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The past, present, and future of digital banking

The past, present, and future of digital banking 3

The past, present, and future of digital banking 4By Peter-Jan Van De Venn, VP Global Digital Banking, Mobiquity

Modern banking is digital through and through. But how did we get here, and what does the future have in store? By looking at past waves of transformation, we can discern lessons about what may come next. Let’s start with banking channels.

Banking channels

Digital banking starts with the emergence of web-based services in the 1990s. The 90s also saw the emergence of the first mobile banking services, using SMS and WAP for basic account services. But it was not until the emergence of smartphone and app-enabled banking in the 2010s that things really took off. For most of that decade, people used a combination of web and mobile channels, with no one channel preferred over the other. Conversely today, 80% of bank customers report that mobile is the main channel though which they access their bank account. Banking channels will continue to evolve in the future. For example, banks are already experimenting with innovations including wearable devices for payments, notifications, alerts, and transfers.

Business lines

Business line transformation started with retail banking. This was largely driven by the explosion in challenger banks and fintech innovators offering compelling financial services, but it was given a significant spur by the advent of open banking from 2016.

The second banking line to transform was SME banking, fuelled by the surge in gig-economy jobs and early-stage start-ups in the 2010s. Largely underserved by traditional banks, fintechs and challengers banks have led the charge into SME banking.

Behind SME banking is wealth management, an area of banking that has maintained manual processes right into the current decade. However, covid-19 inspired lockdowns drove the virtualisation of the business line. Compared to before the pandemic, over half of wealth managers in the US and UK have increased their use of digital technologies.

Finally, there’s corporate banking – another digital laggard. Change is now getting underway as enterprises demand digital experiences from their banks to match the data- and AI-enabled applications they are used to in other areas of the business. In the future the success with which banks modernize corporate banking will tie directly to their innovation capability, customer experience, and ultimately market share.

Banking architecture

The transformation of banking architecture started with the transformation of front-end, customer facing use cases such as banking portals and apps. From there it moved to APIs, with the aim of delivering the right data to banking channels to enhance the user experience. Thanks to APIs, even banks with outdated core infrastructure have been able to digitalise through an API layer.

The next element of banking architecture to evolve is core banking. The transformation of core banking has been helped by the arrival on the market of cloud-based, “composable” banking systems. The availability of technology coincides with recognition from banks that core banking needs to be modernised with urgency to reduce costs and increase agility.

The result is the emergence of “composable” banking. In the same way corporate enterprises are composed of a variety of applications on a common platform, composable banking platforms enable banks to connect applications from a broad range of fintech partners to their architecture.

The banking sector leaders of the future will embrace composable banking to better fight off fight competitive threats and develop additional revenue streams by extending their service portfolios.

Data modernisation

Banks have traditionally struggled to achieve a single view of their customers due to highly siloed data. Now, banks are better able to connect their datasets to create rich customer profiles. This transformation is driving a range of benefits including better insights for product innovation, improved efficiency, and the personalisation of products.

The next stage on the data journey will be to leverage data at scale in AI models. Most financial institutions say that they have already implemented AI, such as in risk management (56%) and revenue generation through new products and processes (52%). However, use cases are proliferating, such as chatbots for customer engagement, automated advice, better credit scoring models and predictive analytics to identify sales opportunities. AI will therefore lie at the very heart of the next generation of banking services and operations.

Personalisation and human centricity

Another area where digital technology has yielded big results for banks is in personalisation. In some ways, this has been needed to counter the depersonalisation of technology, which has resulted in bank branches being largely replaced by digital channels. Banks have also had to embrace personalisation to compete with digitally native competitors that have been able to offer greater customisation.

Banks are now responding with human-centric services of their own. One example is Personal Finance Management, where digital technologies like behavioural analytics are used to provide financial advice, insights and support tailored to users’ unique needs. The future of banking therefore in some ways will reflect its origins insofar as services will be customised completely to the unique contexts of individual customers.


The product area to change was daily retail banking services including balance enquiries, payments, and transfers. Soon after, all activities once conducted in-branch were quickly digitalised.

Next, banks have looked to leverage digital to deliver value-adding services. These include the Personal Finance Management products mentioned above, as well as point-of-sale loans and, digital receipts. A more recent innovation has been around marketplace banking, which aims to offer customer-centric services on a similar digital platform to ecommerce marketplaces.

Now, banks are looking “beyond banking” to opportunities in adjacent sectors. Some of the areas being looked at include real estate, professional services, digital identity, and travel services. Banks will soon operate across a much broader industrial spectrum than at any time in the past.

Key learnings

This potted history of digital transformation in banking provides important lessons for future innovation. Most importantly, progress can only be made when customer needs, technology evolution, and the needs of banks combine. Future initiatives should therefore focus on business drivers and planned outcomes rather than technology enablers alone. History shows that propositions that are desirable for customers, viable for the business, and which are technically feasible are the ones that succeed. It’s at this convergence that the banking industry of tomorrow will be made.

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