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Digital Banking in 2021: Recent Trends and Future Opportunities

Digital Banking in 2021: Recent Trends and Future Opportunities

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September 21, 2021
Dreamix, frontpage
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We live in a world where Information technologies are developing really fast. Everything is digitizing. The number of FinTech companies is constantly on the rise. Banks are competing against each other to come up with new ways to gain new customers. Let’s check the current situation of financial services and focus on Banks.

What Financial Services Can We Use Online?

In today’s life, all banks should have online banking solutions – mobile and web customer applications. Providing various online services is the only way banks can stay relevant in today’s competitive market. These services include:  

  • create/manage an account
  • create/manage a deposit
  • make a transaction
  • check balance
  • request a debit/credit card
  • request a loan
  • make utility payments
  • add cards to digital wallets
  • make secure online payments using 3D authentication

Тhose cover the bare minimum of online solutions every bank should provide in 2021. Living in a digital era, customers do not have the patience to go to a physical bank office, wait in line, and fill a lot of paperwork. The urge for self-service is increasing rapidly. Here are some new banking trends:

  • Self-registration. Some banks provide the opportunity for self online registration without ever going to a front office. This process requires authentication . Authentication is significant in the process of preventing fraud and money laundering. There are different ways to authenticate new customers such as filling in personal information, uploading an identification document, taking pictures or videos. A lot of resources are spent on big KYC teams, who have the task to review customers’ applications. 90% of this process can be handled by AI solutions. Another approach is using third-party methods like eSignitures.
  • Manage banking cards. Freeze/unfreeze or report a stolen card. Set different limits for atm transactions and POS payments in and out of the country. Request a physical debit/credit card and receive it by courier, then authorize it and set your PIN code.
  • Transactions authorizations. From physical tokens(static PIN plus generated code) through application tokens(static PIN plus scan QR code) to biometric authorization.

  • Cryptocurrencies. Buying and exchanging cryptocurrencies. 3 in 4 people have heard of cryptocurrencies. One of them has owned cryptocurrency for some time now.
  • Instant payments. SEPA Instant credit transfer allows payments up to 15 000 euros to happen in less than 10seconds. Of course, these banks have met a lot of requirements and regulations.
  • Digital wallets. Online banking offers a way to add your card to a digital wallet. Some banks even offer their custom digital wallets as alternatives for secure online shopping.
  • IOT (Internet of Things) is one of the trends in technologies in the past couple of years. Banks offer wearables like smart bracelets and smartwatches as paying methods.
  • At a GENPACT REPORT , JASON OSBORNE stated that “Trying to enable a digital customer experience without back-end capabilities is like trying to connect your iPad to an old refrigerator”. Back office transformation is crucial for staying competitive.

    What is the Condition of the Back-office in Banks?

    Sadly, the condition of the back office system is one of the things that most banks are not proud of. A lot of them still have a 10-plus-years-old core-banking system. These systems are outdated, complex, and full of technical flaws. Moreover, it is only natural that different departments have different needs, e.g.there are operations that require information from more than one place. This led banks to have a lot of small IT solutions for their various needs. For example, in 2017 Lloyds Banking Group had a complex ecosystem of more than 4000 IT applications. Having so many applications causes stress for both employees and customers. 

    Recent studies of KPMG International shows that people prefer and have more confidence in new and digital banking than the old ones, as shown on the diagram below: 

    Banks’ back-office systems need transformation. These are some of the benefits of transformations and modernization:

    • decrease human errors by optimization of processes and validations
    • bring better user experience
    • faster onboarding of new employees
    • increase speed that brings faster service
    • increase customer satisfaction => increase profit
    • decrease long-term expenses – manual operations increase operating expenses

    However, for these to happen, banks need to be flexible. They have to embrace the agile way of building a modern up-to-date centralized software solution. 

    Transformation requirements:

    • revise what is there so far
    • R&D (Research & Development)
    • think about security
    • check the competitors – what they have done, what problems they had
    • find the problems and the missing pieces
    • optimize processes to match current reality
    • centralization
    • design better UI and UX

    Did Covid-19 Pandemic Change the Financial Services?

    At the beginning of the pandemic, the banking sector struggled a lot. Using online financial services has surged more than 5 times overnight. Financial institutions had to act fast to support all that traffic. At the same time, a lot of people lost their income and began to struggle with loan payments. Thus, some banks took the initiative to build a service for online requests to freeze loan payments during the pandemic. Covid-19 pandemic accelerated the digitalization of financial and banking institutions. According to KPMG International, one in ten people is considering switching banks as a result of the Covid-19 pandemic. Mostly because of bad or lack of digital services.

    Recent studies show that financial institutions that offer a variety of digital services are more likely to gain new clients and increase their profits.

    Aleksandra Yanovska

    Aleksandra Yanovska is a Full-Stack Software Developer at Dreamix

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