Digital Lending

Top digital banking trends to watch in 2018

Qanta - 2018 digital banking trends - Blog

1. AI use will explode

It used to be that artificial intelligence in banking was strictly addressing issues like risk and fraud. Now, it is hard to find an area where it is not being exploited. We are talking compliance, customer experience, risk management, marketing, and product delivery. The list goes on. In fact, in a survey conducted by Narrative Science and the National Business Research Institute, 32% of financial service executives confirmed using AI tech like voice recognition, recommendation engines, and predictive analytics. The promise of AI is multifold, starting with the automatic analysis of huge amounts of data and ending with striking gains in productivity. In 2018, we can only expect the percentage of organizations adopting AI to increase, and the sophistication to rise alongside it.

2. However, there will still be challenges to adopting AI

Advancements in fintech have revolutionized the industry by bringing forth disruptive technologies like advanced data analytics. But, realistically, implementing AI can be complicated. It encompasses a lot of digital components, from big data to cloud-based solutions. It is true that we now know what the necessary AI ingredients are, and their uses are well documented. For example, big data tools can parse and sort data for analysis and machine learning can tease the insights out of your data. Mixing them can be tricky though, and lenders embarking on an AI journey need a personalized recipe to stitch it all together.

This is the big hurdle of AI! But, fear not, there are solutions. Three out of every four banking providers in the Efma study, “Innovation in Retail Banking,” believe partnering with third-party services can give them access to innovative new technologies. Funding internal R&D and working with partners are also viable options. In 2018, we will be seeing more partnerships and collaborations across the board.

3. Banking will get a customer experience wake-up call

Thanks to tech advances in banking, more personalized customer engagement across different channels is now possible. That does not mean, however, that customer experience is a banking priority, especially for smaller institutions. Lenders across the board need change that dynamic and meet the evolving needs of their customers. Fortunately, there are ways to put the customer back in the center, for example, by moving the focus of digital engagement from cost reduction to experience enhancement. Also, they should learn which channels each customer prefers and give him or her the options to choose. Leveraging advanced analytics, machine learning, and contextual engagement to provide a highly personalized experience is also a solution. Expect to see more of this in 2018 and, in the meantime, check out our post on how chatbots can improve customer service in banking.

4. Banks will become more attuned to millennials

Millennials (ages 18-34) are the largest generation in American history and are therefore crucial for lenders to bring on as customers. A study commissioned by Kasasa explored perceptions of financial institutions by Americans aged 18+. Here are some of the most compelling figures:

  • 8/10 said they would switch accounts for better rewards (e.g., high interest rates, cash back on purchases, ATM fee refunds)
  • 93% sad no-fee banking is important when choosing a financial institution for their everyday banking needs
  • 9 out of 10 said convenient location is important when choosing a financial institution for their everyday banking needs
  • 41% said it is important to them to conduct their banking at the same bank as their parents or other family members

In 2018, banks will accelerate the pace of programs and services that cater specifically to millennials.

5. That means more digital banking

According to a PwC’s 2017 Digital Banking Consumer Survey, 46% of millennial consumers only use digital channels for their banking. If access to banking will exclusively be made through phones, computers, and tablets for the majority of customers, the question is how will this impact development, sales, customer service, and the design of mobile banking applications?

First, institutions need to deeply understand their client base and the different needs according to their demographics. Second, they will have to respond by selling to customers at the time, place and channel they prefer. Third, they will also need to create easy-to-use, ‘one-click’ products. Offering personalized products and services that are both timely and relevant will be essential to their digital strategies. Finally, they will have to move to a real-time delivery of information that can help consumers manage their finances. The banks that will implement most or all of these suggestions in 2018 will be primed for future success.

6. And digital banking will become more than just a buzzword

What are the benefits of becoming a digital bank? According to a recent J.D. Power customer satisfaction survey, the largest and most digitally-focused banks scored highest in online, mobile and ATM satisfaction. But, “it is not enough for banks to woo customers with nice-looking apps concealing patched-together systems. For innovation to translate into customer satisfaction, banks need to master the bare necessities,” said Ben Robinson, Chief Marketing Officer of Temenos. That includes:

  • A digital-first strategy, beyond just mobile and online devices
  • An analytics-driven experience for customers that supports real-time contextual and personalized solutions
  • A seamless experience resulting from a customer-centric perspective
  • Open architecture that allows for reductions in cost and operational risk
  • Upgradable solutions across the organization that tie back-office and front-office processing into an integrated solutions
  • Agile development that spells instantaneous products and services
  • Cloud-based solutions, to provide scalability, drive down processing costs, and support increased security standards

7. In fact, it will become an arms race

As Mary Beth Sullivan, Managing Partner of Capital Performance Group, noted, “2018 will see a radical change in how traditional financial institutions approach digital transformation.” However, the Forrester group sees this new year more, “like a digital arms race between warring incumbents than a year in which firms find new ways to specialize and create value for customers.”

A panel of experts highlighted 3 top strategic priorities for retail banks: redesigning digital experience for customers, enhancing data analytics capabilities, and finding ways to reduce operating costs. Banking and finance executives also need to remember that the shift and emphasis placed on becoming digital will have impacts on talent recruitment, which also needs to be integrated into their 2018 operations strategy. Expect 2018 to be competitive.

8. We will see the rise of virtual branches

Even though for a growing segment of clients physical bank branches are becoming obsolete, branches still hold the appeal of personal interaction. With new tech creeping into everyday customer experiences, how could we bridge the physical and digital worlds? Moreover, how can the benefits of face-to-face interaction be integrated into augmented reality (AR) and virtual reality (VR) solutions?

An option that could bridge the technology of Augmented, Virtual, and Mixed Reality and the reality of physical branches is virtual branches. Video conferencing with bank representatives is an option that already exists. However, it has certain limits, for example that product details can be difficult to showcase, that VR and AR could resolve. For example, with VR, a virtual bank or virtual banking officer could be created with the ability to interact in (almost) the same way as in a physical branch. Account openings, loan application processes, or investment advisory services could all be presented with the use of digitized visuals and simulations, personalized with AI to fit the customer’s specific needs. Virtual branches are just around the corner – could 2018 be the year?