Banks of the future may use advanced digital platforms to validate identity, provide powerful financial insights and reaggregate the customer relationship.
Digitalization is changing how people interact and do business on a day-to-day basis, and advancements in banking technology are continuing to influence the future of financial services around the world. Increasing demand for a digital banking experience from millennials and Gen Zers is transforming how the entire banking industry operates.
From retail and mobile banking to neobank startups, technology has its hand in seemingly every aspect of the banking industry; and, the influence of technology will continue to launch banking into a digitized future.
Let us look at some prediction on how internet banking will look like in the next 10 years and beyond.
- Here is how Internet Banking will Look in 10 years
- What Banking Could Look Like In 10 Years
- The Future of Digital Banking in 2030
- Why Digital Banking is the Future?
- What can Traditional Banks Learn from Fintechs?
- What are the Disadvantages of Online Banking?
- Why Should you use Online Banking?
Here is how Internet Banking will Look in 10 years
Future of Retail Banking
Retail banking refers to the specific services banks can offer to consumers – such as savings and checking accounts, credit and debit cards, and loans. Consumers’ growing desire to access financial services from digital channels has led to a surge in new banking technologies that are reconceptualizing the entire retail banking market.
Read Also: Five Ways the Banking Industry has been Transformed by IT
Technology geared toward improving retail banks’ operational efficiency is positively impacting the market. According to Business Insider Intelligence, 39% of retail banking executives say that reducing costs is where technology has the greatest impact, compared to only 24% who say it’s improving customer experience.
Retail banks are also launching platforms in the Banking-as-a-Service (BaaS) space to remain competitive. For example, UK neobank Starling used to exclusively offer business-to-consumer (B2C) retail banking services; but, after launching a BaaS platform, Starling diversified its product and revenue streams, helping it remain relevant in the neobank space.
Future of Mobile Banking
Mobile banking has become the go-to method for users to make deposits, account transfers, and monitor their spendings and earnings. According to Business Insider Intelligence’s Mobile Banking Competitive Edge Study, a massive 89% of survey respondents said they use mobile banking.
A top concern consumers have when choosing mobile banks is security. The fear of data breach increases the demand for services that keep users’ data secure – allowing consumers to place holds on credit or debit cards, schedule travel alerts, and file and review card transaction disputes are some successful security banking features.
Mobile wallets are another up-and-coming feature in mobile banking. Mobile wallets are applications that emphasize convenience; they allow users to make purchases online or in-store with their smartphones – without ever having to take out their physical credit card.
Successful mobile banking options also include money management features that help users cut spending and grow savings. The future of mobile banking points toward offering savings tools and financial wellness scores, which is seen as particularly important among millennials.
Future of Online Banking
The popularity of mobile banking has surpassed that of online banking, and the overall number of online customers has slowed worldwide. According to Business Insider Intelligence, mobile banking is growing at five times the rate of online banking, and half of all online customers are also mobile banking users.
Despite this growing popularity, some banks still fall short on the demand for mobile tasks, like bill pay and reward redemption, causing them to push users to online banking. However, even this push won’t be enough to popularize online banking as millenials and Gen-Zers continue gravitating toward the mobile market.
Future of Digital-Only Banks
Digital-only banks, also known as neobanks, are redefining the future of banking around the world. Though off to a slow start in the US due to high regulatory barriers, recent developments and the loosening of regulations suggest that US neobanks are set to take off.
San Francisco-based neobank Chime has attracted over 2 million consumers and is adding more per month than Wells Fargo or Citi – demonstrating the shift toward digital channels. The development of more neobanks in the US will bring awareness to digital only banking, and eventually wane-out traditional banking competitors.
According to Business Insider Intelligence’s Evolution of the US Neobank Market report, the increasing competitive digital banking only landscape is going to cause banks to overhaul their entire business, catering to the demands of the digital era.
Banking Technology Trends
The future of banking technology is driven by consumers, especially Gen Zers, who see technology as something that enhances their lives. A common trend in banking technology is using an application programming interface (API) to make proprietary data available to anyone who has the consumer’s permission to access it.
