We all know and accept the fact that the future of banking is online. In the digital era where everything had already started going digital, banking was the sector that was left behind and started very late but it has started transformation with extra pace. Millennials have been influenced heavily by the ease that technology has provided in most aspects of their life. When it comes to banking, their expectations are just as high as they were with other parts of the market, low fees or no-fees banking and excellent customer service were just a couple of their challenging demands. An effective strategy for banking institutions was to invest in digitalizing processes with the latest technology that can help in decreasing costs and improving customer service.
Introduction of virtual banking was a revolutionary move in banking sector. Virtual Banks didn’t appear by some coincidence. The demands of the digital age and changes in customer’s behavior encouraged the emergence of a new culture of banking. The logic of the virtual bank majorly differs from the physical one. Today physical banks run e-banking applications and offer online & mobile banking’s, which have many features that are inspired by the offerings of virtual banks. The youngsters feel fine utilizing smartphones for banking requirements. So, 82% of 18 to 24-year-old manage their funds and pay through the phone. According to the survey conducted by BI Intelligence, 71% of millennials say it’s very important to have a banking application and 60% say it’s very important to have an app to make payments.
Online banking has had a tremendous effect on the banking sector because people can now complete their financial transactions by visiting secure sites that are maintained by physical or virtual banks, brokerage houses or credit unions.
Here we have short listed ways in which Virtual banking will shape the future, let’s have a look at them. fintech news
- Blockchain in Banking
One of the most discussed topics in the financial services industry at present is blockchain in banking. Blockchain and distributed ledgers have a great future. As an open-source, real-time, and trusted platforms that transmit data and value securely, they can enable banks to reduce the cost of processing payments and also develop new products and services that can generate significant new streams for revenue. The biggest key to turning the potential of blockchain into reality is a collaborative effort among banks to create the network necessary to support global payments.
In Europe, Santander is leading the way by launching One Pay FX, the first international money transfer service for retailers based on the blockchain platform. In the US, JP Morgan has filed a patent for the application of Blockchain to speeding up cross-border payments, which came as a surprise to many but is a clear sign that the technology has now crossed over from the periphery to the mainstream. In Italy, 14 big lenders have launched a project on blockchain-based interbank reconciliations.
It seems that Blockchain has risen up out from the pack as something that the big, traditional financial institutions see as being a more stable bet for the future. And now that the first banks have made their moves, we can expect a rush of others to follow, as nobody wants to be left behind.
- AI-Driven Predictive Banking
One of the most exciting innovation trends will be the continued movement to predictive banking. For the first time, the banking industry can unite all internal and external data, building predictive profiles of clients and members in real-time. With consumer data that is accessible, rich, and financially feasible to deploy, financial institutions of all sizes can know their customers as well as provide advice for the future.
This enhanced utilization of data will improve the consumer experience while increasing security and efficiency. By moving from a rear-view-mirror perspective of customer communication to services positioned by AI-driven chatbots and Robo-advisors, financial institutions will provide consumers with value through ‘next-best actions’ rather than blind selling of products. The real innovation will happen when financial institutions integrate this ability with the expanded services of open banking and connected devices.
The reach of banks and credit unions can be extended as virtual agents work on behalf of the consumer to find the best blend of solutions for every individual in real-time. This transformation may also result in the elimination of certain traditional products such as checking, loans, payments, with the rise of universal cash management solutions that address all requirements in an integrated service.
In the end, the focus is no longer on assembling together good information and waiting for someone to look at it; information is presently shown with the goal of proactively changing customer’s everyday behaviors, with figures and insights contextually delivered.
- Automation of Customer Interaction
With high street banks shutting down and face-to-face human interaction between clients and service providers dropping to only 10% of all contacts in 2017, banks need to grasp another method of offering services. And most are now currently investing intensely in both text and video chat services. Chat is proven to build customer loyalty and bring better business results. For the banks, it becomes an absolute must as the client turns out to be less able to interact with the bank’s employees in a brick-and-mortar branch.
Chat agents, be it through video or chat, become the human face of a branded customer experience in the digital world. But, to continue staffing costs down, banks require to simultaneously invest in automation to ensure that customers only interact with humans when necessary.
The automation of customer service turns into a gatekeeper; the bank first utilizes machine learning and algorithms to try and solve the customer’s query without the need for human intervention. The chat option becomes available if the customer still needs help. The trick is to implement automation without dehumanization, by having the right AI touchpoints to solve problems where possible and human touch where necessary.
A clear indication of how genuinely fintech organizations and banks are about getting the balance right is the roll call of investors in Cleo, the London-based company that offers an AI-powered chatbot as a replacement for banking apps. Errol Damelin of Wonga and Taavet Hinrikus of TransferWise have bought into the service, as have a number of other large industry players, proving that people in the industry see it having a big future.
- Open Banking
More and more regulatory bodies worldwide are requiring banking organizations to empower clients to share their data securely with third parties to power new financial services and increase competition in the banking sector. By making account and payment data accessible through secure APIs (Application Programming Interfaces), consumers have greater freedom and control by the way they interact with their financial service providers.
Open banking APIs accelerate innovation and collaboration, prompting extended banking ecosystems that could incorporate more than just financial services to make the lifestyle of consumers better. What is exciting about open banking is that creating consumer consent a central part of open banking strategy places an increased emphasis on consumer value propositions. In other words, if an improved value isn’t part of the open banking consumer proposition, the client won’t permit the sharing of their data. On the other hand, those firms that provide the best consumer value proposition will be the relationship champs.
The understanding and leveraging of the innovation capability of open banking will enable legacy financial services organizations to develop on their existing customer relationships. By giving customers choice and control of their own data, first-mover banks, and credit unions can lead in an era of increasingly personalized financial services. The expansion of open banking also will support non-traditional financial firms to team up with traditional banks.
- Need of Cybersecurity
These days, digital banking and online payments are a fast and convenient way to manage our money. We can check our balances, pay for goods and services, and transfer money to our family and friends in a few clicks from any place, any time, any device and on any platform.
There is no surprise that even banks are keen to push a mobile-first agenda. Digital banking decreases the cost of tellers handling transactions by reducing the need for clients to visit a physical branch of a bank and removes the dependency on banks for minor information and automation of certain less valued processes. And it is slowly removing the requirement to have physical bank branch premises at all.
Customer trust is the soul of the banking industry wherein any breach of security could amount to a loss of reputation and customer loyalty. The popularity of the smartphone means that the world is more connected than it’s ever been but as a result, it has extended the target for cybercriminals, so we need to be more than up to the challenge.
As the number of high street bank branches is diminishing, bank robbers are becoming a thing of the past. From 1992 to 2011, the bank robbery cases in the UK fell from 847 to 66. The another reason for this is that criminals moved faster than banks in the cyber world and took their activities online.
Cybersecurity has been of great significance in the financial sector. It becomes even more necessary since the very foundation of banking lies in sustaining trust and credibility. Banks need to be alert more than most businesses. That is the cost of holding onto the kind of important personal data that banks do. Your data with the bank can be breached if not protected from the threats of cybercrime. There are also needs to secure the payments done through various digital modes.
Aashish is currently a Content writer at FintecBuzz. He is an enthusiastic and avid writer. His key region of interests include covering different aspects of technology and mixing them up with layman ideologies to pan out an interesting take. His main area of interests range from medical journals to marketing arena.