The Ledger

A digital finance blog

The Ledger

Posted by Felicia Bowe

Banking Industry Trends and what to expect

Historically, banking has been a traditional standalone institution, but digital and emerging technologies have evolved. So has the push for converting to more automation and seamless transactions based on consumer expectations, business models, and the overall shift towards a more mobile-centric world.

The bank of today will look completely different than the bank of tomorrow or five years from now. Based on how consumers have adapted to mobile banking and new technology unfolding, banks need to consider new strategies for preparing for the near future.  

The role of cloud computing in the future of banking

Leaders in the banking industry are rapidly recognizing that the cloud is becoming a must-have. It is a secure and reliable place to store data and access updated and advanced software applications. Cloud systems can also create opportunities for integration throughout the organization, including customer support, operations, regulatory requirements, and finance. It allows ample data storage and processing power in one place and applies advanced processes that allow companies to take advantage of future insights, become more efficient, and reduce manual activities.

"Essentially every bank, at least over 80 percent of them, are either in flight with some sort of digital finance transformation program or are now considering what are they need to do about it." (full podcast episode)

-Allen Narkiewicz, KPMG Partner, Finance Transformation Practice

Finance leaders are advocating for cloud technology and finance transformation on the basis that it will be faster, cheaper, and more flexible than the alternative of on-site data storage and solution maintenance. They are also making the case that cloud technology can improve banking performance and increase returns for shareholders.  

In the past, banks have been reluctant to shift to cloud-based services due to cybersecurity and the perceived lack of control. However, these organizations are growing more open to the idea of SaaS applications, ERP cloud platforms, and more. 

Only within the last five years or so do we see banks more open to outsourcing their infrastructure and software in the form of a SaaS solution - and this trend is only accelerating. Banks like to move together and they don't want to fall behind their competitors. So now that they've started adopting cloud, we expect banks to embrace the value of SaaS together. Nobody wants to be first and no one wants to be the last.

The transformation of work and employee experience 

Although banks are embracing cloud and other digital technologies, they are still facing various challenges as they look to transform. Challenges the banking industry face include: 

  • The rapid increase in competition from non-traditional players like Klarna, Google, and Amazon  
  • Foot traffic in company branches is declining based on the increasing digital expectations of consumers 
  • Critical regulatory needs are compromising margins.

Banking and financial services must invest in their digital transformation to remain competitive based on the challenges faced. This can mean ensuring employees are equipped with the latest technology and training to work effectively.

Adopting a more digital workplace can increase teamwork and collaboration and allow departments and companies to provide: 

  • automation of customized workflows and administrative tasks, allowing the team to work on more complex cases. 
  • additional tools for critical incidents, allowing employees to de-escalate situations quicker 
  • transparency across the organization  
  • teams who are better aligned, resulting in better customer service.  

LinkedIn-AptCast2109-Ep1

Consumer experience and digital engagement  

While these improvements are critical to the primary goal of ensuring that consumer experience and digital engagement are constant and growing, there are other trends that banking institutions should be on the lookout for or have begun implementing, such as:  

Chatbots  

This digital messaging system has become a foundational technology across many businesses. It has allowed companies to use these chatbots for basic or specific questions that remove waiting times over the phone. Allowing the customer journey to become more seamless by having their most basic questions answered faster. And if there is a need for more assistance, messaging systems and phone calls are permitted for better service. The chatbots have created a shift from the traditional brick-and-mortar and heavy branch interactions to more online services. 

Mobile banking  

Banks have seen a spike in digital banking usage in the last few years, with options like digital deposits, opening checking accounts on the mobile app, and approved loans within 10 minutes of filling out applications. Banks like Wells Fargo have seen an increase of 35% to 50% in online services, including wire transfers.  The pandemic has brought the notion that "Cash is not king," and with the use of mobile wallets, countries are now becoming cashless, slowing down the use of ATMs.  

Blockchain for cybersecurity  

The shift to more digital interfaces has made blockchain a key consideration in the banking sector, ensuring that transactions are secure. While transactions may be safe now, customer trust has increased based on fintech companies' transparency. The vast amount of sensitive data produced from the financial sector can be hacked, making blockchain technology necessary in online and traditional banking. Banks must now take a more secure design approach that ensures they are abiding by their cybersecurity requirement to prevent the threat of attack.  

The emergence of Fintech as a service (FaaS)   

With the rise of digital platforms for lending, insurance, and payments, tech-backed banking has increased. Numerous FinTech's have emerged as service platforms to offer their software as APIs to other competitors in the financial market to integrate into their system. These FinTech's provide a technological solution to many traditional lending companies that want to leverage their business functionalities, resulting in a new model called Fintech as a Service (Faas). Companies like Flywire and PayPal enable banks to provide a range of services like ACH and wire transfers. Other platforms like Affirm allow lending for consumers to become a seamless process by using Buy Now, Pay Later features on apparel, furniture, appliances, and more.  

Banks must continue to digitally transform

The COVID-19 pandemic and the subsequent recovery have kept the pace of demand ever-changing, with customer-facing services requiring banks to undertake a fundamental transformation. 

If you are interested in more perspectives on banking trends, listen to the recent podcast series featuring KPMG Banking and finance transformation experts discussing their perspectives on building the bank of the future and other top-of-mind topics relevant to finance groups within large banks.

The Aptitude Accounting Hub (AAH) provides financial management solutions in organizations looking to simplify their complex problems. It is an essential tool in transforming the business to embrace changes in technology, business models, future regulations, and more.  

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