The latest wave of modern technologies has already made its mark on the financial industry. Instant payments are available in more than 50 countries, cloud computing has become mainstream, and the shift away from physical branches to digital ones is gathering pace.

More advanced banks and financial institutions (FIs) are also using artificial intelligence (AI) in a bid to make processes smarter, faster, and more efficient. Emerging technologies are facilitating faster ways of implementing traditional banking concepts, and are helping banks and FIs to comply with regulations, mitigate risks, increase productivity and engage better with customers.

“There are many technologies already available that are yet to go mainstream,” says Zubair Ahmed, EVP & General Manager MEA at VeriPark, a global solutions provider for financial institutions. “There are also many in the experimentation stage, which will be quite transformative for businesses in the future.”

A key example of the latter is blockchain, a form of distributed ledger technology (DLT) that’s currently gaining a lot of attention. Some see decentralisation as the end of banks, but there are ways the industry can embrace blockchain technology rather than let itself be replaced by it.

One use case involves lengthy Know Your Customer (KYC) requests, which usually involve duplication of effort between banks. A Reuters survey has revealed that financial firms spend around $60m on KYC compliance per year on average. Blockchain has the potential to change this by enabling KYC information to be shared securely between firms.

“The application of blockchain and DLT in banking is massive,” says Ahmed. “For instance, why does every bank have to do KYC on their own? Why do we not create a circle of trust, based on DLT? The trust is missing, that’s why you ask for a passport or ID every time a new client joins. Blockchain is the technology that can revolutionise that.”

Reimagining online banking

Many technologies focus on rethinking the digital experience for online customers. The use of application programming interfaces (APIs) enables third-party financial service providers, such as budgeting applications, lenders, or other banks, to gain access to a bank’s customer data.

This Open Banking concept creates the opportunity for innovative, personalised financial management services. As well as transforming the competitive landscape of the financial industry, it makes previously lengthy processes quick and simple for consumers, such as the switch from one bank to another.

As the online experience develops and branch visits dwindle, banks and FIs are looking for more ways to create engaging customer experiences via digital devices. Traditionally, consumers have viewed banking as an essential yet uninspiring part of their lives. But, with new possibilities presented by augmented and virtual reality, established companies can finally hope to cast off their conventional corporate image. More banks are likely to incorporate augmented and virtual reality into their digital branch strategies, as an immersive marketing tool but also a way of visualising data to improve financial literacy.

Banking 4.0

The potential of AI in banking is huge, and banks and FIs are just getting started on their AI journeys. AI will provide many ways to add value to the industry’s operations over the next decade. Fraud detection, which becomes possible with machine learning (ML), will be one focus. The ability of ML algorithms to learn from historical fraud patterns and recognise them in future transactions promises to perform better, faster, and more efficiently than human workforces.

Another key focus should be the provision of more personalised services to customers. “After the pandemic, a new focus on the customer is going to bring deeper maturities in traditional solutions,” says Ahmed. “Customer relationship management (CRM) will go deeper in its understanding of customers through AI. At VeriPark, we offer Next Best Action. When employers interact with the CRM software, it tells them the next product that customer would be interested in.

“CRM systems have been there for years,” he continues. “Applying analytics is an elementary layer of intelligence, but I think the development and depth that we will see coming in the future is going to be astounding. For banking and finance, the use cases for things like AI, ML and analytics will take time to mature, because you need more data to be churned before it becomes intelligent data.”

Traditionally, banks have looked at data as a liability, something that has had to be kept for audit and compliance reasons only. “The tech giants have taught us that data is the real asset. Banks have understood that and are trying to make a shift, but they’re realising that their data architectures are archaic. Data platform technologies are not possible in some banks right now. It requires renovation,” concludes Ahmed.

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