By Dan McKinney, Finxact
For the banking and fintech industries, 2018 was a year of dissecting challenges tied to bank regulations, disruptive technologies, legacy systems and pursuing new strategies for sustainable growth. Will we continue to see more of the same in 2019? And how can banks be ready?
From big data to AI to predictive services, the trend of digital disruption will continue, ushering in a new wave of innovation. Below I have shared with you what I see will be the biggest trends to watch out for in 2019.
Innovating at the Core
We’re seeing a strong trend in the U.S. where banks are launching digital only banks to collect deposits. The trend we expect to see in 2019 will be a wave of truly innovative customer experiences and banking products. Driving this trend will be the churn many banks will see after attracting new customers with high rates, only to see customers “rate chase” to their competitors. Whether it be new customers or protecting an existing customer base, they key to customer stickiness in 2019 will be first-to-market products and experiences that customers value. Banks are quickly realizing that with everyone configuring the same systems, true innovation is a long and costly process. With modern cloud native, API first core banking systems, banks now have for the first time ever, the ability to become innovation leaders and we will see the first wave of innovation by banks who will use their new technology platform to create sustainable competitive advantage in the market.
Banks Becoming Less Bank-Like
I was recently meeting with a large regional bank who summarized the industry’s challenge well when he said, “banking is banking”. What is interesting is that many industries are disrupted by outsiders who don’t see “banking as banking”. Banks will always “be banks” but we will see a shift in banks also becoming “less bank-like”. This may be in the form of sub brands, partnerships or even under existing brands. There will always be branches, call centers, deposits, cards, ATMs, and probably even cash and checks. But we will begin seeing banks become more “invisible” in how they deliver their services. Banks will leverage their brand’s trust, data, and expertise in ways that support their customer’s lives and businesses. Cross selling will no longer be intrusive and friction caused by batch systems and even security will yield to moments of customer delight. In fact, we may start seeing banks organize around “Reactive Services” (there will always be a need for reactive services like ATMs, mobile banking, and branches) and “Predictive Services” (services driven by rich data, AI, and machine learning and the key to all this will be a rich, real time data).
Big Data
Regardless of the latest technology, people are still struggling with data. Now, for the first time in decades, the banking industry has a way to consolidate all of its mission critical data, in real time. What’s more, this data is now rich, and accessible. This itself will drive transformation in customer experience, security, and efficiencies. We are currently seeing some of the first wave of predictive services with robo-advisors, and AI driven chatbots. We will continue to see innovation grow in this area. The real innovation will begin when banks begin adding richness to their real time systems of record and enabling consumption of that data by connected services. When every part of a bank’s stack innovates with real time rich data we will begin to see novel customer experiences with security that is improved while also frictionless.
As we look toward 2019, one thing is clear: banks continue to adapt to new trends in order to provide a broad range of financial solutions, and it will become more essential for them to be ready with a modern platform that can support near term innovation and eventual migration from antiquated and even unnecessary systems. Having a SaaS core banking system as an open system of record, which supports an entire bank’s product and scale requirements can serve as the foundation for this new platform. The key to the future is putting a platform in place that enables rapid innovation now – while also supporting the future when we don’t know what the market, technology, and innovation requirements will be.
Dan McKinney is Co-Founder and Chief Marketing Officer of Finxact