Digital Banking Trends for 2023
The impact of technology on the financial industry has been significant. New digital innovations have changed customers’ approach to managing their money by closing the gap between their needs and what financial institutions offer. In 2023, digital banking will see significant changes due to advancements in technology. Financial institutions must adapt by offering more personalized and convenient services to stay competitive.
In 2023, the customer interface will be automated, and AI and machine learning will provide faster and more efficient answers to customers’ inquiries. Digital transformation in banking refers to digitizing services traditionally only available at physical branches and automating the entire banking process. The most important digital banking trends for 2023 include a stronger presence of AI, collaboration with fintech, simplification through embedded finance, building a better customer experience, a focus on big data, and the growth of open banking.
Digital Transformation Concept in Banking
The process of digital transformation in banking involves transitioning traditional banking services, previously only available at physical branches, into digital forms. This includes operations such as transfers, account management, obtaining financial products, and bill payments.
A complete digital transformation in banking also requires the automation of internal processes (the back end) and connecting these systems through middleware. This goes beyond simply offering online or mobile banking options, as it encompasses the automation of the entire banking relationship.
Digital Banking Transformation Trends 2023
In 2023, digital banking will see major trends including:
- Increased Artificial Intelligence (AI) use
77% of banking leaders believe AI will be crucial in determining the success of banks, with 56% already adopting AI in at least one function. AI offers personalized experiences by aggregating financial and life data to generate valuable insights.
Imagine if artificial intelligence could aggregate data from all your financial accounts, activities, and aspects of your life to generate and provide valuable insights on the go. This could have a drastic impact on the financial industry as Google did for advertising. Personalization by AI in banking is important because it can help improve customer experience and drive business growth.
2. Collaboration with Fintechs
Traditional banks must partner with established Fintech companies to keep pace with digital advancements. Fintech companies were seen as competitors to traditional banking, but now it is clear that they have been taking advantage of the gaps that have appeared due to the failure of traditional banks to keep up with technological developments.
3. Simplification through Embedded Finance
Embedding financial services into non-financial companies offers new revenue streams for financial institutions and increases competition for traditional banks.
Reimagining services in terms of user experience can have a huge impact. The Buy-Now-Pay-Later model gained great popularity through Klarna’s embedded experience, which made the Swedish FinTech company one of Europe’s biggest unicorns at a $10 billion valuation. Apple has now announced its no-fee model for Apple Pay Later; as a result, the banking industry will have to change the way it engages with customers and competes.
4. Increased competition
As non-financial companies start to offer financial products and services, traditional banks will face increased competition for customer attention and market share. This can lead to lower profit margins, which could lead to greater pressure on banks to innovate and improve their offerings.
5. Improving Customer Experience
Financial institutions must provide omnichannel experiences without interruptions to meet customer expectations and personalize interactions through the use of data and AI/ML.
To create a deeply meaningful banking experience for its customers, the bank can personalize interactions with them based on their unique needs and past experiences. Personalization means that the customer will build a closer relationship with the bank and be less likely to shop around in the highly competitive market. To provide personalized service, the bank needs comprehensive data on each customer and up-to-date information about their current situation.
6. Big Data Focus
Storing and processing large amounts of personal data has become essential for financial institutions with the growth of online activities.
7. Expansion of Open Banking
Financial institutions can share information and data with other banks using Application Programming Interfaces, or APIs. This ensures faster service and better recommendations for customers’ financial management, customized according to their situations. Many pioneering banks worldwide have already adopted APIs and achieved impressive results; this is because it functions as an effective tool for banks to create new opportunities in cross-selling products or transactions.
In 2023, banks and other financial institutions will increasingly use Application Programming Interfaces (APIs) to aggregate customer data. This integration will blur the boundaries between banks and their customers, allowing for accelerated innovation and improved customer experiences. As such, open APIs will remain a preferred choice for banks in 2023.
8. Embracing Digital Payments
The popularity of cashless and contactless payments is growing, requiring financial institutions to invest in innovative payment solutions.
According to Accenture, seven out of ten banking executives believe that transforming the payment industry is the key to their larger digital banking transformation initiatives. However, few financial institutions are taking the necessary steps to achieve measurable results from this changing landscape. To keep up with modern trends and provide seamless products for their customers, financial institutions must invest in both new technologies and talent.
Maximize Your Chances of Success
Financial institutions must prioritize their efforts toward digital banking transformation, even during economic uncertainty. This means focusing on initiatives that will deliver the best ROI in a timely manner, while also making long-term investments.
Stay ahead of the competition by modernizing payment infrastructure and enhancing innovation through partnerships with outside entities. Utilize data and AI to enhance customer experiences, and provide real-time, personalized engagement to meet their needs.
For expert guidance, reach out to Gyan Consulting.
