In the coming years, increasing digitalization will continue to shape how banks operate and interact with customers. To keep up with the times, financial institutions continue to create innovative digital retail banking services to cater to their customers’ needs. This became more evident as the pandemic prompted customers to shift to online banking platforms for secure online transactions.
Moreover, a sizable number of bank customers are comprised of millennials and Gen Zers. These demographics are notable for using computers and mobile phones when it comes to managing payments. As such, they expect more flexible and secure digital transactions from their banks. In response, banks are taking advantage of the latest digital innovations to provide more personalized and efficient services to earn their customers’ trust. This impetus to significantly improve services in the coming years will further initiate major changes in banking.
To give you a better idea of how banks will implement changes, here are five key innovations you should expect in retail banking within the next ten years:
Unified Automation of Principal Banking Processes
Expect banks to focus on broad digital transformation in updating their core systems in the coming years. Digital technology such as robotic automation and artificial intelligence (AI) with machine learning capabilities will be integrated into core banking operations to increase efficiency. Processes such as customer onboarding, the opening of accounts, and repetitive payments will be fully automated. Even applying for mortgages and loans will have automated support that will make the underwriting process go more smoothly.
Automation will eliminate redundant tasks and minimize human errors in processing customer data. Banks can also generate comprehensive up-to-date reports to analyze customer information that will allow them to create more personalized products and services in line with customers’ demands. Overall, broad automation will make banking processes faster, improve customer service, and reduce the cost of labor.
Artificial Intelligence (AI) and “Smart” Banking Experience
In the coming years, many banks will leverage AI to analyze valuable customer data and transaction records. They will use their data to run AI assistants that deliver personalized customer experiences across different banking services and mobile apps. More banks will be using AI-enabled chatbots to initiate conversations with customers on banking platforms. This reduces the need for additional operators that handle customer requests on a daily basis.
Moreover, banks will use AI technology as a smart voice assistant that can answer customers’ questions 24/7. Advanced chat support can help customers navigate through routine banking activities, such as checking savings accounts and planning budgets.
Banking Innovations Using Internet of Things (IoT)
Since many objects can be connected to the internet, people can now use different devices to access apps and financial platforms. This has led to the rise of the so-called Internet of Things (IoT), essentially objects embedded with software and sensors that can go online to connect to a network of other devices to exchange data. These things can be your television, mobile phone, baby monitor, and even your refrigerator. Ultimately, banks can tap into IoT technology to expand their services.
In the next ten years, customers can use wearables such as smartwatches to purchase products. They can simply scan it on a terminal to send instant payments. Digital wallets can also be accessed through mobile phones, smartwatches, and car dashboards. Users can receive payment and banking notifications on these devices.
Broad Open Banking Options Through API
More financial institutions will implement open banking capabilities to satisfy customer demand for online platforms and mobile apps. Open banking allows third-party financial service providers open access to customers’ financial data through the use of Application Programming Interfaces (API). Banks that work with third-party providers such as Financial Technology (FinTech) companies can develop customized digital banking services, such as apps that enable fast, real-time payment transfers for customers.
Besides developing better digital services, open data access allows banks, third-party providers, and customers access to a protected network of accounts. And with more financial institutions embracing open banking, customers will have the freedom to use a variety of third-party financial services available to them. More importantly, it ensures that customers can safely use their financial data when they sign up for third-party financial services.
To accelerate the shift to open banking, some countries have enacted data protection laws that have required banks to share data with third-party providers. A good example of sweeping data regulation is the Second Directive on Payment Services (PSD2) mandate by the European Union. Other countries such as Australia and Hong Kong also have their version of open data protection laws. More countries are likely to follow suit in the next ten years.
Biometric Technology for Enhanced Security
In the coming years, banks will adopt biometric technology to identify their customers. This is a major security upgrade that will prevent fraud and increase banking protection. Since biometrics verify customers by scanning their voice or fingerprint, it would be much harder for outsiders to hack accounts. And unlike passwords and PIN numbers, customers don’t have to worry about changing their passwords regularly for security purposes.
You can expect ATMs to have fingerprint scanners in the next ten years. Biometric security will be offered across different banking channels, including online accounts and mobile banking apps. It will allow customers to withdraw, transfer, and check their funds securely at any time.
All these changes are driven by the growing demand for more innovative retail banking services. Because of evolving customer needs, financial institutions are challenged to redesign their banking experience to meet the demands of the digital age.