APIs could be used to enable a bank’s mobile app to pull down customer account information. Fintechs have also used API technology to enable their businesses to work, and their success is encouraging competitors to develop their own APIs.
Additionally, Business Insider Intelligence reported that 48% of banking executives believe new technologies like blockchain and artificial intelligence (AI) will have the greatest impact on banking through 2020. According to Business Insider Intelligence, banks are exploring blockchain technology in hopes of streamlining processes and cutting costs.
Consumers can already see AI being used by most banks through chatbots in the front office. Banks are using AI to smooth customer identification and authentication, while also mimicking live employees through chatbots and voice assistants.
What Banking Could Look Like In 10 Years
Fintechs Will Win Back Trust By Working For The Customer
The first priority for the banks and fintech of the future is to repair trust with their customers — a trust that believe was badly broken 10 years ago and has suffered many severe blows since.
They will likely do this by offering their customers more than just a safe place to keep their money. They will need to be transparent about their fees and services. They will need to meet the customers where they’re at — on their smartphones and computers.
They will need to be built to accommodate modern humans who don’t have the time for or interest in balancing checkbooks. Most importantly, I believe the banks of the future will need to actively help customers manage their money in smarter ways and proactively work to help them get ahead financially.
In short — as Clarence Saunders did with grocery stores — they can do this by offering their customers a better experience. There are three concepts that could very well be key to this experience: digital identity verification, financial insights and a holistic relationship.
Digital Identity Could Be Easier To Verify
In the wake of numerous high-profile data breaches, consumers and financial institutions are right to be worried about the data protection and identity verification of individuals and companies.
In January of 2018, the World Economic Forum published a whitepaper titled “On the Threshold of a Digital Identity Revolution.”
One of its conclusions was that “it no longer makes sense to rely upon physical documents as the only mode [of verifying identity]” and that “given the various market factors … as well as its position of trust, the financial services sector could potentially revolutionize the future of identity services.”
It can — and we believe it will. The new technology that leverages data more intelligently, mainstreams the use of biometrics for banking and makes use of mobile device authentication features could help to revolutionize the way we think about identity and provide better access to affordable banking services, including credit.
Financial Insights Could Positively Impact Consumer Financial Health
Banks collect a tremendous amount of information on consumers — new account applications, know your client (KYC) checks, account aggregation, transaction data and credit bureaus create a constant stream of data to banks about their customers. In my experience, this data is often used for internal purposes or not used at all. And it’s rarely used to help customers achieve better financial outcomes.
With the rise of open banking, ownership of consumers’ financial data effectively transfers from the bank back to the consumer. Consumers can now decide to link accounts and share data with companies that will help them better manage their financial lives.
Furthermore, with machine learning and AI, I believe finance companies can transform data into meaningful insights to help customers solve everyday financial problems, such as avoiding missing a payment or overdrafting, not using an ATM that charges a fee and staying on track with a savings goal.
Over time, customers will expect their banks to be using their data to help them succeed. And those that don’t may risk losing the customer relationship.
Better Technology Could Enable Reaggregation
Over the past decade, we have seen many new technologies develop to help solve specific consumer pain points, such as making payments to friends, getting loans, checking credit scores, microinvesting and saving.
The focus on taking friction out of the customer experience has led to widespread adoption. However, these apps are often just “point solutions” that don’t take into consideration the customer’s broader financial situation.
One way a financial institution can innovate to tackle this is getting to know their customers better through better data. For example, spending and savings behavior often changes in the year or more before a person makes the decision to buy a home.
What if the financial institution could read those signals in banking and savings accounts and help get that customer prepared so they could readily borrow an appropriate amount for a home? What if the customer could even make an offer on the spot — with an approved mortgage — using their phone? I believe this kind of integrated experience is quickly becoming a reality.
The Future of Digital Banking in 2030
The banking industry of 2030 will look very different from what it looks like today – some of what we will see will be evolutionary and some will be radically different.
Whilst predictions into the future are always fraught with uncertainty, we are confident that the landscape will be far more competitive, efficient, and innovative in delivering consumers ‘autonomous experiences’ that are not possible today.
