The Future of Digital Banks

By Ritesh Jain, COO|CTO, Former Global Head of Delivery – Digital Tech Foundation, HSBC.

Digital transformation is what the global industry of all sectors are heading towards. The banking sector is nowhere behind in this race of transformation. It is time to bring a substantial change or get lost in the digital waves. In the coming decades, we will witness a much rapid change in the bank and customer alliance, and the coalition of different sectors with financial sectors and FinTech collaborations.

“Digital banking simply makes life easier for consumers – Ian Bradbury, Fujitsu.”

Retail banks are already harvesting Omnichannel banking. We can see a change in digital selling of bancassurance. It provides the customer with real-time access to their banking services through their choice of channel. The banking sector will be integrating augmented reality, AI, and other Internet of Things (IoT) integrations. The next big thing we can see coming is enhanced biometrics usage and digital voice services powered by the cloud, and collaboration of services through Open Banking or Opening doors for others through Banking as a Service.

Transformation is the need of the hour

“Wave of change is in the air”

Digital transformation not only involves the evolution in the modus operandi of banking but, reshaping competency and business models. Banks will be soon be unable to carry forward their core banking systems. The Banks need to provide an integrated financial service to adopt customer behavior and rapidly changing requirements. Bancassurance needs to redefine their distribution model to ensure a great response to consumer demands.

The stats from a BI Intelligence survey revealed that 71 percent of today’s banking customers find having a banking app, the most important aspect of their banking experience. 60 percent supported the significance of an app to help them with payments.

Current Scenario of Digital Banking

Ritesh Jain

The traditional methods have already started to retreat. Large institutions to small banks, they are all getting themselves online. People are now accustomed to the digital platform being their first point of contact. The market has witnessed a boom in payment apps and platforms with tech giants like Apple and Samsung offering payment solution business with their own Apple Pay and Samsung Pay payment platforms.

Banks have moved to offer a digital branch experience with audio and video connect facilities, apart from the chatbox support functionality.

Many traditional banks have by now shifted to mobile apps. However, with the decline in physical visits, non-lending products like Bancassurance are still slow in their growth. A closer work collaboration between banks and insurance providers to provide the customers with more customized and personal offerings.

Key Factors Shaping the Future transformation

“Customer is the priority; the transformation should have an approach of not having just another interface but amalgamate their life experiences and habits with banking.”

We narrow down the factors to these three parameters: Safety, Simplicity, and Agility.

Safety: Data has never held such importance as much it holds in today’s scenario. The customer wants their data and identity to be safe and secure at any cost. They demand service with security.

Simplicity: Customers are looking for a simplified user experience. Technology has nowadays made people habitual of a simple and easy to use interface. The banking sector is expected to do the same and come up with platforms with the most simplified functionalities.

Agility: Most of the customers have been using multiple banks, and they can easily compare which one works best for them. The only way to deal with this is the advancement of their core legacy systems to adapt security and agility. The competition in digital banking is fierce, with emerging big names with even bigger links and technologies.

“Crucial for this is understanding that the future of digital banking lies in how banks can apply Safety, Simplicity, and Agility to shape the financial wellbeing of their customers and how they are willing to integrate and explore beyond possibilities.”

Future Phase of Transformation has Already Commenced

The Digital era is the era of transparency and immense possibilities. The working in silos approach needs to fade off securely. The widespread application of banking apps and internet banking was just the curtain-raiser to the digital world in banking.

Big technical names are advancing towards the financial sector that might work to drift away from the inhibitors like banks core legacy systems. The future is the collaboration of both the technical and financial sector, yielding a whole new digital banking experience. Sustainable Teller Machines (STMs) is the dawn of a technology that puts an end to the legacy banking system.

After mobile banking apps, we will witness the arrival of innovative digital payment solutions that offers effortless ways of payment and purchase. This might make some of the dominant and prevalent features obsolete. Contactless digital payment medium is a revolution in the digital sector.

With the emergence of IoT in financial sector, wearables encompassing digital payment can also be in making. The rise in smartphone usage and extended internet connectivity has enabled new possibilities of payment technologies. Payment and security will now be enabled with the tokenization of card details, multi-factor authentication through biometric, and EMV standards for user authentication.

Digital disruption has been observed in cross border payments. SWIFT gpi is the torchbearer of this digital evolution, enabling great speed and transparency in cross border payments.

The banking sector could completely eliminate bank branches and migrate to digital offices. The idea and methods will be the same as traditional banking but, with the digitally revamped banking experience. Maybe soon, we can provide the customers with the ease of banking from voice assistants like Google Home, Alexa, or Siri or a personal AI advisor.

Personal data and lifestyle can be pulled to offer customer lifestyle experiences catering to their needs. Solutions like Liv. and Valora are doing the current implication of such an ideology.

Smart contracts will be the ultimate way forward for the commercial lending process. With this, Blockchain technology is another field that we can see collaborating with the banking domain. It is transparent, secure, and decentralized. Monetha and Bankera are some of the payment solutions already doing its rounds in the market.

“With IoT and blockchain, there will be Speed, Simplicity, Agility and Security”

Banks will be seen dealing in both traditional and cryptocurrencies. Mobile payment company Abraare is analyzing the potential of blockchain technology in devising platform for mobile P2P payments and cross-border payments. Finance platforms like NASDAQ and the Australian Securities Exchange have already dived into blockchain solutions to minimize costs and enhance efficacies.

Summing it Up!

One might not be aware of what the future of digital banking hold, but we can be sure of witnessing a roller coaster of changes. Every financial organization will change, not only to survive but blossom in the emerging digital disruptions. This is the time where new and comparatively smaller firms can play it big.

What all are you expecting? What are your thoughts on the future of digital banking?