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What’s next in digital modernization?

The banking industry continues its makeover to gain efficiencies and meet customers’ desire for faster, easier and more convenient services. 

Aug 30, 2023 / Digital Banking

The banking digital transformation that started years ago and accelerated during the pandemic continues as a dominant theme in the industry. 

One digital transformation trend was observed in the 2022 BAI Global Innovation Awards—the prioritizing of digital innovation that is evolutionary instead of revolutionary. Banks can get more smaller improvements in products and processes to market faster, and in doing so, they provide incremental benefits to customers. 

Momentum is growing for other banking advances. This includes a broadening in how artificial intelligence is applied across the industry, while another is focusing more attention—both in mind share and in money—on the growing problem of bank fraud. 

We recently spoke with Debbie Bianucci, BAI’s president and CEO, and Dennis Gada, global head of banking and financial services at Infosys, to explore where gains are being made on the digital side. 

The interview has been edited for length and clarity. 

BAI: The trend you are seeing these days, innovation-wise, is toward what you call the incremental, rather than the giant leap forward. Do you think that moonshots are a thing of the past? 

Dennis Gada, Infosys: I feel that the focus right now is a bit more on the here and now—financial services firms giving more practical considerations to how they can be more efficient and cost-effective, 

and how they can be faster to market and make their customers’ financial lives simpler. That said, moonshots are also important to look at new and uncharted territories, really pushing the boundaries to think differently and think big. In most organizations, there is still a continued focus on how to take a long-term view on certain ideas, and moonshots will continue to play a crucial role in that long-term progress. We are seeing trends around those moonshots, whether the metaverse in financial services or the more recent wave of generative AI, which could have a significant impact on financial services. Maybe 10 years back, people thought that digital-only banks would not be possible. How can there be a bank without a branch? But I feel that maybe five years from now, banking in the metaverse and transacting through generative AI may be a reality. 

Fintechs want to be more involved in the banking world, and banks want to have a more innovative presence on the technology side. Where do you see the fintech-bank partnership/rivalry going from here? 

 Gada: Fintechs and traditional banks are both seeking to benefit from each other’s trends and capabilities, and, in my view, the partnership going forward will only deepen. Banks are innovating faster, but getting more integrated into the fintech ecosystems, either by acquiring fintechs or investing in fintech startups, will help them accelerate innovation and bring new products and services to their customers. Fintechs, on the other hand, want to partner with banks so they can access a larger base of customers. There is a healthy collaboration environment right now for fintechs and banks. 

Debbie Bianucci, BAI: Fintech partnerships are much more prevalent than even a few years ago, but sometimes it is thought that they are mostly with very large banking organizations. The trend we’re seeing is that many different types and sizes of financial services companies are entering into these partnerships. A good example of this is a community bank, MVP Bank in West Virginia, that has put a program in place to actually help fintechs become better banking customers. So we’re seeing a lot of innovative approaches—not only in the largest organizations, but through more midsized and community banks and credit unions. 

Where do you think U.S. banks are now in terms of achieving their desired level of personalization via digital channels, and what do you think it will take for them to get to where they really want to be? 

Gada: The North Star of hyper-personalized experiences is to have an Apple-like experience, Google-like targeting and Amazon-like fulfillment and customer service. That’s bringing the best of all together to deliver very strong end-to-end, personalized experiences. From a U.S. bank perspective, a lot of progress has been made over the last few years, whether it’s for virtual chat assistance, lending and card offers and very personalized wealth and advice solutions. A lot of that is due to the use of technology—AI and machine learning techniques—to analyze customer data, provide personalized recommendations and so Now, having said that, there are still a couple of challenges that need to be dealt with. There is always the data privacy issue, and mechanisms need to be set up to get the right level of consent from customers to use their data for the expected level of personalized analytics.

Let’s wrap things up with some short-term future gazing. What do you see as a banking-related trend that’s going to emerge with more energy and focus in the next six months to a year? 

Bianucci: I think there will be an increasing interest in finding new and different ways to address fraud. Fraud is growing. It’s more complex. All types of fraud are so much more complicated and expensive every year. It’s a very real resource drain. So I believe that fraud will continue to be important, but may even rise to a higher level of innovation investment to help address the problems faced by so many companies, individuals and financial services providers. 

Gada: We’ve been hearing about ESG for several years, but I feel that it’s going to be much more front and center as a business priority for financial services firms. Instead of just the narrative of the market and long-term goals, we are seeing a lot more short-term focus on actions in systems, business processes and lending practices to support ESG initiatives. Long-term growth for banks may depend on how quickly they support and adapt to ESG requirements; not just for themselves, but for the environment in which they operate. It’s really exciting to see how this space will continue to grow. 

We offer actionable insights on other digital evolution topics that can benefit banking institutions in the BAI Executive Report, “Keeping up with banking’s digital evolution.”  

Q&A conducted by the BAI Editorial Team.