Seven digital trends that banks care about
Digitalization matters in the banking sector. The development of the global fintech market, forecast to grow by 13.5 percent annually and balloon to almost 5 trillion euros by 2022, should be enough to convince anyone of that. It matters so much, in fact, that out of the top 10 overall banking trends reported by technology consultancy Accenture for 2018, eight were related to digital innovation.
To help you sort the hype from the helpful new possibilities that could secure the future of your organization, we’ve compiled our own league table of the six digital trends that banks should get ahead of today.
The payment revolution
Electronic and non-cash payments have been replacing paper money in physical stores for a long time. Financial technology (fintech) startups identified this as an opportunity and began designing new methods for crediting online purchases. Digital payments now make up the largest segment of the fintech market by far, reaching a transaction value of nearly 3 trillion euros worldwide in 2018. With the European Union’s Revised Payment Services Directive (PSD2) recently allowing non-banking firms to become payment service providers, this area promises to become even more dynamic going forward.
Personalizing the customer journey with AI and data analytics
Big data analytics and artificial intelligence (AI) allow banks to better understand and predict the specific behaviors and needs of their customers. This can help improve credit scoring models and personalize the banking experience, potentially increasing sales by meeting customers with the right offers, at the right time. The Polish Alior Bank became one of the first in Europe to use AI algorithms in its customer service processes, including social and financial data aggregation tools for credit scoring and a financial forecasting module to provide customers with contextual, relevant recommendations based on their income and spending patterns.
Customers today expect to do everything instantly on their mobile phones – even open a bank account, transfer money or file an insurance claim. Collaboration between fintechs and traditional banks in this field has led to breakthroughs like instant payments, not just from one bank account to another, but also between secondary identifiers like two mobile numbers. In Europe, the Berlin-based startup N26 launched in 2015 and successfully positioned itself as the continent’s first completely mobile bank, attracting consumers with ultralow fees and an overall lack of red tape. As of January 2018, it boasted half a million customers.
Blockchain: maximum security for the digital world
As more and more financial and data transactions are executed digitally, security is becoming a pressing issue for banks. Blockchain is the paradigm-shifting tool that can revolutionize not only how money changes hands, but also how sensitive data in general is protected in the digital realm. Allowing data to be stored in a decentralized way and guaranteeing its integrity by requiring edits in any part of the chain to be verified by the whole, blockchain is virtually impossible to tamper with. The World Economic Forum has even predicted that 10 percent of global GDP could be stored on blockchain technology by 2025.
Digital first – but branches a close second
It’s a fact: millennials expect to bank online. However, a recent survey by consulting firm PwC has shown that the majority of consumers, particularly high-profile private banking customers, still feel it’s important to have a local branch. For banks, striking this balance will mean, on the one hand, integrating their digital offering by building user-friendly interfaces with end-to-end services and a GAFA-inspired experience of continuous interaction. On the other, it will require them to redesign their branch networks to increase efficiency and improve the quality of the services that do continue to be performed there: these will likely shift away from transactions towards consulting and sales.
Moving the back office to the cloud
Many banks use decades-old core processes and mainframe applications that prevent them from keeping up with digital technologies: They often have multiple large databases that could offer a huge wealth of insights if used for data analytics, but fall short for lack of integration. In-house IT infrastructure also tends to be rigid, expensive and difficult to expand quickly. Moving your architecture to the cloud then, is no longer optional. There is now abundant evidence that cloud can be just as secure as any private data center, sometimes even more so, but with the added benefit of letting you scale IT capabilities on demand according to your business needs. For organizations as heavily regulated and security-dependent as banks, however, it’s essential to choose the right provider and devise a smart migration strategy that excludes infrastructure elements which handle mission-critical applications.
Ramping up security
It seems like online data theft is making the news headlines on a daily basis nowadays: even the most reputable companies are not spared. Banks, as they offer more digital services, collect and store ever larger amounts of customer data. The volume and nature of the information that financial institutions harbor makes them particularly appealing for hackers. Going forward, they will have to implement more comprehensive and advanced protection systems to ensure that their growing data wealth is not endangered by a multiplication of security breaches targeting it.
Explore your options
As a trusted technology partner for the banking sector, Deutsche Telekom has extensive capabilities to support financial institutions in any digitalization project: from core solutions like cloud-based Infrastructure-as-a-Service, through security-enhancing tools such as the electronic biometric signature, and all the way to value-added services for customers. Among other things, these include digital solutions that allow clients to choose the branch with the shortest queue or consult with a regional expert using local videoconferencing facilities.
To help you dive deeper into these important topics, we are opening a discussion about Digital Transformation in the Banking Industry with our key customers and innovators. The innovative two-day event for banks will take place in Berlin on October 17-18.
For more information, please visit www.b2b-europe.telekom.com/events/banks2018
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