The Future of Banking and Of Course It’s Digital!

“Software is eating the world” a famous quote from Netscape founder, Mark Andreessen. An example from his speech “Today, the world’s largest bookseller, Amazon, is a software company.  Its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary.” So what do we expect from banks? Do we still need branches? Yes? Why?

In our perspective the banking industry already behind the revolution but thanks to challenger banks, it is in the middle of the wind of change. In this article, we like to discuss on banking model of the near future with some stats from around the world, customer behaviours, predictions of big consultancy firms and expert thoughts. But, first things first. Yes, the customer is first.

Know “the customer” set your business for “a customer”

If you are reading this and reached your mid-thirties, you are supposed to have read countless numbers of articles that says “The future of X” or Y etc. But let us do something different and put ourselves into the core as customer, futurist or banking professional. Then, let us try to imagine what will be the “us” in the near future. 

This article is written in Google Docs and shared with a colleague for the grammar and punctuation control. -She has Grammarly on her computer.- Then she emailed it to another colleague to create a visual for it. And finally, visual and the text uploaded to CMS via another email. Now you are able to read it. No office needed! No paper needed! No psychical storage needed… This is the evolution of software. We, human beings, are adopting ourselves to software we create. Let’s say this is the “new normal”. 

In other words, we are getting poor on time and highly mobilized. We need someone to help us with “overwhelming” tasks in daily life routine. A personal assistant to help us with traffic jam, a smart servant to set room temperature & save energy and money, a proofreader to check our typos, a financial advisor to guide on investments… Last example and the rest have something in common and its result is more software. Future of the customer is more software-centric version of ourselves.

How digital the current banking system is?

As we discussed above, pandemic is disruptive change affect in every industry, it also has echoes in banking systems, too. Since it is dangerous to go bank branches and do some operations, customers are in the need of digital banking. In the article, What Do Customers Want from A Digital Bank, we’ve studied new customer personas and their emerging demands. For now, let us add some more statistics by regions that would help us to analyze the current situation. Then, we will be able to predict the future. 

According to statics site Statista, in Europe Norway is the leading country in terms of digital banking usage habit with 95% of the group age 16 to 74, in 2019. It follows by Iceland with 94%, Denmark, Finland, the Netherlands with 91%. In the 28 Europen Union countries, the average is 58%. On the other hand, the reverse side of the chart, Montenegro 3%, Kosovo 5%, Bosnia and Herzegovina 5%. As numbers showed that, In Europe trust and need for digital banking is in the rise. This is leading the innovations in Financial Technology (fintech) industry. 

In 2020, we have experienced digital banking license rival in Singapore as well as in Europe. As a result, we have more challenger or neobanks now. We expect this rival led to bank and non-bank partnerships more. June 2019 PwC survey of financial services companies worldwide shows that among companies that wanted to collaborate with other sectors for growth, 47% were likely to collaborate with a fintech firm. (eMarketer)

According to EY’s “Global FinTech Adoption Index 2019,” financial technology services adoption among internet users has nearly doubled during the past two years, and the adoption rate is growing. Its March 2019 data shows that 64% of digitally active consumers across 27 markets used fintech.

How will banks evolve?

It is commonly accepted that “data is the new gold” Thanks to digital technologies banks are able to collect enormous amount of data ever than before. ATMs, web apps, mobile apps, integrations and cash/credit card data and more… And of course, new business models and the new data gathered from partners, too. But what banks will do with the data? 

This data allows Artificial Intelligence (AI) algorithms to work smoothly. AI or more technically, Machine Learning Algorithms are mathematical models that can predict some behaviours, information or function which success heavily depends on the data that the system learns from. As the amount of data increase, then AI functions better. So it would be the responses of AI in terms of digital banking:

  • Cost-saving via chatbots. Now banks are able to handle customer complaints or services without human error and psychology effect. 
  • Personalization. Since banks know more about their user they serve better service that completely personalized for them.
  • Fraud and risk detection.