Digitization, emerging technologies and customer-centric offerings represent important priorities for retail banks, and in 2019 we will see even greater momentum in these areas—as well as corresponding technology investments.
That’s great news for customers—who will benefit from new, personalized services—and banks, which will realize greater operational efficiencies. In addition, the banking landscape will change significantly in response to regulatory requirements and changing industry standards. Here are the top four technology trends to anticipate in 2019.
1. Open and ecosystem banking will emerge
Today’s consumers live in the digital world—and expect their banking experience to be seamless and digital, too. Today’s fastest growing business models such as Uber, Airbnb and Netflix testify to this fact.
In retail banking, we see a big trend that will accelerate in the coming years—the move towards open banking and “ecosystem banking,” where banks will belong to an ecosystem that’s nearly invisible in customer transactions. Ecosystems will enable banks to deliver various services in broad value chains by leveraging fintechs, startups, service providers and solution software suppliers in concert.
Several critical factors will enable this change: rapid acceptance of open APIs (application program interfaces) by banks and fintechs to collaborate at scale; and progressive regulation towards this open approach in Europe, UK and Asia Pacific—with a growing acceptance in North America.
Some banks may even radically shift from builders of financial solutions to assemblers and curators of consumer-driven financial management services, tools and related offerings. BaaS (“banking as a service”) will change both the competitive landscape and the economics of doing business.
Banks will be better suited to venture into new areas of digitization, which include roboinvesting, automated consumer lending, and the clearing and settlement of cash and securities transactions.
2. Deeper digitization across the business
While fintech has come into the fray via digital- and cloud-first models, traditional banks are reacting to digitization demands by tinkering with the front end. In 2019 and beyond we’ll see a greater demand for deeper digitization within business lines such as retail, SMEs (small and medium-sized enterprises), and commercial lending and payments.
With lending, the entire customer lifecycle will be further digitized: not just through digital app-based access but also by re-engineering the now largely analog process. Look for completely digital foundations across acquisition, onboarding, servicing and collections.
3. Data driven artificial intelligence and machine learning-based decisioning
Incumbent banks still hold vast amounts of secure financial customer data. That creates an opportunity to safely, securely mine this data to serve the customer better. This is becoming a growing necessity in the wake of open banking. We see banks investing in using data for a complete “720-degree view” of the customer.
This view essentially accounts for understanding customer needs and offering financial solutions ahead of consumers applying or asking for it. The recent emergence of machine learning tools and AI capabilities will help this data flow from insight to action—in real time. We foresee multiple applications emerging, but one critical, needed impact will center on on credit decisioning. Data-driven decisioning already reduces the “time to yes” for loans from days to hours (personal loans) and from weeks to days (mortgages). We will also witness further development by adding multiple layers of data such as location and relationship-based pricing to fund customer dreams faster.
4. Technology should drive better banking
In conclusion, 2019 will yield the faster operationalization of technology innovation for better banking. Banks will move to adopt technology that will directly benefit customers.
Now more than ever, banks will use emerging technologies such as AI, machine learning and biometrics to gain an “information edge”—and put that data to work in relevant, personalized customer services and experiences. For example, customer data will feed AI assistants and chatbot technology, which can understand, learn and converse like a human.
We expect machine learning—and specifically, unsupervised learning—to play a growing role in credit risk management. In addition, we anticipate pilots where banks use facial recognition and other biometrics for use cases such as recognizing a banker to implement online approvals; recognizing priority clients when they enter a branch; and directing a relevant banker or relationship manager to assist them. This will improve the overall customer experience and the bank’s operational efficiency.
The year ahead holds exciting potential to achieve a trifecta in technology advancement for retail banks: improved customer experience, better bank profitability and elevated security with streamlined regulatory compliance. Indeed, with tech in 2019 we will move beyond a time of “shiny new toys” to shining possibilities.
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Sonny Singh is senior vice president and general manager, Oracle Financial Services Global Business Unit.
Hear Sonny Singh discuss the 720-view of the customer on the BAI Banking Strategies podcast.