• Ankit Shah, Head of Digital Banking at Apex Group


• 04.01.2023 02:00 pm
#banking

With the year drawing to a close, 2023 promises further advances in digital banking and technology which will continue to reshape the financial services landscape. While it can feel as though digital banking has become ubiquitous for consumers, there is still a great deal of room for further growth in the corporate and institutional world, and new technologies will be key to that.

It’s true that a significant majority of the population now use banking apps and online banking, but, at the start of 2022, only 27% of UK banking customers had embraced digital-only banking. This number is likely to have grown over 2022, and to continue growing in coming years. New technologies will make digital banking more convenient and will also allay concerns that individuals and businesses that remain around privacy and security.

So, what are the big themes that will come to dominate the coming year, and what impact will they have on customers and the financial services sector alike?

Artificial Intelligence (AI)

In many industries, the race is on to embrace and harness the power of AI, and financial services are no exception. In fact, over 2023 and beyond, AI will become an essential part of the corporate digital banking industry. AI is already being applied to - and successfully solving for - a range of challenges that banking has traditionally faced.

For example, the ability of AI to deal with large, complex data sets and spot patterns that would take a human operator years to assess is being used to detect and prevent banking fraud and manage risk. At the front end too, AI is being used more and more to triage customer service enquiries, freeing up human time to deal with complex cases.  From the adoption of basic workflow management and automation of processes, 2023 will see banks increasingly adopt AI techniques to achieve hyper-automation across the business process lifecycle.

Big data

AI of course would be nothing without the data sets that feed and train it, and 2023 will see the digital banking sector continue to explore the possibilities unlocked by big data. Data is proving to be one of the best means of understanding, predicting and responding to customer behavior. It allows for greater personalisation and can save significant time when it comes to dealing with customer requests.

The coming year will see banks continue to build the data sets that will give them the edge, especially when combined with the AI that can utilise the data sets to best effect.

Blockchain

While blockchain in finance has been closely associated with cryptocurrencies, the technology is also having a big impact on the wider banking sector too. By making peer-to-peer transactions ever more secure as well as digital transactions more generally, blockchain is eliminating intermediaries while at the same time making transactions quicker and more efficient and convenient.  Over 2023, as more banks and financial institutions engage fully with blockchain technology, significant savings will be made on operating costs. This will give the banks that best harness this technology a significant edge over their competition.

Client privacy and security

As our individual and corporate digital footprints grow, so do opportunities for fraudsters to take advantage of any weaknesses in our security. While progress is being made on this, digital fraud remains a major issue. According to UK Finance, criminals stole a total of £609.8 million through fraud and scams in the first half of 2022. And, underlying the role that banks have to play here, the report also found that bank security systems prevented a further £584 million from being stolen. So, this remains a major issue for customers and banks alike and the expectation is that security measures are front and centre and always visible.

Delivering a good experience at every key step of the customer journey is critical for building trust, and security is key to this. Banks need to make every experience feel safe and secure whether it is a retail banking customer transferring £100 – or a corporate moving £1m.

Clear secure verification processes, messaging through the banking portal and segregated access management give customers the confidence they need that their financial transactions are secure. In 2023, Zero-Trust security architectures will grow in importance as a means of providing end-to-end, secure banking transactions. Chaos testing and vulnerability testing will also become integral to building security into the life cycle of critical platforms.

Open Banking

While Open Banking started as a regulation in some countries to encourage fintechs and competition, banks now view Open Banking not as a matter of compliance or as a threat, but as a business opportunity.  Banks have been slowly embracing the possibilities of a marketplace founded on application programming interfaces (APIs) and the question of how such a market could be monetised. APIs allow more fluid interactions between financial institutions and these partnerships will drive the next wave of growth for banks over the next year and beyond.

Open Banking will further accelerate the digital payments revolution and the near future will see digital banks continue to adopt composable banking services and/or BaaS platforms to quickly set up their entities.