To remain relevant, banks will have to embrace emerging technologies, become flexible to adopt evolving business models, and put customers at the center of every strategy, according to Deloitte.
In a Perspectives piece, the consultancy firm outlines eight main tech trends it believes will shape how banks will look like by 2030.
Eight key trends changing the banking landscape
These trends are arising from technological advances including blockchain and artificial intelligence (AI), and are driven by increasing demand for hyper-personalization from digital-savvy Millennials, as well as and the rise of platformification in banking, among other things.
According to Deloitte, banks must react quickly and “transform boldly” in order to be successful in this evolving landscape.
New cyber risks and financial crimes (CyFi)
Traditional prevention methods are no longer protecting consumers from complex and sophisticated financial crimes. Hence, financial institutions need to embrace advanced technologies such as analytics and AI to improve threat visibility and detect fraud effectively, Deloitte says.
Findings from a 2019 study by Accenture found almost eight out of 10 business leaders believe that they are adopting new technologies faster than they can address related security issues, and estimates that nearly US$350 billion of value could be lost by the banking sector to cybercrime in the next five years.
Data integrity and analytics
Trends such as open banking will force banks to open up customer transaction data to third parties. This will likely have profound effects on traditional retail banking and will require organizations to make strategic choices around business-model impacts and customer retention.
Leveraging cutting edge technologies
New technologies including AI, automation, blockchain and the cloud, are drastically changing the industry in the front, middle, and back office. Banks will need to embrace these emerging technologies and keep up with the rapid pace at which the sector is transforming.
According to UBS, blockchain and AI will be at the heart of the fintech evolution, bringing both opportunities and challenges to the financial sector. The bank estimates that blockchain could generate annual economic value worth US$300–400 billion globally by 2027.
As for AI, Autonomous Next projects that AI applications could help banks save an aggregated US$447 billion by 2023, with the front and middle office accounting for US$416 billion of that total.
Moving forward, technology will continue to be the driver of business growth and will remain key to delivering a wide range of services through excellent customer experience.
A 2019 Bain & Company survey found that consumers are increasingly willing to use tech firms for simpler banking products if a traditional provider makes it hard to find out about or purchase products on a mobile device or online. This is especially true for younger, digital-savvy populations as 75% of consumers between 18 and 24 said they would use a banking product offered by an “established” tech company.
But while digital transformation has become an imperative for incumbents, real changes have been slow and many have yet to make consistent, sustained, and bold moves toward thorough, technology-enabled transformation, Deloitte says.
Results from a 2019 Digital Banking Report research echo that as only a very modest 12% of financial institutions said they considered themselves digital transformation leaders.
Speed and agility
The accelerated pace of technological innovation has given birth to new business models at an even faster speed. In this rapidly changing landscape, the competitive advantage will come from being fast and nimble, and banks must embrace digital forces to innovate in smaller, bolder cycles, Deloitte says.
Future of work
Technologies advances such as automation and AI will replace human thinking, and trends such as the gig economy and crowdsourcing will continue to change the way work is done. Hence, banks will need to rethink their talent landscape and the skills required to stay ahead of the curve.
Already, 71% of AI adopters are reporting that AI technologies have changed their company’s job roles and necessary skills, according to 2020 Deloitte survey. 82% believe AI will lead to moderate or substantial changes to job roles and skills over the next three years.
Leveraging platforms and monetizing data
Data will be key for institutions to improve customer experience, and banks will need to figure out how they want to utilize platforms, and the data behind them, in order to grow.
Orchestrating across the ecosystem
The financial services ecosystem is growing, and as we move towards 2030, regulators, fintechs, big techs, banks, and other industry participants will need to work together to better serve customers.
In this context, the importance of a deliberate ecosystem strategy and the effective orchestration will be critical, and banks will need to select how and where to partner, Deloitte warns.