Trends in banking industry

By Georg Tichy

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For many banks the thought of integrating modern technologies feels like a minefield. Claudia Hauser, EMEA financial services lead at Microsoft, believes that financial institutions need to proactively embrace technological innovation. As the market becomes more transparent, customers are using online price-comparison services to shop around. The digital revolution has also given customers the option to seek other businesses if their current providers do not offer services on multiple channels. Banks are creating user-centric experiences for customers to differentiate each other from the competition (smartbanking solutions). However, this is still a challenge for most financial institutions.  A recent survey reported that 53% of millennials in the U.S. do not see any difference between banks. Anytime, anywhere banking is essential, but it is also the norm.

There is a lack of “human touch” between banks and their customers, and this is one of the reasons why people only visit a branch when they have to, and their relationship to banks is mostly transactional. Fintech companies like Venmo and Sqaure Cash are serious competition for banks. These platforms mimic the natural flow of people when it comes to sending money, which banks are unable to do because of legal regulations and obsolete IT structures.  However, these fintech companies can only provide bank-like services but not a complete holistic financial model.

Banks can offer great help to their customers by providing personalized feedback based on their spending habits and offer smartbanking tools. In today’s technologically oriented culture, the opportunities for banks to integrate this information are endless. Banks are in the enviable position to know every financial touchpoint of their customers, from where they prefer to shop to their credit capacity.

What will the financial world look like in fifty years? Everything will change, except human nature. (Or, nothing will really change.) The financial and banking sector is embracing the new opportunities of emerging technology. Data mining and machine learning platforms, and the rapidly developing world of artificial neural networks, are having significant impacts on the global financial world.

  1. Privacy is dead, and financial inclusion is allowing new opportunities for women and youth. Many countries are implementing biometric-based ID cards for all citizens, including socially conservative countries such as Indonesia. With legal identity outside of the family unit, women can bank, establish credit, take business loans.
  2. Credit scoring is global, much more accurate, and reflects the ability to use better data. An example would be credit scoring in the developing world. For a woman farmer with five children, credit scoring might reflect that all the children are going to school, rather than staying home to work the farm. The ability to correlate variables in behavior with credit will give more accurate pictures, and credit will become global, rather than national.
  3. Fintechs have become an important player (in niches?).
  4. Financial regulation will become global. The rise in the RegTech industry, technology that allows financial institutions to meet increasingly complex and rapidly changing regulatory and compliance standards, suggests the need for global standards.
  5. The rise of ethical banking. Finance, with the idea that strong ethical standards are upheld for investments.
  6. Buying will become biometric. Passwords and pins are gone; chips have replaced cards. Fashion has found ways to decorate chips, which are adhered to the body in a semi-permanent fashion. Just below the eye is popular among teenaged girls, though conservative women use the inside of the wrist. Men prefer the forearm, with changeable tattoos.
  7. The informal economy and the global movement: Cash is still alive, but so is barter, and the power of barter is growing. Coffee beans and tobacco have become standardized barter in different parts of the world. The informal economy is growing, with a larger number of people left behind. There is an increase in small, local food economies, along with an increasing global community for information and language.
  8. Banking still exists, but entirely online, and paper-money is illegal. Most bankers have been replaced by AIs. Reports indicate that some AIs are waiting for new directives…
  9. Crowdfunding and Crowdinvesting is being used as primary credit-source instead of traditional banks, which are are merely processing transactions.

Whatever the future will bring, it’s very likely that banks will not be so dominant any more.

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