What Challenges Does The Banking Sector Face In Digitalization?

Banking CIO Outlook | Friday, January 15, 2021

FREMONT, CA: The digital age has brought a paradigm shift in the banking industry. Physical branches have become less of a necessity today as smartphones are a ubiquitous phenomenon. ‘Anywhere, anytime’ has become the new status quo as the industry is keeping a weather eye on the changing customer profile. Increasing demand from the newest customers, generation Z, for a more enhanced digital experience is completely transforming the way the industry operates. The banking institutions have started to realize that innovations in digital banking are going to be the next competitive differentiator, and today, technology seemingly has its hand in every aspect of the banking industry.

Digital banking offers a winwin situation for both the banks and their customers. Investment in digital technology can benefit the customer acquisition strategies of the banks and enhance the customer experience while reducing the overall cost for both parties. Digital banking offers round-the-clock seamless banking experience adding to the customer experience significantly. Real-time customer support channels and techniques like co-browsing are found to be highly effective in query resolutions. Digital banking also simplifies the onboarding process of the banks. Further, it can streamline the bank operations to deliver more value to the customers and decrease the operational costs that can be passed on to customers in the form of reduced charges.

The sector is exploding with new ideas and applications from voice-first technology and artificial intelligence (AI) to advanced biometrics and blockchain technology. Even though distinct data sets and the risk of confidentiality has limited the penetration of AI in the sector, experts predict that it will soon take over. Predominantly used in the sector to enhance the customer experience, AI has enormous potential in banking, such as risk mitigation, analytics, and hedgefund management. Similarly, voice-first technology is being extensively leveraged today to make the banking experience personalized for the customers. Several banks have already started using voice recognition as one of the methods for two-way authentication, and it could also find its application in providing private banking access through smart devices such as Alexa or Siri.

Another technology that is making its way in the sector is blockchain technology. The banking and finance industry is the largest consumer of the technology as it is predicted to improve efficiency and security, and increase cost-effectiveness. While banks cannot rely on digital entirely, it indeed could determine the future of the industry. In today’s competitive landscape, it has become a necessity for banking institutions to embrace emerging technologies to make banking much more secure, personalized, and cost-effective.

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