The Future of Banking and Finance: How Digital Experiences are Transforming the Industry

Digital experience in banking and finance is the use of digital technologies to improve customer interactions, increase operational efficiency and create a more personalized experience for customers. It may be achieved using mobile banking apps, chatbots, and voice assistants, virtual and augmented reality, digital asset management platforms, open banking, and biometrics. Financial institutions in banking and finance attempt to better understand customer behavior and preferences to offer faster-personalized services.

Digital banking has become increasingly popular over the past few years, with the use of digital technologies in banking and finance aimed at improving customer interactions, increasing operational efficiency, and creating a more personalized experience. Digital banking experiences are already a leap from the traditional banking model, offering customers 24/7 access to their accounts, personalized recommendations, and reminders for due payments, among others. Financial institutions also benefit from digital experiences, as they allow them to better understand customer behavior and preferences, improve customer experience, increase operational efficiency, and access customer data in real time.

One of the benefits of digital banking is that it has reduced the number of people visiting bank branches. In the United States, the percentage of Americans visiting a bank branch dropped from 49% in 2017 to 43% in 2019, according to a report by the Federal Deposit Insurance Corporation. Another report by Statista estimates that digital banking channels will continue to grow in the United States, with 160.5 million users expected by 2023, an increase from 128.2 million in 2018, representing a 25.2% increase. The adoption of digital banking in the Middle East has increased from 10% in 2014 to 30% by 2020, according to a McKinsey & Company report. Furthermore, a study by PwC found that 67% of consumers in Qatar prefer to transact with their banks via digital channels, while only 8% visit their banks regularly.

Another trend in digital banking is the rise of online-only banks, also known as neobanks. These banks have gained significant traction in recent years, offering consumers an alternative to traditional brick-and-mortar banks. Business Insider Intelligence estimates that 64 million people will use neobanks globally by the end of 2021, up from 13 million in 2017, representing a compound annual growth rate (CAGR) of 45%. In the United States, 40 million people are expected to use neobanks by 2024, according to a report by Cornerstone Advisors. Neobanks have attracted significant investment, with funding reaching $5.3 billion in the first quarter of 2021 alone, according to Business Insider Intelligence. McKinsey & Company predicts that neobanks will capture up to 20% of retail banking markets in Europe by 2025.

Digital banking has transformed several banking services, resulting in increased convenience and accessibility for customers. Online account opening, mobile banking apps, chatbots, voice assistants, digital asset management platforms, and open banking are some of the services offered. Cheque deposits using a phone camera and biometric authentication, such as facial recognition or fingerprints, are also being used as an additional layer of security.

Banks and financial institutions can use virtual reality and augmented reality to offer customers a new interaction experience. Virtual reality may be used to provide virtual tours of bank branches so that customers understand the bank and the services if they intend to personally visit the branch. Using virtual reality and augmented reality, banks and financial institutions may offer demonstrations of new product launches so that customers are well-informed. Using VR and AR, banks and financial institutions provide customized recommendations, suggestions for more savings, staying on track for their goals, training on products and VR headsets to contact a customer representative, etc. VR and AR can be used by bank employees to search for suspicious activity in physical locations to detect card skimming. AI and ML can be used to analyze video footage to detect card skimming.

Based on the location identified from mobile applications and spending patterns, customized recommendations such as events happening, and favorite retail outlets can be notified in real-time. When unusual spending patterns are observed at a new location, additional authentication needs to be performed.

Biometrics can be used to enhance security by using facial recognition or fingerprints to access accounts or conduct transactions. It can be used as an additional layer of security rather than a PIN or a password.

While digital banking offers several benefits, it also comes with risks, such as cybersecurity issues, compliance requirements, and data privacy regulations. Banks and financial institutions must develop strategic plans to assess and mitigate risks, implement security policies and procedures, invest in secure infrastructure, train employees in cybersecurity, and raise customer awareness in addition to providing insurance for security threats.

In conclusion, the adoption of digital banking is expected to continue growing, providing benefits to both customers and financial institutions. As more and more customers embrace digital banking, banks, and financial institutions will have to adopt the latest technological trends to offer to the customers to remain relevant.