The banking industry has contributed significantly to the ever-changing finance landscape. There has been a paradigm shift in banking operations over the decades. We are already aware of the regulatory shifts observed in the banking industry. Several banks have undergone a complete digital transformation to remain competitive. Gone are the days when banks would only store your savings. New trends in banking industry have begun changing how banking operations are conducted.
Bank service offerings include advisory, investment research, asset management, online transactions, and many other facilities. Professionals working in the banking industry are slowly growing accustomed to these emerging trends, ones which will be the ‘new normal’ with time.
Let us discuss some popular trends in banking industry.
Top Trends in the Banking Industry
Here are some you must know that are shaping the way banking operations will go ahead in the future:
The Use of AI and ML for Banking Processes
AI and ML are the most popular new-age technologies in the banking industry. These technologies can help banks achieve automation for mundane tasks. Banks no longer require dedicated teams for customer support, data analytics, customer authorization, and other processes. AI and ML algorithms can help banks automate customer support, data analytics, and other processes. You might have seen chatbots embedded on official websites or mobile bank applications. AI-backed chatbots can respond to basic queries without manual intervention, removing the need for dedicated employees. Similarly, AI and ML-led systems help analyze large volumes of data and generate insights in the banking industry.
The Rise of Fintech
Fintech integrations are an integral inclusion in emerging trends in the banking industry. Gone are the days when you had to visit a bank in person to make transactions, apply for loans, open a savings account, or perform any other task. You can now make digital payments, apply for loans, and open new accounts on a smartphone without moving an inch. Besides the top Fintech players, traditional banks also embrace technology for providing services. For instance, many banks have launched their digital payments platforms or applications in the recent past to stay competitive.
Cryptocurrency has already made waves around the world. Many governments that were critical of cryptocurrency in the past are now normalizing it. JP Morgan Chase, Goldman Sachs, Standard Chartered, HSBC, Wells Fargo, and many other popular global banks are now crypto-friendly. While some banks are launching their cryptocurrencies, some are offering crypto-related services. For instance, some banks have started offering crypto trading services to their customers. Banks are also embracing the technology behind cryptocurrencies, which is blockchain. Blockchain has become vital in conducting international transactions, smart contracts, and other services. Distributed Ledger Technology (DLT), the superset for blockchain, has been around for some years in the banking industry.
Banks are increasingly paying attention to sustainability factors. A bank can ensure long-term returns with the help of sustainable operations. Banks consider ESG (Environmental, Social, and Governance) factors for their activities, as relevant stakeholders want to indulge in sustainable business practices. You can see several examples of sustainable practices in the banking industry in 2023. Several commercial banks offer loans to only sustainable companies. They might not offer commercial loans to companies with a poor ESG score. Similarly, banks use ESG principles in risk management, reporting, and other activities.
Removal of Legacy Systems
Most banks have now shifted to new-age and automated software systems. There’s little or no use of legacy or obsolete computer systems in the banking industry. Legacy systems have been around for several years in the banking industry. The technologies used in these legacy systems are no longer in use. AI, ML, blockchain, and other new-age technologies have evolved in the recent past. More banks will discard legacy systems for operations in the coming years.
The Rise of Open Banking
Open banking provides third-party service providers with financial data, bank infrastructure, and other resources. It leads to the development of new financial products and services and improved innovation and customer satisfaction.
Finance professionals must be aware of emerging trends in the banking industry. Financial institutions that must embrace digitization, open banking, Fintech, cryptocurrency, and other trends might find it challenging to survive in the coming years. Banks can always partner with specialized third parties for innovation, technology adoption, and other purposes to become increasingly familiar with these upcoming trends in the banking industry.