2018 promises to be the year we see the culmination of some key technologies — from blockchain and intelligent AI, to design thinking and the cloud. Some of the trends to look out for this year include-
– Massive Investments in Digital Transformation
As customers become more digital, more demanding and more tech-savvy, legacy bank infrastructure is strained to support new modes of engagement and grow digital efforts significantly. In response to increasing competitive pressures and people’s rising expectations, financial institutions around the world are investing aggressively in digital transformation projects.
– AI & Blockchain
AI development will focus on cognitive use in the sales, marketing, investments, wealth management and compliance sectors of the financial services industry.
– Digital-Only Banks Becoming More Acceptable
With the entire banking industry shifting to digital channels, digital-only players will pose more and more challenges to the historical dominance of traditional banks and credit unions. These challenger banks will fuel increased competition in the industry, forcing traditional financial institutions to improve their digital offerings and extend their reach to fend off these disruptors.
– Design thinking needs to be combined with creative engineering to bring the UX vision to reality. Banking providers will focus on a few key use cases and technologies where customer-first design is key, like account opening and augmented reality. Augmented Reality (AR) and Virtual Reality (VR) will benefit from developments in immersive UX design aimed at improving the customer experience.
– Real-Time Risk Decisions
AI will also support risk management by improving the enterprise-wide risk analysis needed to fulfill the changing needs of the organization.
– Increase in the number of Alternative Lenders Leveraging Alternative Data
The 2008 financial crisis left banks and credit unions at a disadvantage with credit challenged consumers. This, combined with the emergence of online lending technology and streamlined lending processes — made room for alternative lenders to thrive in this environment. According to Capgemini’s report, “these non-traditional lenders use technology-based algorithms and software integrations to assess credit profiles of customers and are also leveraging alternative data such as social media photos and check-ins, GPS data, e-commerce and online purchases, mobile data, and bill payments”.
RegTech has a vital role to play as firms move beyond initial MiFID II compliance and gain more long-term benefits from the regulation and take a tech-first approach to their compliance efforts. This will lay the foundation for greater economies of scale across data, analytics, and related risks.
– Big Data Gets Even Bigger
Big data initiatives are pushing more sophisticated and more open business models with better data tools and visualizations. While the beginning efforts for data standardization have already started, financial institutions are still relying on legacy data architecture and infrastructure. Stepping forward with future systems is a priority for data in 2018. Additionally, this requires new data infrastructure to comply with the upcoming new data requirements like General Data Protection Regulation (GDPR) and Payment Services Directive II (PSD2). With those changes, new ways of extracting additional value from data have emerged, such as data virtualization, data lineage, and data visualization.
– Connecting With Third-Party Providers to Drive Customer-Centrifuge
Through open APIs, banks and credit unions will go through significant changes in the way they provide CX-based processes. Customers are increasingly adopting fintech offerings for better services, leaving banks and credit unions no choice but to adapt – or get left behind.
– Adoption of the Cloud in Banking
Adoption of the cloud will increase this year, with the focus on security and regulatory compliance with an inclusion of enterprise-wide middle- and bank-office applications. Banks and credit unions will feel the push to create more cloud-enabled business models in 2018, while the use of open APIs will drive consumer applications to the cloud even more.