Change is the only constant today. What we’ve observed over the last few years is industries being shaken and reshaped by digital transformation, customer relationships and experiences changed by disruptive technologies everyone’s talking about. In banking, we’re witnessing another revolution in payments. China is confidently moving to become a cashless society. Already today AliPay and WeChat Pay are ranking as top two preferred online payment methods in China. WeChat’s QR code or quick response scan or AliPay’s “pay with a smile” payment options at retail locations are making not only cash payments but traditional credit card transactions seem prehistoric. And in order to keep up with their customers, banks need to take note and get to grips with the latest tech trends. Below we took a detailed look at some of the most promising fintech trends and tried to uncover how banks can make the most of them.
Experience fintech the new way with AR/VR
Today it seems like AR and VR are at the forefront of customer experiences across all industries and the financial services industry is no exception.
Already, some of the banks are in on a trend. Like National Bank of Oman that uses AR to help their customers locate the nearest ATM or find some offers and deals while shopping in a mall or down any street in Oman. In the meantime, BNP Paribas offers their clients VR experience that allows them to virtually access account activity and transaction records or walk users through various and complex steps of a real estate purchase in virtual reality mode.
In 2019 Extended Reality (XR) that includes Augmented Reality (AR), Virtual Reality (VR) and Mixed Reality (MR) is one of the most promising fintech technology trends. According to this year’s survey, 45% of tech-savvy consumers want their banks to present new ways of communicating, like wearables or virtual reality. At the same time, 80% of respondents believe it’s important to be a pioneer in XR solutions.
For banking, AR/VR could mean higher workforce performance and more meaningful customer engagements. AR can help increase workers’ productivity by helping salespeople view and analyze large quantities of data faster, thanks to more intuitive AR interfaces. For customers, VR/AR technologies can redefine their relationships with banks and also serve as a time saver. The popularity of online banking apps and digital-only banks is growing. Eventually customers who can’t or don’t want to visit bank branches won’t have to. For them, AR technologies will soon make it possible to have person-to-person virtual meetings with bank officers from the comfort of their home or any place in the world.
Customer service aside, there are other possibilities how VR/AR technologies can influence the financial sector in the upcoming year. Like visualizing and carefully structuring data to help traders arrive at more intelligent decisions. Another current use of VR in fintech — virtual reality workstations for trading. Polish-based tech giant Comarch has already put it into a good use by introducing wealth management to virtual reality and offering a completely immersive experience. Moreover, you can now pay for things without leaving the virtual world. Together with Wearality MasterCard created a virtual reality gold experience “Priceless” where you can buy a shirt within the game by using virtual reality payments.
Considering the estimated growth of AR/VR market over the next couple of years, the financial industry will have to keep up and get in on a trend that is a perfect way to engage, entertain and retain their customers.
AI as a co-worker and an assistant
Artificial Intelligence is probably the most popular tech trend to be discussed in the banking industry and other financial sectors. It has been making headlines and stirring debates about its potential to cut countless jobs. Indeed, numerous companies have been guilty of making shocking predictions about the number of its employees to be replaced by AI. Deutsche Bank chief executive went as far as to predict that half of the bank’s 98,000 staff will be replaced with robots.
Whether any of these predictions are anywhere near the reality only time will show. But today AI has made a very prominent place for itself in the banking industry. A recent survey shows that 79% of bankers believe that within the next two years AI will work alongside humans as a colleague, advisor, collaborator.
Collaborative robots or cobots that work alongside humans and help them perform their job quicker and better as well as guarantee the best possible service for customers is becoming a widespread practice. Back in 2016 Bank of America presented Erica, an intelligent virtual assistant that leverages predictive analytics and cognitive messaging to provide 24/7 assistance to the company’s over 45 million customers.
Another way to use AI that will become popular this year for the financial sector are voice assistants. As digital assistants become a part of our everyday lives and we’re getting more and more used to them, the financial services industry is making a use of them for their customer services purposes. OCBC Bank has partnered with Google to make the first in Singapore AI-powered voice banking. The service allows its users to initiate a conversation about OCBC Bank’s services straight from their smartphone or Google Home device. The Google Assistant will provide information on how to calculate mortgage loan amounts, plan future savings, or receive the latest market updates as well as the location of the nearest ATM.
Chatbots and virtual assistants aside, the financial sector can make use of customer profiling and algorithmic sorting to provide customized communications and decisions based on detailed customer profiles. AI can also streamline processes and help with some decision-making, provided it has complete knowledge of regulations and laws. Generally, AI in the financial sector has the potential to cut costs and speed up the processes, as well as accelerate services.
Physical banks are a thing of the past
71% of millennials would rather go to the dentist than listen to what banks are saying. Going to the actual banks is becoming a habit of the past in the era when mobile banks are popping with the speed of light. It is expected that by 2022 customer visits to retail bank branches will drop by 36% while mobile transactions are to grow by 121% and will eventually compose 88% of all banking transactions.
Three main factors stand behind the growth of this trend. Mobile banking is more convenient, instead of going to the local branch, no matter how close it is, all the services you need are at your fingertips. It is more accessible, owing to the fact that 65% of the world population own a smartphone. On top of that, banks can benefit from this shift as well since mobile apps facilitate cheaper transactions and cut costs sufficiently.
