Digital Financial Services emerged with increased consumer demands for more efficient ways to access banking records and complete financial transactions. It has undergone three distinct phases of digital transformation in the last few decades. The first was a conversion to electronic operations through the use of ATMs, call centers, telephone banking. The second was fueled by a range of SMAC technologies (Social, Mobile, Analytics, and Cloud) that allowed digital financial services to have a somewhat personalized form. The third and current phase is being driven by newer technology that has the potential to dramatically alter the digital financial services landscape, making it smarter, human-like, and much more personalized.
The whole banking industry is turning its focus toward this new technology to prepare for a future that will be increasingly driven by innovation. Hereafter, I summarize the major developments in digital financial services, and where the future is actually headed.
No more traditional branch visits
With most banking services becoming online, there is no need for customers to visit traditional branches anymore. Customers nowadays prefer to do financial transactions online rather than visit the branch as they can complete major financial transactions online, from opening new accounts, editing info, to money transfer, bill payments, monitoring expenses, and applying for a credit card or loans. Those online services are more comfortable, quick, effective, and available 24/7.
Uptake of new-age technologies
Banks’ continuous endeavor to provide their customers with excellent and comfortable digital banking services has given rise to new technological advancements, such as robotics, artificial intelligence (AI), and API banking. These new-age technologies are set to drive profound changes in the banking and digital financial services landscape where customers will increasingly enjoy human-like, personalized services with speed, precision, and convenience. These are the forces that will power the banking industry and reshape how it operates for the foreseeable future.
Optimizing Back-end Processes
Banks are re-evaluating the traditional role of the back-office operations. The traditional function of the back office will be positively impacted by AI and robotic technologies to reduce the dependence on manual processes. There will be a significant improvement in efficiencies in back-office processes which are expected to lead to significant cost savings for banks.
Another function where the back-office of a bank will have an impact on is customer experience. It processes almost all the customer data making it a goldmine of customer information, where it is capable of contributing to the bank’s top-line growth.
Two-Way interaction
There will be increasing use of an AI-powered digital financial assistant, like Siri and Google Assistant to do financial services, that are set to have human-like conversations which allow banks to interact with customers wherever and whenever they want via text or voice commands. It reassures them and creates an instant connection. These conversational interfaces automate repetitive tasks so that humans can focus more on complex issues. Banks can provide customers with the most natural, frictionless, automated interactions for their services across multiple devices used by their customers.
More personalized and targeted services
Powered by artificial intelligence (AI) and machine learning (ML), Banks will be able to provide much deeper levels of personalization and enhanced customer experience. AI-based bots can gather information about customer preferences. Banks can leverage this data with advanced analytics to provide predictable personalization and delight their customers.
Banks will shift their focus from simply selling products and services to providing relevant and contextual financial advice. Banks can offer customers relevant financial options, interactive tools, and educational resources at the right time. In addition to automated budgeting, spending analytics, savings reminders, promotions, and many other tools to help inform and engage customers.
A chance to know about the many banking products
AI-powered digital financial services don’t just provide usual banking services but also present a wide range of available banking products, including savings accounts, credit cards, and loans.
With the intense competition in the banking sector, Banks must be agile and respond quickly to the changing market dynamics. One area which is seeing a major disruption is the introduction of new products, AI will allow Rapid Product Innovations as immediate accurate analysis of customer behavior and transactions can help in creating new relevant products for them.
Multiple Interactive Banking Channels (Omnichannel)
Banks have realized that customers like to have a choice and hence offer them a full range of channels. Banks of the future will offer customers the option to check their balance on a mobile app, pay their bills online, and speak to an adviser about a loan with near 24/7 availability. Seamlessly across multiple devices and channels while delivering a consistent experience.
I would be negligent if I painted a rosy picture about the new technologies without mentioning a few warnings. Two issues are worth mentioning:
- Customers remain suspicious of AI: People still prefer to deal with people at some point. They look for personal connections, and they don’t have trust the machine can understand them. And, while digital financial assistants are becoming better at providing this type of personalized attention, it will take some time for them to gain complete trust among banking customers, leading to lost opportunities in the interim.
- Cost isn’t cheap: AI technology often comes at a premium. Software fees are paid upfront, and there are updates to contend with. The total cost of ownership of an AI decision management system is higher than traditional banking systems or even acquiring Chatbots.
Despite these potential setbacks, artificial intelligence (AI) is still revolutionizing the banking and finance industry. The amount of change dictates that “business as usual” can no longer be an answer. Banks will have to evolve to respond to these technology changes and think of themselves as technology companies that deliver financial services. They will have to wholeheartedly embrace it if they want to remain competitive in the next decade.