2019 was the year when big tech finally made the move into financial services. Meanwhile, financial regulators around the globe were extremely busy introducing new regulations positioned to spur on advancement in the financial institutions.
The unstable basis, created by the previous 12-month period and the pandemic period that followed it, made 2020 quite stormy for all of the banking industry.
Understanding the Future of Banking
The growing pace of digital banking technology and innovations has begun to radically change not only the interaction of consumers with their financial institutions, but also the rigid business procedures and conventional internal workflows. Many former financial institutions and traditional banks have encountered turbulence while trying to keep up with these changes.
However, the banking industry continues to produce encouragingly higher and higher profitability levels. As a result, competition among traditional banking businesses continues to increase; especially digital players are moving in areas such as small business loans.
The only way for financial institutions to stay competitive and maintain their profitability and efficiency over the next decade is to invest in digital banking and digital credit solutions with smart and agile solutions. It is inevitable for them to adapt to innovations that will increase the acquisition of new customers and also keep the old customers on board by helping ensure a smooth customer journey during their banking experience.
Key Trends for 2020
Thus, what awaits the banking industry in 2020, shaped by disruptive technologies, rising and changing customer expectations, and sharp digital transformation needs? Let’s take a look at the trends that we will continue to talk about in 2020:
The financial sector, like other sectors, may have been talking about this for a long time. However, especially after the Covid-19 period, digital transformation in banking is no longer just on the agenda of early adopters. All financial institutions that have been left behind and showed resistance will have to get rid of old systems and implement strategies and services that will support the needs and expectations of customers that continue to change rapidly in 2020. Before this period, all the companies that adapted or practiced the transformation were applauded. But in 2020, it will become a norm to quickly outperform its systems and processes and to switch to the new reality.
The uses and opportunities of artificial intelligence in the financial sector and banking are almost limitless. The year 2020 is already a big year for artificial intelligence in banking. Leading financial institutions in the sector are spending more money on research and development in this area than ever before. According to the Business Insider survey, 75% of large financial institutions are in the process of implementing artificial intelligence strategies, and their benefits will be seen in 2020.
Open Banking initially aimed to increase competition by breaking the link between transaction accounts and payments in the EU. However, as the regulators continue shifting, the focus of Open Banking also shifted from the initiation of payments to consumer data rights.
In 2020, it seems that it will not be enough for the banking industry to gain trust by showing customers how their data is used and giving customers control over their information. It looks like it will be a year for banks to show customers that banks can also add value by using customer data in the most secure way to improve their financial health.
Thus, by sharing their data, customers can also automatically receive low-cost insurance when they purchase a new home, car, or installment loan, and they can be profitable by managing both their needs and risks at once. Therefore, as customers benefit more by sharing data, the trust will increase between financial institutions and the customers. At this point, the only thing to be considered is the risk of data breach and information security errors, which can increase with more data sharing.
As we mentioned above, the increase in customer demands for end-to-end customer journeys with the effects of Open Banking has paved the way for soft regulations for fintechs and “Banking as a Service” as a legitimate revenue model for traditional players. By providing third-party providers with access to basic systems and functions, banks can attract new customer bases and create new revenue streams.
Although the blockchain did not achieve the expected momentum last year, it is expected to increase rapidly this year. This momentum will take place not in bitcoin or cryptocurrency, as many expect, but in digital payments, credit transactions, and almost any area where valuable information or currency needs the highest level of security.
“RegTech” is another field that Blockchain will frequently encounter. Blockchain is expected to assist automated processes that must meet certain regulations before executing in 2020.
Most banks still rely on on-premises server systems. But in recent years, especially the visionary actors are moving to the cloud to take advantage of the advantages already provided by their innovative colleagues in the industry. In 2020, we will be watching more banks moving to the cloud in general. The reason for this can be shortly summarized with the positive contribution of cloud technology to financial institutions’ speed to enter the market, customer experiences, and cost reductions.
How to Pioneer the Finance Sector in 2020
Trends and new technologies in the rapidly changing world offer unique potentials to the banking and finance industry. Working closely with an experienced and expert technology provider team to follow the trends closely and to lead the industry with visionary technology solutions and innovations will provide you with power and speed while keeping your projections predictable.
Here at Foreks Digital Solutions, we see our customers as our partners, and with their sectoral experience of more than 30 years, we provide them with full support in realizing the most accurate digital transformation projects they need. Thus, by offering them the environment of trust they aim to create for their customers, we lead them to provide their customers with the most flawless experience with our FinTech solutions.