In 2019 we will witness a growing number of digital banks due to their popularity among the younger generations who prefer to have all the banking services they need on a mobile device rather than going to a local branch.
Already, the list of digital-only banks to watch gathers quite interesting examples. Digital banks provide their clients with apps that are good not only for managing money online, exchanging their currency or cryptocurrency, but also allow to set up a budget, track daily expenses online, set a daily spending limit and see your expenses categorically.
Design thinking to understand what customers need
One of the freshest trends to raise in the banking and fintech sector is Design Thinking. With numerous fintech startups popping each year, the banking industry has little choice but to adapt to the new startup culture and start thinking like one. That’s where Design Thinking can help.
Having little to do with only aesthetics, its focus is more on how a product works, helps customers and solves their problems. Design Thinking achieves its objectives by applying design principles to the way people interact with the world. The process involves trying to understand a customer’s behavior, a way of thinking and behaving (empathy) in order to get to the bottom of their problem and see if there’s a common issue among numerous users (definition). It allows total freedom for brainstorming (ideation) to see through the feedback on your prototypes which of the crazy ideas work and which don’t (prototyping) and finally verify your assumptions with real people (testing).
Traditionally, banking hasn’t been exactly one of the industries to look at the product design and problem-solving from the customer’s perspective. Complicated online banking apps, frustrating online account opening process – all sound familiar to bank clients.
And Design Thinking can actually change that and get the innovation ball rolling by co-creating products with their customers to get their feedback quicker or hiring diverse teams to build more emphatic solutions.
Some of the banks are already successfully putting this idea into practice. The multinational Spanish banking group BBVA is spreading design thinking practices throughout the whole organization. They understand its value and the fact the most innovative products on the planet are created when design principles are a part of the organization and not just a department. They are promoting design thinking courses and training to encourage their employees to implement design principles into their everyday work. Their latest app was built with design thinking in mind, and the bank giant attributes the app’s success to it. According to their data, new credit card applications went by 80%, account opening by 20%, and sales of investment funds by 50%, all after the redesigned app was released.
Data Veracity is as valuable as ever
Big Data means big responsibility. The more businesses become data-driven, the more valuable it becomes for information to be accurate and untampered. It may compromise the decisions companies make or insights they rely on.
For the financial services industry, where institutions have traditionally possessed large amounts of important and confidential information about their clients, partners, services, data security is especially important. According to a report by CB Insights, in 2017 financial services industry saw the highest volume of cybersecurity incidents compared to any other industry.
In an effort to protect their customers from fraud and hacking, financial services industry is adopting a biometric technology. Most of the banking apps today prefer using biometric authentication, which offers a safe and faster way to access the app. Some experts think that PIN numbers will vanish by 2020 and MasterCard has already set a deadline for their customers to have access to biometric authentication services — by April 2019.
Most banking organizations rely heavily on data to drive automated decision-making. 84% of bankers that took Technology Vision survey can attest to that. At the same time, 77% of respondents note that most organizations are not ready to face the implications that come with corrupted insights, bad decisions, and possible compliance failures.
This means that if banks want to build long-term, strong relationships with their clients, they require a level of trust. Some of this trust can be achieved through regulations like GDPR. But in order to truly succeed, gain their customers’ trust and respect, banks will have to go further and strengthen cybersecurity, involve technologies like blockchain to enhance transactional banking. These actions should be first of all with customers in mind, to show them that they are protecting their personal data and using it in customers’ best interest.
Blockchain goes beyond Bitcoin
This wouldn’t have been a real fintech trends overview without the most talked about, in the financial sector included, technology.
Blockchain has been stirring innovation across various industries and financial services industry is no exception. Nine out of ten banking executives say that their bank is currently exploring blockchain use. Blockchain allows to track every transaction and provides accurate information from any point in the network. When fully adopted by banks, it will allow a quicker and more accurate payment processing at the same time reduce its cost. And as the technology further develops and matures, it has the prospect to replace banks’ legacy systems in the future cost-effectively.
Earlier in 2018 several banks in Asia made a successful use of Blockchain to transfer funds in a matter of seconds between Thailand and Singapore. Right now banking organizations are at the early stages of adoption, either focusing on developing their blockchain strategy or working on the proof-of-concept. Some of the banks are wasting no time. The Central Bank of India created a league out of firms that are responsible for 80% of financial transactions in the country and used blockchain for interbank transactions. By sharing distributed ledgers between institutions, banks can provide faster access to funds for their clients as well as more efficient processing and as a result, save some money for themselves.
Today’s fintech trends show us that financial services industry needs to master how to best apply disruptive tech into their strategy in order to meet the growing need of their tech-savvy customers. Some of the technologies, like VR/AR or Blockchain can be game-changing and completely change how your clients experience your products. But sometimes, even the slightest change like considering mobile app development will facilitate your business growth, help solve your current customers’ pains and attract new ones as well.
Ultimately, it’s the matter of winners who will learn to lead and adapt to new technologies and losers who will fail to digitally transform their institutions.