Top Digital Banking Trends for 2022
The majority of history’s defining moments are only apparent in hindsight. However, the pandemic is a real-time dividing line for the financial industry.
If 2020 and 2021 were the years in which COVID compelled banks to embrace change, then 2022 will mark the institutionalization of that change and the beginnings of a new normal. For the majority of the world’s leading banks, the pre-COVID propensity for incremental change and cautious experimentation has been replaced by a faster digital metabolism and a willingness to challenge conventional business models, even if this results in the erosion of traditional revenue streams.
Empowered clients are becoming more demanding on numerous dimensions, including service costs and sustainability, while new entrants are expanding their service coverage. Therefore, the top banks in the world must rise to the occasion in 2022.
Extensive Application Of Automation And New Technologies That Empower The Client
Automation and artificial intelligence, which are now significant components of consumer banking, will permeate operations even more deeply in the coming years, offering benefits not only to a bank’s cost structure but also to its clients. For instance, digitising the loan closing and fulfilment experience will expedite the procedure and provide consumers with the flexibility and freedom to examine and sign documents online or via their mobile application. Typically, US consumers must wait at least a month for mortgage approval; digitising this process and automating approvals and processing would reduce the wait time from days to minutes.
Likewise, for call centres Powered by powerful AI, users might receive quick, efficient automated customer support as opposed to waiting on hold or being passed between several people.
AI and advanced analytics could also enhance the resolution of disputes. Customers can contact their bank at any time via the internet, their mobile device, or email to receive prompt, real-time decisions. On the back end, systems would do an almost instantaneous data review of the dispute, analysing the customer’s past interactions with the bank and use historical dispute patterns to settle the issue.
Integral Procedures And Constant Quality
Today, many operations staff execute dozens or even hundreds of similar duties on a daily basis, such as assessing consumer disputes on credit or debit cards, processing or authorising loans, ensuring payments are properly processed, etc. It is hardly surprising when mistakes occur. Five to 10 percent of all debit card disputes processed by some US banks had inaccuracies.
By automating these and other procedures, human bias in decision-making will be reduced and errors will be nearly eliminated. This will allow operations personnel to assist customers with sophisticated, large, or sensitive situations that cannot be automated. And these personnel will have the authority to make decisions and the abilities necessary to promptly resolve client complaints.
The Need of Super-Apps
Super-apps consolidate many of our retail, social, and other needs, similar to how the smartphone concentrated our hardware needs into a single device. The majority of digital banking consists of checking account balances, paying bills, and making deposits—functionality that large technology companies are progressively integrating into broader platforms that include commerce and social media services. Super apps such as WeChat render financial services invisible by transforming them into tools for engaging in more engaging activities, such as travelling, shopping, and side hustles.
How should traditional banks adapt to the rise of Amazon, Walmart, Meta, and others into financial services?
There are various solutions available to banks, each with advantages and disadvantages. They can attempt to add non-banking capability to their own services and compete head-to-head for client attention, but it is an expensive operation with no assurances and is likely only viable in a few of markets. Alternately, they can collaborate with a super-app to provide white-label services, accepting that they will be a junior partner and will likely compete with their own branded services. Their third alternative is to isolate themselves and defend their conventional franchise. However, differentiating themselves could be difficult, and they will have to accept a diminishing percentage of traditional transactions as super-apps emerge to dominate more of their clients’ financial lives.
Innovation Makes A Resurgence
The decade following the great financial crisis was a period of retrenchment during which many banks refrained from releasing new products and instead concentrated on putting the fundamentals right. This void was filled by start-ups and digital rivals, who identified growth opportunities that legacy banking institutions had been ignoring. Consider people who are in danger of running out of money right before payday as well as small businesses seeking guidance. With the assistance of COVID-induced improvisation, banks are responding with innovation. At the industry level, alliances like the one that produced Zelle are forming to compete with payment apps like Venmo.
At the institutional level, banks now have a clearer understanding of when to construct, purchase, and collaborate. Two of the world’s largest banks have embedded their treasury services APIs (application programming interfaces) into the Stripe payments platform, which in turn is embedded in Shopify’s e-commerce platform. These decisions were influenced by the belief that product innovation is what will ultimately affect balance sheet market share.
A Fascinating Mystery Tour Of Fees
Over the course of the previous several decades, banking costs have changed from transparent charges for services such as account maintenance to more concealed fees for things such as overdrafts. Then fintech companies appeared, promising a variety of services at the enchanted price of zero, only to subsequently reveal that revenue must come from someplace. One financial company just requested a “contribution” that began at $1 and increased from there. Others assess penalties for clients who skip a buy-now-pay-later arrangement.
As customer distrust increases, banks are rediscovering their empathic roots and developing features that put customers in control of their decisions. They are now compelled to be more upfront about fees, and thankfully, digital, AI, and cloud technologies are merging to give the ideal platform for individualised counsel that will actually aid in fostering consumer trust and engagement.
The Digital Brain Acquires A Compassionate Heart
Before and during the epidemic, banks made significant investments in digital technology to make banking easier, faster, and more efficient. Customers have made it abundantly obvious that an app, even a good one, does not exactly inspire loyalty. From 2018 to 2020, the percentage of consumers who trust their bank “a great deal” to protect their long-term financial security decreased from 43% to 28%. Banks are increasingly aware that they have much to gain by reintroducing empathy and relationships to a company that has become otherwise impersonal.
This will necessitate gaining a deeper understanding of and responsiveness to clients’ financial conditions, as well as abandoning some of the neutrality that banks typically demonstrate on issues that are important to customers. Consider using AI and other technology to assist banks in predicting customer intent and delivering more personalised messaging and goods.
Payments: Everywhere, At Any Time… And Now In Any Way
Thanks to Alipay, Venmo, and other apps, getting paid and sending money are now anytime, anywhere capabilities that we take for granted. The next step in this payment revolution is the opening of these networks. Today, despite their size and convenience, most networks are closed; try sending money via Venmo to a Zelle user. Soon, senders and receivers will be able to operate across networks.
China has already mandated that internet firms accommodate competing payment services, while planned legislation in India would compel digital wallets to communicate with one another and require businesses to accept payments from all of them. As the world of networks expands, banks with payment operations will have to compete and collaborate with competitor banks, fintech companies, and other stakeholders.
The Competition For Talent Intensifies
As technology has become a vital enabler for banks, a dearth of engineering, data, and security skills has obscured a sobering reality: banks are no longer as appealing to prospective workers of all types as they once were. Yes, unmet demand for technical professionals is a concern, but these positions represent a negligible portion of the skill required by banks. Younger workers desire flexibility and recognition in the workplace. Nonetheless, many find the banking culture to be inflexible, hierarchical, and too formal, driving a disproportionate number to leave the industry.
Progressive banks are building integrated programmes that address their work and talent concerns holistically. They are mapping the capabilities they need today and anticipate needing in the future and employing a variety of recruitment and retention strategies. In addition, they are re-evaluating their structure, culture, and work practises in an effort to increase their desirability as employers.
It Is Time For An Alternative Strategy
Historically, banks depended on their scale and regulatory protection to withstand disruption. There is growing evidence that these factors may not only be assets in the current context, but also impediments. The banks that successfully navigate these waters in the future will operate differently.
They will continue to shape their operations to meet the requirements of consumers, employees, and other stakeholders. The greatest asset of banks will be their capacity to detect opportunities and innovate efficiently. We believe that in 2022, when the pandemic declines, a new normal will begin to develop in the financial industry.