Future of banking
One of the most important areas of finance is banking and insurance, banks are not just a service but the lifeline of an economy. A robust banking ecosystem reflects the state of economy of the country and instills a great deal of confidence amongst investors. However, banking over the past decade or so has seen rapid advancements through the adoption of digital technologies. We are marching our way into a world where digital payments will occupy a majority of the transitions and cash will take a backseat. In a post-pandemic world, banking as a service will evolve and banks as institutions will have to redefine themselves as they face competition from sectors that were once hardly in the picture.
Let’s read to understand how the banking sector might look like in the post-pandemic world.
1. Customer experience takes centerstage - For banks to continue to be successful and be relevant in today’s society, they need to focus on their customer and listen to what they’re saying. While it’s safe to say that COVID-19 has resulted in overnight adoption of digital services and channels for customers, they’re also looking for the human touch when they need it. Therefore, an omnichannel approach for banks may be the best way to enhance customer experience. Banks are also witnessing a huge influx of Gen Z customers today, who are extremely demanding in terms of flexibility and customisation. For banks, this might be a challenge, but those that cater to most of these demands are the ones that will end up with a majority of the market share.
2. Hubs of digital innovation - Even in the pre-pandemic era, traditional banking was dying a slow death. This is because banks are no longer earning revenue in the traditional way i.e. through deposits and lending. Traditional banks operating a large network of physical branches and maintaining expensive IT systems will increasingly find it difficult to achieve profitability. In order to stay relevant banks will need to leverage the likes of artificial intelligence, automation, chatbots, interactive virtual assistants, and many other frontier technologies in their day-to-day banking operations. In fact, artificial intelligence is already being used by the majority of banks to detect money laundering and prevent fraudulent transactions. Artificial intelligence is also helpful in enhancing customer experiences as it grasps customer behavior through previous interactions, thus helping banks design better suited personalized banking products for their customers. Lastly, artificial intelligence and machine learning helps to automate repeated monotonous work thus freeing employees to focus on value-added tasks that require human intelligence. On the phone banking front, interactive virtual assistants through voice recognition are emulating human operators thus gradually replacing them. Banks must stay ahead of the curve and reap the benefits of technology to not just stay profitable but also to be relevant.
3. Masters of Data - Banks for years have been collecting and sitting on heaps of data. We all know the potential of data and if used smartly, banks can differentiate themselves and stay ahead of their competition. Below are a few areas where analytics can help banks open up a new world of opportunities.
4. Sales and marketing - Analytics can easily point out to show what’s working in terms of marketing for a bank and which strategy is giving the best Return on Investment (ROI). It can further classify customer target segments and make them easier to manage. Banks that have the ability to collect demographic data can leverage predictive analytics and see what marketing campaign would be most effective for them. Once these prospects are shared with the sales teams, big data can help determine which sales techniques would be most effective for them and what leads might be dead.
5. Security - For digital banking customers, fraud and unauthorized spending are their biggest worries. They would like their bank to be proactive and do all it can to safeguard their money. Through big data analytics, banks can create a typical customer profile and identify any unusual activity which may indicate that the account is being compromised. Such analytics will protect the customer and help the banks avoid investigation and chargebacks, which is often time-consuming and expensive.
6. Personalised products - For banks to improve their product offerings and services, gathering and analysing data of how customers use their banking products can be highly beneficial. Mobile apps, portals, and data from various other customer touchpoints can be used to determine whether products are fulfilling customers' needs and how exactly are they being used by customers. Identifying these trends within data can help banks create much more user-friendly and customised banking products, thereby enhancing the overall customer experience.
7. NEO banks - NEO banks are increasingly being referred to as banks of the future. Although they’ve been around for a while, an increase in internet penetration and smartphone users has led to an explosion of NEO banks across the globe. The global NEO bank sector was worth $18.6 billion in 2018 and by 2026, it is going to be worth $394.6 billion as per Zion market research. NEO banking is completely virtual where users are allowed access to a bank account through their smartphones via a mobile banking application. NEO bank accounts are not only easy to operate, but they’re also fast, secure and offer all-round customer support. This allows banks to extend their services to customers who were once never a part of the banking ecosystem, thereby enhancing financial inclusion across the globe.
Banking as a key service in the finance industry is evolving, and will continue to do so as customer preferences change.