In the banking sector, the transformation has been long overdue. Less than a
decade ago, a historical Scratch survey revealed most of the millennials were
dissatisfied with the ways banking services were delivered. The 4 of the major
American banks were named among the millennials’ least favored brands.
To make things worse, 71% of young people who were polled said they would
rather go to a dentist than listen to what their banks had to say, and hinted they
would rather embrace financial products from their favorite tech brands, than
from respectable banking institutions. Obviously, the consumer banking sector
was ripe for disruption.
At present, the banking sector has gone a long way to implement technological
innovations. The pace of the digital disruption in banking was accelerated by
lockdowns, forcing the world population to start actively using digital transactions
and payments. By 2026, the global online banking industry is expected to reach
$20.5 billion, and the market for mobile banking is catching up as well.
Let’s now explore how fintech makes a revolution in banking in more detail.
Digital payments and payment innovations
According to recent stats, 75% of customers on a global scale are familiar with
digital payments, which means 3 out of 4 people use fast and secure digital
payment processing. In banking, the adoption of omnichannel payment solutions
accounts for seamless and effective money transfers. This is already a far cry from
going to a physical bank to initiate a money transfer, as it used to be a decade ago.
As far as payment innovations are concerned, new convenient ways of payment
are emerging following the digitization of payments. The BNPL (buy now, pay
later) solutions are offering customers more opportunities, and are no longer
limited to short-term payments only. Credit card and loan providers are starting to implement similar models.
In lending, the digitization of payments has turned out to be truly revolutionary,
automating a wide array of processes that were previously carried out manually:
– anti-fraud procedures like identity and credibility identifications
– processing loan application documents
– originating and managing loans
– providing information and support to customers, etc.
More and more banks are launching proprietary lending apps for both personal
and business lending. The competition in the lending segment is also quite fierce,
and currently includes non-banking institutions, which are also providing lending
services. With many easy and comprehensible lending options available,
customers stand to benefit.
Personalization of services
The implementation of AI and big data has paved the way for an increasing
personalization of banking experiences. Banking apps and online services
aggregate data on:
– customers’ demographics
– patterns of financial behavior, etc.
They also deliver automated credibility assessments and personalized financial
advice accounting for creator customer engagement and loyalty.
Outsourced fintech solutions
Supported by international regulators, Open Banking practices open the doorway
to the standardization of digital banking, ensuring its security and enabling
developers to deliver quality fintech solutions. This, in turn, helps banks enrich
their product portfolios with new services by leveraging outsourcing and
third-party companies, and quickly testing and launching new projects.
The transformation of the banking sector is still underway. At this point, it is
obvious, the future of banking will deliver on the promise of increased
personalization, efficiency, better customer services. Standardization, enhanced
security, and the availability of banking infrastructure providers will enable
companies to enter the fintech scene and to partake in fintech transformation by
launching new software solutions.
The banking sector transformation will enable customers to benefit from diverse
and more targeted offerings. In the future, we will see more products like
PayMyParents, a lending platform for friends and family, making banking
accessible and integrating it into our everyday lives.