The market-leading banks of tomorrow will understand that technology will not limit what is possible. Instead, they will harness digital capability to put the customer firmly in control of their destination and preferred model for dealing with their bank and other service providers.
This is not a one-size fits all.
Some consumers will opt for an autonomous banking experience where they are time poor, lack knowledge and have high levels of trust in their bank to do the right thing by them and confidence in their competence to do what they say they will do. And others will want more hands-on involvement – it will be their choice and winners will be adaptive to their needs.
Crucial to this is an understanding of how technology is reshaping how people work, live and play and embracing this deeper knowledge to help consumers better manage increasingly complex, fragmented lives whilst giving them the confidence that their data is safe and secure.
The Future of Digital Banking report, written in collaboration with the Commonwealth Bank, stimulates thinking about how the banking industry can be smarter and better, positively impacting on consumers, their relationship with money and through this, their financial wellbeing.
Key report findings
- How will banks evolve?
Banks will transform alongside the shifts in how people work, live and play. We explore the four primary areas that will enhance financial services ability to deliver improved financial wellbeing: data, business models, regulation and emerging technology. - The impact of technology in 2030
A number of emerging technologies will combine to redefine the bank-customer relationship forever. As technology reshapes how we live and communicate, this will have an impact in a number of ways including a hyper-connected world as the norm, engagement as a service and the rise of the ‘super-app’. - Banking in 2030
Leading banks will become a trusted interface for life, embedded within the needs and lifestyles of consumers. For banks to truly succeed and stay relevant, we have identified six key themes they will need to tackle and own. - Future customer of 2030
Banks will need to adapt to individual customer desire for control and knowledge. Our survey of over 1,000 Australian consumers identified the increasing savviness of consumers will drive an intense and urgent new battle between incumbents and challengers to be their trusted interface of choice.
Why Digital Banking is the Future?
New trends in finance, from open banking to the rise of fintech startups, are shaking the industry and putting customers at the heart of the future of banking.
While security and cost-efficiency are strong motivators for banks, the true value of digitalisation is what it can do for the customer. “Digital banking makes life easier for consumers,” says Ian Bradbury, chief technology officer for financial services at Fujitsu.
“People are increasingly enjoying the simplicity of managing all their finances in one place, setting up automatic payments or making deposits, any time and anywhere, without the need to queue in a bank.”
And with an increasing number of challenger banks and fintechs in the game, competition for the customer has never been higher. As Flavia Alzetta, chief executive officer of digital banking company Contis points out, traditional banks have an advantage in both the range and complexity of the products they offer.
“Traditional banks have a 360 degree offering. If they were to put the customer first, they already have a very strong base to continue to occupy their place.”
More importantly, they have an existing clientele, which many of their younger competitors are still trying to build. “The customer is king and very expensive to acquire. Banks need to realise that if you look after customers they will reward you with loyalty,” continues Ms Alzetta, “customer expectations have evolved over the years, and there is no reason why they should not be met.”
What is omnichannel banking?
Omnichannel banking allows a customer to access their banking services, in real time, through any channel they choose, be it the physical branch, an ATM, a call centre or online. Implementing it means allowing customers the freedom of choice to access their finances anywhere, at any time, via any medium.
“Choice is the way forward, always”, says Ms Alzetta. But, she continues, although retail banks have begun to embrace an element of omnichannel banking, it has yet to develop to its fullest. “Omnichannel banking has been implemented mostly in terms of transactional activity. What would be a real novelty would be to rethink the most complex products and services banks provide, such as mortgages.”
The opportunities, should traditional banks fully embrace omnichannel banking, are extraordinary. In essence, it could mean a comprehensive, joined-up experience for the customer, at every stage. “If you call up to enquire about a credit card, and say ‘I’ve got a question about my mortgage too’, you shouldn’t be transferred,” says Mr Paris.
“When you go into the bank and tell them you’ve been speaking to someone on the phone, they shouldn’t say ‘you’ve got to go back through the call centre, because I’ve got no idea what you’ve been doing’. It goes-hand in-hand with open banking.”
