The 10 digital innovations that will profoundly change banking professions

Brett King summarizes very well the four evolutions of the bank

  • Bank 1.0
    • Traditional and historical banking is centered on the bank branch as the main access point. Started with the Medici family in the 12th century.
  • Bank 2.0
    • The emergence of self-service banking, defined by the first attempts at access outside working hours. Started with ATMs and accelerated in 1995 with the Internet.
  • Bank 3.0
    • Bank 3.0 makes it possible to carry out banking operations when and where you need them with a smartphone and to its acceleration with the transition to mobile payments, to P2P in the logic of ATAWAD.
  • Bank 4.0
    • Banking 4.0 is differentiated by ubiquitous banking services delivered in real time. It started in 2014 with platformization.
    • The massive use of AI facilitates customer identification and authentication, mimics live employees via chatbots and voice assistants, provides personalized information and recommendations.
    • Digital innovations enable banks to assess risk, detect and prevent payment fraud, improve anti-money laundering (AML) processes and perform regulatory know-your-customer checks ( KYC) at a very low cost.

Fintech competition

With the use of digital innovations, Fintechs are competing with banks in their traditional banking markets. For example: peer-to-peer lending platforms are at the forefront of the fintech revolution. These platforms connect borrowers with investors (e.g. individuals) online who fund loans rather than traditional finance providers such as banks and building societies. A unique feature of peer-to-peer platforms is that they use digital algorithms to screen a borrower’s loan application and determine if it meets their credit standards. The entire digital lending process is automated, so bank “customers” do not need to visit a bank branch.

Tomorrow’s bankers will therefore be “high-tech” companies that will allow their customers to enjoy the banking experience in a decentralized way when they want it, where they want it and with the equipment of their choice (ATAWAD).

For example, Apple will look more and more like a bank. Indeed, Apple first launched into fintech with the Apple Card. Users of these cards can now get Daily Cash, Apple’s special mark on the most mundane cashback rewards, on their purchases. The promise of this “high yield” savings account is that cardholders can deposit their Daily Cash into it “with no fees, no minimum deposits and no minimum balance requirements”. Additionally, whoever owns the account can also deposit funds into the new savings account from a linked bank account or their existing Apple Cash balance.

PayPal also offers a savings account with an annual percentage return of 2.45%, and Robinhood has tested similar features.

“High Tech” companies

Here are some examples of digital innovations that will be at the heart of the bank of tomorrow, that is to say that of “High Tech” companies such as Apple, Paypal and Robinhood.

La datafication

The “bank” of tomorrow will depend on data that provides context for the delivery of real-time banking services. With millions of customers, banking and financial institutions are probably the most data-intensive organizations in the global economy.

Only by analyzing data can banks truly listen to customers and create personalized financial services that will benefit them. Result: The winning banks will be those who manage to generate tailored offers and personalized experiences for their customers.

Chatbots

Chatbots are probably the future of banking. It is software that can simulate online conversations with people through different channels such as websites and mobile applications.

  • Chatbots act as personal digital assistants that answer customer questions in real time, provide 24/7 service, and deliver a personalized experience.
  • Additionally, an advanced chatbot can help customers with day-to-day banking tasks (like checking account balances and tracking expenses), and can even collect marketing leads and perform cross-selling activities.
  • According to a report published by Juniper, chatbots will save more than $8 billion by 2022.

Immersive technologies

Augmented reality

Immersive technologies such as augmented, virtual and mixed reality improve the customer experience in all areas. Augmented reality can also be used to solve many of the challenges facing banks today – whether it’s slow self-service capabilities, the lack of a smarter authentication system, a limited customer experience outside of bank branches or limited access to information via debit and credit cards.

blockchain

The Blockchain allows multiple parties to access the same data simultaneously, while ensuring the integrity and immutability of the records entered into the database. The benefits are considerable. For example :

  • Only the information required for each specific transaction is shared, while all other data remains safe on the trusted provider’s server.
  • Decentralized finance (DeFi), markets are always open and no centralized authority can block payments or deny access to anything. Services that were previously slow and subject to the risk of human error are automated and safer by being managed by code that anyone can inspect and examine.
  • Knowledge graphs will have far-reaching implications in the years to come. Their ability to help create associations and identify patterns across complex financial networks will impact many banking businesses.
  • Central bank e-currencies will reshape the global financial system. They will change the face of finance and the nature of money itself.

New technological bricks

The new computer

Here are some examples of the possibilities offered by the new technological bricks that will be at the heart of information systems:

  • Low-code applications created can be modified faster than high-code methods. They require less maintenance and make it possible to create new applications with much less effort.
  • Open source software, serverless architecture and software as a service (SaaS) have become staples in financial institutions. With serverless computing, the cloud provider is not only responsible for managing the infrastructure, but also for scaling the applications. Serverless applications are deployed in containers that start automatically on demand.
  • Edge computing enables local analysis of bank data, which is essential for near real-time decision-making. Additionally, edge computing reduces the risk of sensitive data exposure, as processing operations are performed locally. This allows companies to better enforce security measures.

Automation of robotic processes

Replacing manual labor with automation not only improves efficiency, but also reduces human error and allows banks to respond to fluctuations in demand.

For example, with RPA (Robotic Process Automation), banks can automate rules-based business processes and reduce personnel costs and human errors. Going forward, RPA will be more deeply integrated with AI, improving its efficiency in handling more complex business scenarios and further streamlining the delivery of financial services.

Quantum Computing

While traditional computers use bits and a binary system of representing information (zero or one), quantum devices store information in qubits, which can end up in a particular state, superposition (both zero and one in same time). This allows them to process a large amount of information much faster than conventional devices.

Quantum computers

As soon as large-scale, fault-tolerant universal quantum computers become available, there is a risk that all private data and information about people, companies and transactions will be exposed.

Artificial intelligence

AI applications will prevail in all banking businesses:

  • tailor-made products,
  • a personalized user experience and
  • services for analyzing the needs of each client
  • chat interfaces,
  • market trackers,
  • automated transactions
  • robo-advisors,

API Platforms

Long gone are the days when banks could control the entire customer experience through a monolithic system that controlled everything from record keeping to every customer interaction. Moreover, regulatory requirements have turned this huge system into dinosaurs.

Today, banks need to build “banking stacks” that allow them to be a platform that customers and third-party service providers can connect to to deliver a flexible and personalized end-user experience.

Object portfolio

The electronic purse is very secure and does not require you to enter the credit card number, the security code (CVV) and the expiry date.

Wallets are stored in mobile phones, smart watches or even customer car dashboards allow people to pay for products directly from the device. The bank is where you need it.

IoT

In a completely cashless society, the potential of IoT in banking can be limitless with the generalization of XaaS (Everything as a Service).

In the banking sector, the integration of IoT and blockchain will notably enable risk management by ensuring that accounting records correspond to real-world transactions, thus facilitating a whole new system of trust. The integration of banking services into the IoT will also allow banks to anticipate their customers’ expectations.