This article is part of our Digital Banking & FinTech Platforms resource section
Revealed Top Innovative Trends in Digital Banking
Today, new technologies are emerging every day, and so far, they have ushered in a golden period in consumer financial services like dividend investing. In the last two decades of banking, we have witnessed more change than the world saw in the last 500 years. Expert forecasts have suggested that banking could continue to undergo rapid transformation as technology makes financial services easier, more accessible, and ultimately more popular.
As the world continues to embrace technological enhancements in almost every field, here are some of the top technology trends shaping today’s digital banking industry. These developments also offer a glimpse into the future of banking, where digital services, automation, and customer-focused innovations are transforming how people manage their finances.
Table of Contents
Mobile-first banking
The latest wave of online banks and direct banks is thriving thanks to smartphone technology. Providers have been under pressure to devise the simplest possible experiences due to smaller screen sizes. Progressively, they have enhanced these experiences for larger screens, a move that has made all digital touchpoints even better. Today, device sensors are helping banks reduce friction, whether through data capture to anticipate customer needs or biometrics for account opening.
Smartphone mobility has also significantly increased the utility of financial advice, reaching customers when and where they can respond. A good example is a push notification before exceeding a budgetary threshold or before a bill goes unpaid.
Artificial Intelligence (AI)
Digital banks like Monzo have been benefiting from AI-powered money management by providing highly personalized spending tips that encourage engagement and trust in the absence of in-person interactions. This trend is similar to what Amazon once implemented with real-time notifications to customers on order progress.
With integrations like predictive insights surrounding notifications on upcoming bill payments and cash-flow shortfalls, customers benefit from greater transparency around their choices and the risks they are likely to face. Combining these features with real-time Customer Relationship Management helps new digital banks optimize their product recommendations. Ultimately, it helps them compete with leading online retailers on customer engagement and conversion.
Credit assessments through Big Data
To uncover new lending opportunities, digital banks are using Big Data to augment traditional credit risk procedures. For example, Oaknorth’s Acorn is a platform that can approve SME loans quickly while assessing the performance of similar businesses in comparable cities and conditions to improve the quality of credit assessments.
Big Data innovation allows efficient management and analysis of different data types. This includes unstructured and structured data from growing sources such as web clickstream data, mobile location-based information, and call-center speech analytics. Other sources include sentiment analytics from community networks, transaction history, traditional balance information, and credit profiles.
Enabled partnerships through Cloud
Cloud technology significantly lowers start-up and operating costs and reduces time to market for new banking organizations. For example, Mambu, a cloud-native core systems provider, assisted N26 in scaling faster by launching in several geographies simultaneously with lower marginal costs. Oaknorth has also reported cost benefits from adopting cloud-based core banking technology.
Through the cloud, established banks can consolidate disparate information sets without the expense, cost, and time involved in replacing core systems. Developers also use cloud technology to support open banking requirements and partnerships with startups. Banks can establish incubation sandboxes that permit safe experimentation, using integration layers to protect record systems such as booking or transaction systems. These safeguards also help prevent information breaches that can erode customer confidence.
Robotic Process Automation
New entrants have benefited greatly from automation by reducing operating costs and delivering greater convenience. Digital banks like Monzo in the UK and Starling can offer digital account-opening services. Additionally, P2Binvestor, a peer-to-peer (P2P) lending platform, offers an ongoing line of credit to small businesses.
DBS’s Digibank is another example of the potential for automation to reduce costs and streamline banking operations. Robotic Process Automation (RPA) can reduce repetitive manual tasks, improve processing speed, and free employees to focus on more complex customer needs.
Enabling flexibility and agility through micro-services
New digital banks are emulating the architectures of leading platform firms like Netflix and Amazon by adopting modern technology practices. They are developing small, independent services and optimizing them for change and reuse. The use of low-overhead runtimes and lightweight containers for installing and running new services makes them easier to develop, test, and deploy.
This modular approach can help banks introduce new features without having to redesign an entire platform. It also supports integrations with third-party services and gives development teams greater flexibility when responding to changing customer expectations.
Bottom line
The above are just a few examples of digital banking technology trends currently in commercial use. Others include APIs and the Internet of Things (IoT). APIs are often the glue for digital transformation because they enable multiple new business models, whether banking as a service or banking as a marketplace. IoT also presents opportunities for digital banking. Connecting more items to the internet means more information to anticipate customer needs and more endpoints for delivering insights.
For a broader look at the technologies and developments influencing the sector, explore these banking tech trends. Banks must evaluate these innovations alongside their security, compliance, and customer experience requirements to determine which investments best support their business goals.
Digital banking services are evolving alongside these technologies, from mobile account access to integrated financial platforms. For additional context, read how TechMagic explains digital banking services in 2023.
