Only a few years ago, technology was a huge disruptor in the banking industry. While the pandemic has hastened the deployment of technology across businesses and sectors, our reliance on it has increased dramatically. Online deposits, mobile wallets, e-bill payments, and other similar financial transactions have largely become the norm in recent years.
Artificial intelligence is at the heart of the digital banking transition, thanks to rising customer demand for digital banking services. The expansion of fintech and neo-banks, which are making the entire banking process more accessible and hassle-free for customers, is largely following these improvements.
Let’s take a deeper look at some of the most important digital banking technology trends for 2022, and how they may help your bank grow.
Accelerated growth of Embedded Finance
Customers are warming up to the concept of utilizing non-bank enterprises and social apps for banking-as-a-service (BaaS) and Embedded Finance, such as making payments, transferring money to friends, and managing money.
‘Buy Now Pay Later (BNPL)’ payment solutions are becoming more ubiquitous. According to a recent report by Grand View Research, Inc., the worldwide BNPL market is predicted to reach USD 20.40 billion by 2028, with a CAGR of 22.4 percent from 2021 to 2028. The enormous variety of benefits given by BNPL platforms, such as quick and interest-free payments, can be credited to the market’s rise.
Customers are particularly interested in utilizing non-banking institutions to make purchases or obtain rewards and discounts. The boundaries between banks and non-banks will continue to blur. Banks should employ embedded finance to stay active in their consumers’ financial life, regardless of where or how they consume banking services.
The Evolution of Blockchain
In the fintech business, blockchain is a pioneer in terms of innovation. Blockchain is quick, global, and rich, and with decreased processing fees, it is on its way to completely transforming the face of global financial transactions.
According to PwC, it has the potential to enhance the world economy by 1.76 trillion dollars over the next decade.
Green blockchain efforts, which will place a strong focus on sustainability, is one of the avenues in which, blockchain is predicted to evolve. Second, NFT (Non-fungible Token) is growing and seeing a lot more creative application. Third, rather than accepting existing decentralized coins, more governments are adopting bitcoins and national cryptocurrencies, in which central banks develop their own bitcoins that they can control.
The rise of Smart Contracts
Smart contracts are utilized to carry out numerous processes in a blockchain network. These are computer algorithms that automatically manage and verify data recording and guarantee the party signing the contract fulfils their commitments. The contract’s terms must be codified and translated into suitable software code.
Smart contracts that are automatically executed using distributed ledger technology can save participants money and time when it comes to satisfying the requirements of the transaction. The financial services industry is closely watching banking technology advances in the smart contract field, so their use will increase.
Digital Payments in Offline mode
An offline digital payment is one that does not require internet or telecommunications access. Such payments may be made face-to-face (in proximity mode) via any channel or instrument, such as cards, wallets, mobile devices, and so on.
Such transactions would not necessitate the use of an Additional Factor of Authentication (AFA). Because the transactions are offline, the consumer will get alerts (through SMS and/or e-mail) after a time lag. Account balance replenishment is only possible in an online mode.
This is made possible through – Near-Field Communication (NFC)-enabled prepaid cards and point-of-sale (PoS) devices that support offline person-to-merchant (P2M) transactions; Feature phone-based Unified Payments Interface (UPI) payment system for P2M transactions over ‘sound medium’ by providing a secure channel for data transfer between devices using interactive voice response (IVR); Offline payment system based on UPI that uses SIM overlay smartcards put on the SIM to drive SIM tool kit (STK) menu-based user interface to support P2P (Person to Person)/P2M transactions etc..
MLOps: A great way to enhance your game
Banks have long relied on data analytics, but with machine learning, they can significantly enhance their effectiveness. ML models enable organizations to progress toward near-real-time data processing, which may help them detect patterns, uncover anomalies, develop insights, make forecasts, and move toward automated decision-making.
You’ll need to change your processes as well if you want to make machine learning a primary driver of your bank’s performance. This can be achieved using MLOps, which uses DevOps tools and methodologies to industrialize and scale machine learning.
Several institutions have already built interesting MLOps proof-of-concepts. MLOps has the potential to become a mainstream practice and a major driver of change in the banking industry over the next several years.
UX Design: From a demotivating Excel-like user interface to dopamine-inducing gamification, there’s something for everyone
It’s true that back-office solutions are quite complicated and data-driven since there are vast databases of various types of consumer information.
Banks are pouring money into digital transformation to improve the customer experience, yet cost-cutting in the core banking system has a negative impact on customer service. When it comes to producing financial products, the customer-centered design approach is becoming increasingly popular, and it can be used not just for external banking products, but also for internal solutions.
It is a long-held misconception that gamification and banking have nothing in common. In fact, they have the potential to greatly boost employee productivity and motivation, resulting in superior overall performance.
Never, ever trust; always, always check
The most critical technological trend for banks is cybersecurity. Cyberattacks are growing more common as well as more sophisticated. This necessitates banks beefing up their security procedures.
The idea of ‘zero trust’ holds that no individual, workload, device, or network can be trusted intrinsically. Every access request should be checked against all accessible data points, such as the user’s identity, device, location, and other characteristics.
A zero-trust architecture should be part of any modern organizational setting. The most significant asset for banks is their customer’s trust. A zero-trust security technique is the only way to adequately secure this trust.
The pandemic reminded every business of its mission and what it must give its customers. Customers want banks and financial institutions to have their backs, understand their needs, and actively assist them. The transition to digital, which began long before the pandemic, has abruptly accelerated. This circumstance has also created a chance for financial companies to reconsider their purpose, revise their mission statement, and make the digital banking experience more personal, sensitive, and understanding.
In 2022, banks will have a lot of opportunity to leverage digital tools and data-driven personalization to get to know their customers, provide them advice, and help them achieve financial health. Customer transaction data, which banks currently have, will be the cornerstone for digital transformation in 2022.
Banks can accomplish data-driven personalization that puts the consumer at the center of every encounter by building on their customer data, evaluating it, and getting insights from it. Banks may become trusted advisers that know how to make the appropriate advice at the right moment, in addition to selling products.