The Future of Banking: How Technology is Revolutionizing the Financial Industry
Digitalization is altering the way people interact and do business on a day-to-day basis, and developments in banking technology are continuing to impact the future of financial services all over the world. The high demand for a digital banking experience from millennials is changing how the entire banking industry functions. The growing desire of consumers to access financial services from digital channels has led to a surge in new banking technologies that are revolutionizing the financial industry.
The future of technology in banking
The consumers who consider technology as something that enhances their lives bare the ones driving the future of banking technology. By using an API (an application programming interface), private, restricted information is made available to anyone who has the consumer's permission to access it; this is a general tendency in banking technology nowadays.
Technology aiming to considerably improving retail banks’ operations has a huge positive impact on the market. 39% of retail banking executives deem that technology has the greatest impact when it reduces costs, whereas only 24% say that customer experience is improved, according to Insider Intelligence.
The impact of technology on the financial industry
The impact of technology on the financial industry is enormous and can be observed in the swiftness and promptness of bank operations all over the globe. Standing in long queues to open an account, waiting for a loan approval, or receiving a physical statement are things of the past.
Banks make use of AI and machine learning to provide instant personalized services and assistance to their consumers. AI and automated banking operations increase customer service, credit, and lending services; moreover, they are more reliable against fraud.
The future of banking
Financial and banking industry is facing major restructuring. It is most likely that those banks that effectively manage this transition will become more profitable, they will grow rapidly.
Placing consumers at the center of every digital strategy is the future of digital banking. Financial institutions must implement these changes starting at the earliest in order to be able to seamlessly integrate by the year 2030.
The importance of technology in banking and finance
High Efficiency and swift services can be provided to consumers with the help of modern technologies. Technology makes handling of sensitive information more secure, system monitoring prompter, while housekeeping, internal control, and reporting are available, in a timely and customizable manner. The customer experience and convenience are also important when we speak about the use of technology in the finance sector.
Various technologies used in the industry include big data and artificial intelligence, blockchain and cryptocurrencies, cybersecurity solutions, and digital banking. Online banking includes mobile banking. which refers to the overall experience of banking through digital channels, including mobile apps, live chatbots, desktop, and more.
The benefits of technology in banking
· More Efficient Banking Process.
· Deposits and transfers via mobile apps.
· Electronic signatures without the need for physical printing.
· On-the-go loan approvals without setting foot in a bank.
· Automatic bill payments, which ensure monthly obligations are met in due time.
Challenges and concerns
There are several challenges and concerns when we speak about the use of technology in the financial industry: increasing competition, regulatory compliance, retention of customers, updating business models, security breaches, and others.
Security is the top concern consumers have when using mobile banking. Security is the primary challenge for the banking industry. The series of high-profile breaches over the past years, have increased the necessity and demand for services that preserve consumers’ data secure, convincing customers to still make use of their credit or debit cards, and digital access. Filing and reviewing card transaction disputes are successful security banking features.
In order to keep personal data protected and prevent information breaches, financial institutions must invest in the most recent security measures, like:
AVS (Address Verification Service): checks the billing address on record at the issuing bank in order to identify suspicious transactions and prevent fraudulent activity.
E2EE (End-to-End Encryption): a method of secure communication using cryptographic keys, which are stored at each endpoint, to encrypt and decrypt private messages that prevent third-parties from accessing data while it is transferred from one system or device to another.
Biometric Authentication: a security process relying on the unique biological characteristics of an individual to verify that he is who he says he is. Biometric authentication systems check a biometric data capture to stored, confirmed authentic data in a database – fingerprints, voice and facial recognition, iris scans.
Location-based authentication (geolocation identification): a special procedure to prove an individual’s identity and authenticity on appearance simply by detecting its presence at a distinct location. Banks can use location-based authentication in conjunction with mobile banking to prevent fraud by either sending out a push notification to a customer’s mobile device authorizing a transaction, or by triangulating the customer’s location to determine their location at the time the transaction is occurring.
Out-of-band authentication (OOBA): a process where authentication requires two different signals from two different networks or channels. An OTP (one-time security password) is generated, which is sent to customers via automated voice call, SMS text message, or email; the customer then enters that security code to access their account, thus verifying their identity.
Risk-based authentication (RBA): a method of applying varying levels of strictness to authentication processes based on the likelihood that access to a given system could result in its being compromised. RBA can be tailored according to the risk level of each customer transaction.