Emerging trends in the banking industry
Banking systems and financial institutions are integral parts of an economy. Seamless functions of these sectors are important for an economy to grow.
With the continued advancement and growth in digital technology, banking and financial services have subsequently had a massive shift in their mode of operations.
Mobile and internet banking are just some of the examples to mark this shift.
Furthermore, customers now find it more convenient and flexible to conduct personal or business transactions.
The banking and finance industries have turned focus to innovative technological advancement that will prepare us for a technology driven future.
Banks and financial institutions may have weathered the COVID-19 pandemic, but low interest rates and few loan losses than anticipated pose a challenge to their operating income.
This is prevalent in Fiji as well where banks have anticipated more provisions in their loan books.
Five emerging trends identified in the field of banking are:
Digitisation
Digitisation simply means conversion of data into a digital format with the adoption of technology.
This has become very important in the banking sector in the 21st century.
Internet and mobile banking are examples of digitisation.
By embracing digitization, banks are able to provide enhanced customer services.
Some of the advantages include convenience for customers, saves time and reduces human error and thus builds customer loyalty.
People now have access to their personal or business accounts any time of the day or night and are able to make transactions from the comfort of their homes.
Examples include paying utility bills.
Digitisation has benefitted customers by facilitation of cashless transactions.
Security
With the growth and advancement of technology, we also have various cyber threats that may pose risk to individuals and businesses.
Almost everyone is going cashless these days.
E-commerce is quite popular whether you are looking to buy groceries, pay for studies or buy assets.
To help facilitate such transactions, banks need to implement cyber security control tools that continuously monitor traffic coming through their networks and prevent unauthorised personnel from accessing information in their database systems.
It is not just that data can be tempered with, however, hackers may be able to transfer funds from one account to another.
One way banks minimise risk is by holding large transactions and requesting confirmation from the customer to complete the transaction.
Mobility
Among all the technologies that are shaking up the financial world, the main one that is bringing the most significant transformations across the board is mobility.
It has erased the traditional methods of working and brought about a great change in the working style that the industry has been used to.
Mobility is helping organisations meet customer expectations, increase employee productivity, and cut down on the cost of day-to-day transactions carried out manually.
Bank employees working processes have moved on to smart phones, tablets and laptops replacing personal computers.
This is evident in the current situation where bank employees can work from home and are able to meet customer demands with minimum or no interference.
Data analytics
Banking analytics, or applications of data mining in banking, enhances the performance of the banks by improving how banks segment, target, acquire and retain customers.
It further improves a banks’ risk management, customer understanding and fraud detection to maintain and grow a profitable customer base.
It helps banks and financial institutions gain insights that comprise of all types of customer behavior, including channeling transactions, account opening and closing, default, fraud, and customer departure. With the steady increase in the growing demand for the analytics, banks are deploying a range of analytics today as it helps to successfully produce sophisticated and accurate results.
A good example of analytics is by using bank websites to automate loan eligibility process (real time).
The website will require certain information such as age, loan amount, loan term and it will automatically calculate total loan eligibility and repayment terms.
Regulatory challenges
Compliance risk is one of the biggest concerns of the banking industry.
Failure to comply can have an impact on the reputation of the brand and create a decrease in customer population.
Lack of due diligence in transactions and clients monitoring can drag the bank to costly and time-consuming litigation procedures.
Continuously changing local and international regulations make the compliance function more demanding.
Money laundering may occur in some form through the bank and even though they may not be aware, banks remain liable.
A recent case highlighted was in Australia where a bank was fined billions of dollars by its regulator for breach of Anti-Money Laundering Acts.
The banking world can achieve superior interactions with their public base if they accommodate all their customer needs.
They have a unique challenge to keep their customer alliances and keeping up with the new technologies and competitive strategies that other banks also have to offer the public.
As we venture into the future, technology will undoubtedly continue to change the banking industry.
The COVID-19 pandemic has dramatically changed the way people bank and the industry will probably never be the same.
Banks have shifted services to online platforms, restricted access to their branch lobbies and customers are required to make appointments and wear face coverings, banks have installed protective barriers and enacted social distancing measures.
Customers are encouraged to use their mobile and online banking tools as much as possible.