Digital Transformation in the Banking Industry: How Companies are Modernizing

As digital technology continues to evolve, its practical applications are likewise expanding. While online banking has been the norm for years, the mainstream adoption of digital transformation is taking this to the next level.

Experts predict that the digital banking market will be worth more than $30 billion by 2026. Whether or not your financial institution chooses to continuously innovate, this $30 billion figure will likely become a reality.

Today, we’re looking at how digital transformation in the banking industry is enabling financial institutions to attract more customers and outpace the competition.

6 Technologies That are Accelerating Digital Transformation in the Banking Industry​

1. Artificial Intelligence

From the introduction of ATMs in the 1960s to the rise of mobile banking the 2010s, there’s been a progressive movement toward automation and now, personalization.

Increasingly, banks are using artificial intelligence (AI) to provide customized recommendations and insights to customers based on their transaction histories.

Today’s customers are looking for companies that can offer them something beyond the standard fare of options, so banks are using AI to identify and cater to the different priorities of each demographic segment.

For instance, a customer who is a Millennial may be looking for financial insight and guidance. Meanwhile, a Baby Boomer may be most interested in retirement and security guidance.

Many ERP vendors provide AI capabilities, so an ERP implementation is a great opportunity to explore AI. Otherwise, you may fall behind your competitors as customers seek out banks that can better cater to their unique needs.

2. Chatbots

For years, banks have been using chatbots to provide around-the-clock assistance to customers.

While chatbots are still mostly reserved for customer service and support, other functions now being outsourced to bots include:

• Collecting customer data and generating new leads
• Sending automated notifications (e.g., transactional updates, special offers, payment reminders)
• Gathering customer feedback
• Detecting fraud and notifying customers of suspicious account activity

As these digital tools become even smarter, they’re also beginning to take on more of an advisory role. In fact, some banks have adopted chatbots as virtual financial advisory assistants, helping users keep track of their spending habits and account balances.

If you’re considering implementing a chatbot, it’s important to note that your customer service personnel will need an abundance of education around new roles and responsibilities. What tasks will be offloaded, and what new responsibilities can they take on? A change management strategy can help you communicate with employees before they have a chance to worry about losing their job or having to learn advanced skills.

3. Cryptocurrency

A decade ago, cryptocurrency was still a new addition to our vocabulary. Now, everyone is talking about it.

However, there are several forces working against the mass adoption of crypto, from scams and high prices to tighter control measures enforced by the federal government.

Despite these challenges, cryptocurrency (especially bitcoin) remains popular among banking customers. According to one report, 75% of crypto investors expect the market to hold its value this year or enter a major rebound.

Modern banks are supporting crypto transactions, by . . .

• Offering cryptocurrency wallets (allow customers to store cryptocurrencies in a secure location)
• Offering cryptocurrency exchanges (allowing customers to buy and sell cryptocurrencies using fiat currencies)
• Offering cryptocurrency loans (allowing customers to borrow money and use their cryptocurrencies as collateral)

As cryptocurrencies are still largely unregulated, a full pivot to crypto isn’t likely any time soon. In the meantime, banks must continue to ensure regulatory compliance, while enacting stricter measures around cybersecurity infrastructure and employee training.

4. Open Banking

Open banking is a concept that allows third-party providers to access a banking customer’s data via an open application programming interface (API).

How is this benefiting customers? Put simply, open banking allows bank members to view and manage their money in a way that works for them. It also makes it easier for them to access their credit, as well as personalized deals and rewards.

By leveraging this service, customers can also take advantage of alternative banking services. They can make a payment while playing a video game, for instance, or via a business accounting app.

Before the rise of open banking, there were only two parties that could access someone’s financial data:

• The customer
• The bank

Now, customers are free to share that data with any type of financial service provider they want.

Building the infrastructure for an open banking model can help your financial institution attract more customers because it empowers customers to use their own data for their own benefit.

5. Digital-Only Banks

As more banking customers move online, brick-and-mortar banks are following suit. In 2009, Ally Bank led the race as the world’s first digital-only bank.

Without costly overhead to worry about, these banks can offer financial services to customers at a lower cost.

How are banks doing it? Many are implementing ERP software that enables them to move all their operations online and create a seamless customer experience.

6. Augmented Reality

Banking may soon be an immersive experience.

Institutions are starting to invest in augmented reality (AR) services that can provide financial and operational benefits.

AR allows banks to serve customers from anywhere, even without a physical location. It also enables a more interactive and engaging experience. By accessing these services, customers can view their accounts, interact with representatives, and conduct transactions — all in a virtual environment.

Work With the Right Vendor and Consultant​

Banks process sensitive, confidential information on a daily basis and must be extremely careful with any new technology they implement. However, the pace of digital transformation in the banking industry isn’t likely to slow because there are numerous trusted vendors providing the innovative yet secure capabilities that today’s banks need.

From AR and AI to digital solutions and open banking, there are many innovations reshaping how banks serve customers. To learn how to implement these technologies in your organization, contact our ERP software consultants below for a free consultation.