the consequences of their actions. Environmental and social issues are an important part of their identity, making it impossible for them to be ignored. In order for banks to become more open and responsible, they will have to offer valuable additional services such as curating their communities.
Banks will remain
Putting it simply, banks are well-versed in their business. Using vetted technologies, they can evaluate options and customize solutions to meet the needs of their business processes. The crisis in traditional banking may be resolved by challenger banks according to Simon Moss at TechCrunch. The banks can do impressive things with good services and low costs.
While traditional banks invest heavily in data science and analytics, alternative banks are doing the same. As compared to challenger banks or Fintechs, they possess significantly more resources. Even though the pace of development is slow, the goal is to preserve a competitive advantage rather than share it, as any solution built on a readily accessible data lake would. In the event that banks undergo restructuring for greater agility and new standards and regulations benefit them, they could easily become major drivers of innovation on the market.
The automation of traditional banking is now improving its performance. In the future, will it replace physical branches? Since online banking is now so widely used, it is possible. A simple cryptocurrency html price widget on a site page might open a whole range of new opportunities, not to mention specific mobile apps and digital platforms with financial services.
As a result of a massive shift toward online banking, banks closed 3,324 branches last year, according to S&P Global Market Intelligence.
Keeping banks successful requires fintech companies to help integrate their services into user-friendly platforms. If they don’t, they may lose customers. With video banking, you get the same experience you would get when visiting a bank.