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Digitalization dominated banking trends in 2018, and all indications are that the development of ever more sophisticated tech solutions for banking will accelerate in 2019. Faced with increasing competition from other banks, as well as a growing variety of non-traditional firms, banks are embracing digital solutions at a rapid pace.
The objectives are to anticipate customer needs and to meet them with an effective mix of service and product capabilities, efficient processes, and skilled, responsive people. Here are a few areas where significant developments will be seen and are expected to accelerate this year.
1. Serving The ‘Segment Of One’
According to a recent report by Accenture, there is a growing trend moving past demographic-based segmentation towards greater personalization. Until now, customer segmentation has focused on basic categories such as age and income level. Advanced data analytics, however, is now making it possible for banks to offer a fully responsive, completely individualized customer experience in real time, based on the customer’s interaction with human or automated CRM platforms.
One area where banks may find personalization to be particularly valuable is in serving business customers, especially small and medium-sized enterprises. These business customers often fall outside the “mainstream” of banks’ traditional segment profiles, such as in lending.
Digital banking, however, allows banks to develop more comprehensive profiles of their business customers and opens opportunities for a wide range of product and service offerings that can enhance customers’ core businesses.
2. Growth In Open Banking
With the expansion of non-bank financial services and a greater emphasis on protection against fraud and money laundering, an increasing number of regulators are encouraging – or in some cases, requiring – banks to allow customers to share their banking data with third parties securely.
This has two advantages. From a regulatory and economic policy point of view, it increases competition in the financial services sector and expands the overall market through greater customer inclusivity.
From a consumer point of view, it allows greater personal control over the use of one’s data and simplifies access to an expanding range of financial products and services. Additionally, the growth of open banking APIs challenges banks to develop truly value-added, in-demand products that enhance their consumer value propositions.
Digital banking is, therefore, increasing demand for secure data sharing and improving the way that banks handle customer data.
3. Digital-only Banking
Physical branches are traditionally a high-cost proposition for banks and require a significant amount of customer traffic to make maintaining a branch network worthwhile. However, the digitalization of many banking products and services, such as lending, is obviating the need for full-service branch networks.
Many banks are expected to follow the lead of non-bank financial institutions in shifting at least some of their business to a digital-only model in 2019. Institutions leading the digital movement range from relatively limited programs offering basic services such as deposits, bill payments and money transfers, and customer information management, to full-service models offering loan and investment services.
For many banks, the right mix of digital and physical services will result in the development of more “hybrid” specialized branches: smaller locations with lower overhead that allow customers to access digital services securely while also having dedicated CRM personnel available to resolve problems with their own “personal touch.”
4. AI-Driven Predictive Banking
Advances in predictive banking are expected to be introduced at an accelerated pace in 2019 as artificial intelligence (AI) is applied to a greater range of data analytics. In a very real sense, predictive banking represents the intersection of personalization, greater integration of internal and external data through open APIs, and the extension of automation into a greater range of more complex processes.
Through predictive banking, banks will be able to offer clients solutions in real time based on a “next best action” approach, rather than selling from a static menu of products. Meeting customers’ immediate and future needs with a high degree of precision will allow banks to improve customer retention and increase the value of individual customers.
5. Expansion Of The Payment Systems
Digital payments have been on the leading edge of the digital revolution in financial services, and this is expected to continue in 2019. Banks in the U.S. are increasingly adopting digital payment models, ironically taking a cue from advances in some developing economies, where digital payment systems are seen as a good way to bring millions of “unbanked” consumers into the formal financial system.
Thanks to the expanding use of open APIs, digital payment systems are moving beyond simple digital cash models into “one card does it all” systems. Banks are discovering that once the digital payment framework is established it is easier to “plug in” other products and services such as loans, micro savings, microinsurance, customer loyalty programs at partner retailers, and money transfer services.
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