By Prasanna Chitale . June 15, 2021 . Blogs
As 2020 draws to a close, the world is finally learning to put aside the massive disruption caused by COVID-19 on the lives of people in nearly every country on the planet. As vaccines start to roll out and the world slowly limps back to the good old days of free mobility, there have been certain industries that learned valuable lessons from the pandemic. One of the biggest in this list was the banking sector. Irrespective of lockdowns, restrictions in mobility, most countries listed banks as essential services and as the front line of disbursement of monetary support to citizens. Banks are one of the biggest enablers of the economy by offering numerous services ranging from funding capital to facilitating seamless payment infrastructure for businesses.
On this note, let us explore the five key trends in retail banking in 2021 that needs to be watched by leaders in the banking sector:
Banks need to focus more on bringing technology at the heart of every service they offer. By being a key contributor to the digital economy, banks have the responsibility to keep their own experience digital-friendly. More banks will promote the concept of open banking in 2021 as they seek to expand business opportunities through partnering with leading businesses in all geographies. Trying their hand at the API economy, banks can empower businesses to utilize their banking infrastructure seamlessly and securely through API’s. The growth of PSD2 in Europe which facilitates 3rd party businesses to use channels controlled by banks will be instrumental in extending more technology-driven services to customers in this region.
Studies show that the big data analytics market for the banking sector will register a 22.97% growth in the period from 2020 to 2025. As banks extend their arms by partnering with more businesses, they get access to even larger consumer datasets to work on than before. By expanding their data analytics capabilities, banks can drive more value from the customer data and behavior history and use it to forecast consumer demands. They can identify trends and behavioral patterns of customer spending and roll out personalized campaigns and offers to improve conversion cycles in sales. More use cases of data analytics will be experimented with by the banks to gather actionable insights and growth opportunities. These will help banks improve various facets of their business ranging from customer experience to operational efficiency of their digital infrastructure.
From automated account creation and customer on-boarding to proactive security validation and monitoring, the role of AI in the banking sector is rising exponentially. Studies show that nearly 70% of all financial services firms use machine learning to some extent in areas such as customer credit score validation, fraudulent activity detection, and prediction of revenue and cash flow. By deploying intelligent automation, banks can achieve a drastic reduction in time and effort than what was needed previously. Increased automation will help improve the adoption of digital platforms and will ultimately allow banks to shorten physical branch working hours and enable consumers to work with them anytime from anywhere in a secure digital environment. In 2021, this trend of intelligent automation will certainly hit new levels as more banks opt to experience the benefits of an automated enterprise operation.
Today a wide range of digital services operate in nearly every sector ranging from shopping to food delivery. Irrespective of the business domain, payments are a key part of any business activity. From helping businesses sell their goods online through popular marketplaces to powering popular social payment options of other Fintech companies, banks in 2021 will offer more inclusive services to allow themselves to expand beyond traditional channels and business models.
Neo banks or digital-only banks are a raging trend today, with almost every country globally having one or more such providers of banking services. They differ from traditional physical branch retail banks in the way they operate completely through a digital interface rather than in person. With the Neo banking market expected to showcase a CAGR of 45.23 % by 2025, the future looks very promising. Faster services, convenient banking options, and less manual work make Neo banks a very popular option among consumers worldwide.
The COVID-19 pandemic created huge shifts in the way people interact with their banks. In the US alone nearly 14% of adults had their first online banking experience due to the pandemic. Banks will continue to invest in getting to digital supremacy as more consumers demand faster and more agile services.
Rolling out innovative products like numberless cards, contactless payments, integrated smartphone payment instruments, etc. are all signs of the banking industry’s willingness to adapt to change. Delivering a superlative customer experience across all channels will be the key differentiator for banks to stay ahead of the competition. Missing out on the digital revolution will certainly cost banks dearly.