By Carmine Evangelista, CTO, Auriga
It goes without saying that 2019 was a busy year for the banking sector and that this year will be too. Here are the top four banking technology trends that will define 2020.
- Smarter banking with AI
Artificial intelligence has already made a huge impact on the banking sector. According to estimates from analyst firm IDC’s Worldwide Artificial Intelligence Systems Spending Guide, the global banking industry spent over $5bn (£3.8bn) on AI systems in 2019, and AI investment is set to grow further in 2020 and beyond. By 2023, IDC predicts that global AI spend could total $97.9bn (£74.9bn), making AI one of the most disruptive technologies of 2020. It cannot be ignored –in order to effectively compete and also to thrive, financial institutions have no choice but to invest in the technology.
One of the key reasons AI is so appealing is because it has so many applications. It can be used to better understand what customers want and need, provide personalised, targeted services, and automate some aspects of customer service with chatbots and robo-advisors for faster resolution of queries, higher consumer satisfaction and improved customer retention. AI is also beneficial when it comes to analysing Big Data and leveraging insight. Machine learning can carefully study banking data to identify trends for every customer touchpoint, optimising experience and driving all-important cost savings.
- Banks reap the rewards of cloud computing
Cloud computing is another massive disruptive force in banking right now, which financial institutions can capitalise on to great effect. Its advantages are numerous. Moving to the cloud means banks can be more economical, keeping infrastructure costs lower, boost resilience and benefit from significantly greater computing power so banks can easily house their data lakes and analyse their data more easily.
Edge computing is an emerging technology with great potential for growth in 2020. The practise allows organisations to process data at the edge of their IT networks instead of in a central location. Being able to do this on-premise and close to users means information can be processed with little to no latency making the process faster and more reliable.
- Business leaders take cybersecurity more seriously
In 2020, financial organisations need to be aware of and alert to a widening range of threats, including those carried out virtually and under the radar in the form of cybercriminal activity, from potential malware attacks to identity theft. In an increasingly digitised and cashless world, cybersecurity is critical. Fortunately, there are a number of tools financial institutions have at their disposal to protect themselves including AI and cloud computing. AI can be used to improve fraud detection and risk management in real time by analysing data to identify patterns of suspicious activity. Cloud computing is also useful, as cloud providers make security more of a priority.
- Rise of the lean bank branch
There is no ignoring the steady stream of bank branch closures in the UK over the last five years. In 2020 branch networks will continue to be pruned, particularly in rural and remote areas. However, what is becoming clear to banks is that offering consumers choice of channel is vital – particularly in the wake of a number of high profile mobile and online banking outages in 2019, when consumers that don’t normally use bank branches were seen as a fall-back option. Furthermore, the mounting pressure from residents, industry organisations and politicians to keep banking touchpoints from ATMs to branches available and accessible is helping to encourage banks to only consider shutting in areas where there is no other feasible option. Bank branches continue to be an important channel for many, especially older people, who appreciate the security of dealing with a real person than corresponding via email or text, which could be from someone pretending to be a representative of their bank.
Therefore, this year we will see banks re-think branch formats and develop lean, shared and white label branches so that they can keep them open We’ll see locations that are served by tellers remotely via assisted-service terminals, video link, and branches that only offer the services most in demand by people living in the vicinity. Such branches may also be owned by one bank but have space or technology used by other organisations too, such as via a concession. This enables the owner to benefit from an additional revenue stream to help improve profitability at the branch.
Despite the many challenges banks face over the next year, it is undeniably an exciting time to be in banking. Technologies such as artificial intelligence, cloud, edge computing, cybersecurity software and video banking are helping the sector completely transform and financial institutions to adapt and thrive. However, they must be willing to invest now so that they can fully reap the benefits down the line.