Technological progress has reshaped the way businesses across industries operate, including banking. The pandemic has only fuelled the shift to digital and accelerated the adoption of mobile wallets, contactless payments, and other financial online services. Nowadays, innovations and fintech solutions continue to change every aspect of financial offerings.
The increasing number of traditional banking institutions partner with financial software development companies to operate more efficiently and provide their customers with solutions that satisfy their needs. Many banks are still using outdated core systems that make it hard for them to compete with “challenger” banks leveraging advanced technologies like cloud, machine learning, etc.
It is crucial for financial institutions to find the optimal way of revitalising legacy platforms and introducing cutting-edge technologies to open new revenue streams, stay flexible and meet rising customers’ expectations. Let’s look at the four most common technologies that help banks revise business models and deliver seamless and innovative services.
It is estimated that the application of artificial intelligence (AI) can generate around $1 trillion of additional value for banks each year. AI can help financial institutions streamline customer-facing operations, mitigate risks, reach settlements and more. Let’s dive into the top use cases of AI throughout the banking sector.
- Serving customers – banks are increasingly using AI-powered solutions for customer-facing services. For example, chatbots enabled by AI technology help to reduce the response time and provide 24/7 service, improving communication between bank and customers and overall customer satisfaction.
- Enhancing security – with the rising number of cyber threats, financial institutions should adopt new ways to secure sensitive information and maintain customers’ trust. AI algorithms can be used to detect any unusual activity within an account to prevent fraud. Biometric authentication powered by AI, such as facial or voice recognition, can add an extra layer of security.
- Complying with regulations – the financial industry is one of the most highly regulated. Bank institutions should meet current regulatory compliance to avoid monetary violations, predict defaulting and more. AI can track any updates of the guidelines and notify the company once it is detected, eliminating human interactions.
Blockchain technology enables storing and sharing data between authorised network participants in real-time. Smart contracts, distributed data storage and other blockchain technologies are already powering such banking innovations as digital wallets and digital assets. Blockchain offers a safer and quicker way of data transferring, which is of utmost importance for banks. The traditional asset transferring process takes up to 3 days. By adopting blockchain technology, banks eliminate the need for a mediator that verifies transactions, lowering the processing time and offering customers almost instant borderless payments.
Moreover, blockchain has the potential to prevent data leakage, account hacks and other bank-related financial crimes. Its cryptographic nature and shared ledger system make it harder for malicious actors to tamper with data. And quicker transaction time leads to less and even no time for cybercriminals to perform an unauthorised activity.
Many financial institutions move to the cloud infrastructure. According to Google, 83% of financial services companies implement the cloud as a primary computing infrastructure. Data is essential for bank operations, from identity verification to account management. Moving data to the cloud allows secure storage of massive amounts of information in one place that can be accessed from anywhere with an Internet connection.
Legacy on-premises systems do not offer banks scalability and flexibility as the cloud. The cloud platform seamlessly allows to increase or decrease the capacity on-demand depending on the institution’s needs. Moreover, advanced technologies are not always compatible with legacy systems, while the cloud offers great agility. It can help banks launch their products faster, keep up with the latest trends and customers’ demands, etc.
Banks have always had access to the vast majority of data; however, financial institutions only recently started to use it for drawing actionable insights and tailoring services for customers. Banks that have evolved in data maturity have reaped such benefits as improved ROI and many others, including:
- Better customer experience – by analysing customers’ behaviours and preferences, banks can convert gathered information into actionable insights and provide clients with personalised services. Analysing customer journeys can help to detect obstacles and identify demands and later use this data to improve the service. Improved customer satisfaction leads to increased customer retention and higher profits.
- Credit approval automation – machine learning algorithms using information about a customer’s payment history, loans, credit score, purchases, and others can be applied to grant a client credit. By automating this process, a bank can make data-driven decisions faster and more efficiently.
More and more advanced technologies have become integrated into the daily banks’ operations. Adopting technological innovations is a moment of necessity, not a choice for those institutions that want to survive and thrive in the increasingly competitive landscape.
About the Author:
Olha Zhydik is a Content Marketing Manager at ELEKS, a global custom software development company. Olha has been working in the IT industry for over 10 years, including 6 years in marketing. Thanks to her diverse experience, her writing offers a fresh perspective on how technology can help businesses not only innovatively solve problems but also gain a competitive edge. You can connect with Olha on Linkedin or Facebook.
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