Often the biggest challenge for traditional banks is not the customers, but maintaining a technological DNA. You can’t push the job onto the CIO or CTO any more, the full board have to be involved in technological decisions – Matthias Kröner, the Fidor Group
What is open banking?
Open banking means using open data to move towards greater transparency and ease for banking customers when they use various financial services. Open banking means that customers will be able to access all financial services in one place – whether they are looking for a loan, a mortgage, or to pay their bills.
This revolutionary idea is often tied to a piece of European Union legislation, known as the second Payment Services Directive (PSD2). PSD2 requires banks to open access to a customer’s data and information, if authorised.
The desired goal for the customer is greater ease when it comes to account services and payments. For example, when buying something online, PSD2 will mean the consumer will not be redirected to Paypal in order to pay through them.
Although it is impossible to talk about open banking without mentioning PSD2, the two are not synonymous. Where PSD2 regulates how banks must act, open banking fundamentally means embracing a new mindset entirely, one which puts the customer’s needs right at the heart of banking.
What open banking will do for customers
If implemented correctly, open banking will help retail banks return to their roots as providers of financial services.
Rather than offering customers unwanted credit cards or unnecessary overdrafts, retail banks could use their platform to assemble a number of financial services and personalise them for the customer.
Take the example of buying a house. A mortgage is a product, the financial service is helping you to buy. Open banking would allow financial institutions not only to sell the customer a mortgage, but the most competitively priced one, as well as offer insights on house prices in the area, provide home insurance and find the best deal on gas and electricity.
“The point is that none of these needs to have come from my bank” says Mr Paris. “What my bank has done is assemble the products and services which make sense for me.”
What can Traditional Banks Learn from Fintechs?
What Bank Leumi and Pepper teach us is that both traditional banks and fintech companies have their strong suits, although interaction between the two has had mixed results.
Mr Paris believes the relationship has gone through three phases. The first saw traditional banks detect fintech as a threat and attempt to squash them through regulation. The second came as the banking industry recognised the true value of fintech and set out to partner with or acquire them.
We are now in the third phase. “Banks realise that simply acquiring a fintech company does not solve the problem, as the relationship is still one-to-one. What is needed is for a fintech to have access to thousands of banks and vice versa.”
The question is, will traditional banks consent to learn from or work with fintechs in any real sense? Matthias Kröner, founder and former chief executive officer of the Fidor Group, one of Europe’s first digital banks, thinks not. “I don’t think a big bank corporation is culturally able to deal with innovation”, he says.
“It’s a question of compliance. In order to embrace the innovation of fintechs, you need a special governance structure that allows for a fail-fast, laboratory approach. Traditional banks are too afraid of risk.”
One challenge for fintechs is keeping the innovation level high. The bigger an organisation gets, the more you have the tendency for everyone to lean back – Matthias Kröner, the Fidor Group
So what is the future of banking? It is certainly digital and, as a result, more open, more transparent, more ambitious. Most importantly, it lies in the hands of the customer. Any financial services provider looking to make it to 2030 must embrace this truth, and use all the digital and technological tools at their disposal to make their offering as customer-centric as possible.
What are the Disadvantages of Online Banking?
Online banking via personal computers and mobile apps on cellphones has made banking more convenient and accessible 24 hours a day. However, there are some downsides to online banking. While these disadvantages may not keep you from using online services, keep these concerns in mind to avoid potential issues down the road.
Technology and Service Interruptions
Anytime we use computers or internet service, we are at the mercy of the system’s stability and efficiency. Your ability to access accounts online will naturally be affected if your internet service is running slowly or completely out for a period of time.
Similarly, if the bank’s servers go down or are temporarily unavailable due to scheduled site maintenance, you won’t be able to gain online or mobile access to your banking information.
Security and Identity Theft Concerns
In general, online banking sites and mobile apps are designed to be secure and banks are continually putting updated security protocols in place. However, no system is completely foolproof and accounts can be hacked, resulting in identity theft via stolen login credentials.
