How Digital Banking is Changing the Financial Industry

How Digital Banking is Changing the Financial Industry
7 Feb 2020

Digital banking started to take shape in the 1960s, when cards and ATMs appeared, but it wasn’t only until the ’80s that people could access their bank accounts online. Along with the expansion of the internet came the internet-only banks, NetBank being one of the first and most successful ones, founded in 1996. Afterwards, in 2007, when iPhone was launched, digital banking became even more accessible, given that anyone could have a personal computer on their own phone.

These days, we are experiencing a continuous digital transformation on all levels, and the financial industry is also benefitting from the upcoming technologies. And with the integration of digital technologies leading to fundamental changes in any industry or business’ functioning, the financial industry is no exception. The development of digital banking apps made banking services better, faster, minimized human errors and also helped with cost reduction. These apps save people’s time, make loan management simpler and person-to-person money transfer almost instant. Keeping track of expenses has never been easier and paying the bills as well.

How Digital Banking is Changing the Financial Industry

Artificial intelligence and machine learning are also leaving a mark on the financial industry. With the help of these technologies, the banking industry has saved up to one trillion dollars, as costs were reduced due to less spending with front office operations. At first, AI made its way into the financial industry through virtual assistants that helped customers find answers, set up accounts and cancel or replace lost credit cards. Clients can communicate by voice or by text to their virtual agents and schedule payments, get product information and, in the long term, get closer to their financial goals. Algorithms are used to detect frauds and protect mobile banking, and companies are investing more and more in cyber security systems, that need to continuously adapt to new types of threat.

Today, there are more than 39 million users of digital-only banks, and the forecast is that by 2024, the numbers will increase up to 98 million. More and more banks will start to digitize their business and include technologies such as blockchain, in order to transform their banking processes and provide a safe and convenient alternative to traditional banking. Blockchain is known for its ability to reduce fraudulent activities, and it is already used in payments, transfers of private equity assets, derivative product tracking, transaction management, microfinance applications and mortgage and loan records. In cross-border payments, blockchain can reduce the processing time to minutes, as opposed to the standard of 3 to 6 days. In addition to blockchain, machine learning can help automate manual processes for trading, fraud management and customer segmentation.

The financial industry relies a lot on data and Big Data technology has an important impact on the customer’s experience, providing banks with the opportunity to offer better quality services. Through this technology, banks can enhance their customer’s experience, enabling the use of other innovative technologies such as Internet of Things and Artificial Intelligence.

Digital banking has also influenced the financial industry workforce, automation sometimes leading to downsizing and layoffs. But, at the same time, there is a growing demand for experts in data science for example, and companies are always on the lookout for new skills in experienced banking specialists.

Conclusion

With all the changes that digital banking has brought to the financial industry, companies need to constantly be up to date with the evolution of digital solutions, by using them to their advantage. So, keeping their clients’ best interest in mind, both small and large financial companies should get on board with these game-changing technologies that are key in modern business strategies. Also, we shouldn’t forget about the main purpose that companies are pursuing, and that is to attract and retain customers, as well as increase growth.

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