By Jim Marous, Co-Publisher of The Financial Brand and Owner/Publisher of the Digital Banking Report
When we surveyed a panel of over 100 global financial services leaders as well as financial institutions and solution providers worldwide for their thoughts on retail banking and credit union trends and predictions, the purpose was to provide a view into the future of banking. Ten major industry trends rose to the top, with three trends being paramount in the eyes of the research participants.
Getting a perspective on the future is only valuable if organizations take action on what is known. From improving the customer journey, to building a seamless integration of channels and/or using data analytics to know more about each customer or member, the financial impact of any trend is determined by the specific action taken in the marketplace to prepare or react to industry trends.
Below are the top 10 trends identified in the Digital Banking Report entitled, “,” sponsored by Kony, Inc.. The comprehensive 106-page report is now available here.
An optimal consumer journey makes every step and touch point in the buying cycle streamlined, efficient, consistent and personalized from the consumer perspective. Financial institutions need to re-imagine their core journeys from front to back by addressing key customer pain points and identifying new opportunities to delight customers in differentiated ways. Digital channels and transforming the back office to a digital flow is at the core of improving the customer journey in the future.
Despite the vast amount of data available and the industry’s formidable resources, most banks and credit unions are still far from realizing big data’s full potential. This gap in capabilities is caused by competing priorities, the complexity of knowing what data to use and how to collect the insight as well as the lack of a coordinated vision. Going forward, the use of AI, machine learning and other advanced analytic tools will provide opportunities for greater personalization and channel optimization. Data and analytics is at the core of every trend expected in 2018.
The use of advanced analytics provides an opportunity for an optichannel™ experience, where the best channel is based on the consumer’s needs and preferred channel. So, rather than offering all channels for a specific solution, big data will enable an organization to point the consumer to the channel that will provide the most personalized experience. As multichannel relates to a better experience, the consumer expects to be able to move from channel to channel without a ‘restart’ and does not expect to be ‘forced’ to use a physical channel to complete a process.
With the formal introduction of PSD2 in Europe and greater recognition of the power of open banking, the use of open APIs remains a top priority and trend in 2018. The use of open APIs provides the opportunity for combinations of products and services beyond traditional banking. If executed well, traditional financial services organizations can be at the center of a consumer’s daily life. Otherwise, a traditional banking organization may be relegated to be simply a provider of services for other firms.
Continuing a trend that emerged in 2016, legacy organizations will continue to leverage the advantages of scale, stability, trust, experience in navigating regulations and the access to significant capital as they look for viable fintech partners. Conversely, fintech firms will leverage their agility, innovation culture and technological expertise that legacy organizations seek, with the resultant partnerships benefiting the end consumer. With the expansion of data, analytics and open banking, the evidence of new banking + fintech partnerships will expand greatly in 2018.
The use of mobile payments continues to be less than expected, illustrating the challenges in changing consumer behavior when merchants and issuers can’t deliver a strong value proposition. While mobile payments at the POS level may continue to lag in 2018, P2P transactions will continue to skyrocket as new entrants like and current players like and Square continue to gain momentum.
The financial services regulatory environment continues to be highly uncertain and often has conflicting regulations. In addition to causing a huge increase in the costs of compliance, they have also impacted many organizations’ business models. In 2018, it is expected that governmental agencies will continue to greatly lag consumer demands, but that both traditional and fintech organizations will move forward with a ‘beg for forgiveness’, rather than ‘asking for permission’ mentality.
As quickly as past technologies have become the norm, a new wave of emerging technologies will combine digital technologies and the power of data to set new standards. These ‘essential eight’ technologies include:
Obviously, the prioritization and investment in each of these technologies will vary based on the industry, business model and strategic goals of each organization. For instance, while the marketplace as a whole does not foresee investing much in blockchain technology, the financial services industry ranks this as a higher priority.
Tremendous momentum also surrounds the potential of using voice-first digital assistants in the banking industry. This will be exciting in 2018 as more firms allow consumers to perform basic transactions on their Alexa, Siri, Google Home or Apple Pod device.
The term “challenger bank” is widely used to describe a banking organization, started from the ground up and built without relying on another banking firm for back office support. While very common in the UK, this breed of bank has not yet emerged in the US due to regulatory confusion. With the advent of PSD2 and open banking, we expect most of the challenger bank activity to be in Europe, with the impact of larger tech firms (Google, Amazon, Facebook, Apple, Tencent and Alibaba) becoming much more of a threat to traditional banking models.
While bitcoin and other cryptocurrencies took the headlines in 2017 and early in 2018, the greater impact over time may be the potential for blockchain use in banking. From providing the platform for movement of data and financial records, to the ability to become the foundation for identity management, banks of all sizes will be testing the capabilities of blockchain to save money, reduce risk and even generate revenues.
While early adopters are moving into blockchain production, most of the industry remains in a planning and experimental phase. Yet, the stakes of blockchain are too high for financial services firms to take a wait-and-see approach.
Consumer needs and behaviors are pushing financial organizations to rethink their strategies. Consumers expect banks and credit unions to offer more than simple transaction processing, and instead become financial and even technology advisors.
Despite the lack of overwhelming trust in financial institutions, most consumers believe banks and credit unions are secure, and this is a strategic advantage that should not be minimized or taken for granted. While most consumers do not consider bank branches to be an irrelevant delivery channel, they expect them to be more efficient through digital technology that will improve the customer experience.
Consumers expect new innovations that will serve them in a more personalized and efficient manner, and also want a dynamic blend of digital and human service. Contactless payments, P2P and digital wallets are already a trend that will continue in 2018. Biometrics will also play a more important role in the future.
There are definitely a vast array of priorities and ‘moving parts’ as we go into 2018 and beyond. The Digital Banking Report, , illustrates that those organizations that keep their customers happy and secure, and become almost ‘invisible’ from a friction perspective will be the ultimate winners.
The report, sponsored by Kony, provides an unprecedented look into the future of retail banking, including the improvement of the customer journey, use of advanced analytics, building an integrated multichannel delivery network, use of open APIs, the partnership between banking and fintech, the expansion of digital payments, regulatory changes, advanced technologies and innovation in banking.
The report includes the results of interviews of more than 100 financial services industry leaders as well as a survey of more than 400 financial services organizations worldwide. The report has 106 pages of analysis and 32 charts/graphs.
You review an executive summary of this Digital Banking Report by clicking . Subscribers to The Digital Banking Report and those wishing to purchase the complete report can access it immediately by clicking here.
This content was originally published here.