So while you can use mobile or online banking with general confidence, be careful to avoid using networks that are not secure and be careful to change passwords and protect your login information.
Limitations on Deposits
Daily or monthly mobile deposit limitations may make it difficult for individuals, but especially businesses to make large deposits online. Once you have reached your designated limit, you’ll need to trek to a branch to deposit money.
Also, not all types of checks are easily read by computer scanning software. For example, business checks that are handwritten and have a black line on the reverse side to make a carbon record in an account register may be kicked out of the online deposit system, requiring an on-site deposit.
Convenient but Not Always Faster
While it may take very little time to deposit a check via a bank’s mobile app, you still need to wait for access to your money. Online banking provides convenience in terms of the amount of time saved in travel or waiting in line at a branch location, but all deposits are reviewed and funds are released for access according to bank policy, which may take up to three business days depending on the amount deposited.
Lack of Personal Banker Relationship
For the most part you may be able to handle your general banking needs by yourself. Yet when problems arise if you don’t have a personal relationship with a banker, it might be more difficult to get your issues resolved.
While online banking sites have customer service departments, you often need to work your way through a phone tree and wait on hold before speaking with someone who has no knowledge of your needs or banking history. In contrast, a local banker is motivated to serve their customers and strengthen their personal relationships.
A Limited Scope of Services
Although you can do quite a bit with an online bank account, such as make deposits, check balances and pay bills, there are limitations to the kinds of services you can access.
You may be able to make an initial application for opening a new account or applying for a loan or mortgage, but in most cases you will need to visit a branch to sign forms and show identity documentation.
Similarly, even though you can transfer money to a checking account or debit card in order to make purchases, if you need cash, you’ll have to visit a branch office or a nearby ATM.
Potential to Overspend
The ability to check account balances in the spur of the moment could potentially cause some people to overspend the limits of their checking accounts. Without a careful look at your checkbook or record of uncleared debit transactions, the account balance may not accurately reflect the true amount you have available. Overdrafts and fees might occur if you don’t keep close tabs on all your transactions.
Why Should you use Online Banking?
As a small-business owner, you are likely to spend a good portion of your time in the bank or doing bank-related activities to keep your business’s finances in order. Banking can be time-consuming, but online banking makes it easier for entrepreneurs to handle most basic banking activities via a laptop or Internet-ready mobile device.
Taking advantage of online banking will allow you to maximize your time, and the bank’s online security measures protect sensitive information.
No Additional Fees
Business owners can access online accounts as often as needed without incurring hidden fees. It’s free to sign up for an online banking account, and the privilege will remain active as long as the account holder maintains an account with the bank.
Access From Anywhere
Online banking makes it easy to access your account information at anytime and from anywhere, making banking possible while away on business, at odd hours or while out of your bank’s region. All you need to access an online account is Internet access and your username and password.
Organized Downloadable Reports
Most online banking services provide access to downloadable reports that can help you reconcile your financial statements. These reports include your deposits, transfers, ATM withdrawals and any bills you have paid using your online banking account.
Online banking can help you keep your business records organized or serve as documentation for your bookkeeper or accountant. Some accounts also feature spend analyzers, so you can graphically see where your business’s money is going.
Schedule Regular Payments
Online banking also offers the freedom to schedule payments ahead of time. Rent, salaries and other fixed payments, in any amount, can be set up through your online banking account.
Read Also: Innovation in the Banking System of the United States in the Digital Age
These payments are automatically deducted in the amount you decide on the date of your choice. Set up recurring or one-time payments to be mailed directly to the payee electronically or via postal service by your bank without using paper checks or postage.
Transfer Across Accounts
Managing both home and business accounts leaves many small-business owners struggling. Using online banking, you can instantly move money between accounts when necessary. With the ability to move money between accounts, even while out of town, you can quickly access funds needed to make purchases and payments to keep your business running smoothly.
Save Money
Though it seems minimal, the costs associated with mailing monthly payments to a vendor do add up over time. According to CBS News, the average consumer spends about $6 a month in stamps alone. Business owners can reduce expenses for checks, postage stamps and envelopes by using online banking.
