This year’s Economist Intelligence Unit (EIU)’s report “ Advanced technologies will revolutionize digital banking”, highlights the role of new technologies in driving the digital transformation in banking. It can help them gain a competitive advantage, as they face the growth of Fintech companies.
The impact of new digital banking technologies
Many experts believe that new digital banking technologies will continue to push them to thrive. 84% of respondents agree that DevOps will drive transformation in core banking, while 81% of banking executives believe a multi-cloud strategy will become a regulatory pre-requisite.
Cloud, microservices, DevOps and APIs technologies are all about allowing agility and flexibility in driving new business models quickly and cost-effectively while ensuring the security of a regulated industry like banking.
So, the challenge for regulators today is not just effective risk and compliance but governing the adoption of these new technologies. Besides, make sure that the consumer’s rights are protected.
Blockchain Technology: A Difficult But Important Transition
In 2020, the banking industry is continuing to embrace the potential of Blockchain technology
While we listed blockchain as a highlight of digital banking technology to watch in 2019, the banking industry was slower than expected to embrace the potential.
In this year, more blockchain tests are occurring in retail and corporate banking because it has the ability to improve trust, provide transparency and potentially lower costs, reduce transaction times and improve cash flow.
The initial forays into blockchain will most likely be centered on remittances, KYC/ID fraud prevention, and risk scoring. But, success to the use of blockchain, financial institutions will need to trust between different organizations, with collaboration and the sharing of data. This has been a stumbling block for many organizations.
From Public and Private Cloud to Distributed Cloud
Banks and credit unions began to rely on cloud computing to handle increasing loads of data. Formerly a technology trend to watch, cloud computing has become mainstream, with major players AWS (Amazon Web Services), Microsoft Azure and Google Cloud dominating the market.
The adoption of cloud computing is still growing, as more financial institutions migrate to a cloud solution. But it’s no longer the emerging technology. By 2022, 75% of enterprise data will be applied and processed outside the centralized data center or cloud, according to Gartner.
Compared to a public cloud, that is owned and operated by a third-party cloud service provider, a distributed cloud provides public cloud services to external locations, with the original provider still being responsible for cloud service architecture, delivery, operations and updates.
This provides financial institutions greater flexibility, more deployment options, and better optimization for infrastructure, security and compliance. It also reduces the risk of network-related outages.
Artificial intelligence – Digital banking technology is changing the play
Digital banking hopes AI technology will explode this year
Most ways in which banking and financial institutions competed in the past have pricing, location to services offered are almost all the same and through the same channels at the same cost. Today, the primary competitive differentiator is the experience delivered to the consumer. It makes any brand’s overall growth.
Artificial intelligence (AI) and advanced analytics can be deployed to deliver a seamless and intelligent customer experience at any point in the customer journey, resulting in greater satisfaction, increased relationship value and competitive differentiation in an increasingly crowded marketplace. So, building AI platforms is already the top technology investment area for banks, immediately after cybersecurity.
Another area deploys AI that limits customer fraud. For example, banks that send an alert notification in real-time to check with the user when a transaction looks suspicious. Which can prevent suspicious transactions, a lot of hassle and inconvenience for their customers.
Digital transformation accelerated
With the Covid-19 pandemic, we can see the importance of digital transformation in banking. At present, digitization is a feature at the top of banks’ list of strategic priorities. Even more dramatic is the finding that nearly 60% believe that the traditional branch-based banking model will be dead by 2025, compared to 44% last year and 75% believe cash will represent less than 5% of all transactions globally compared to 48% last year.
COVID-19 has woken up banks to the realization that they have no option but to beef up their digital capabilities. They now need to handle many more interactions and transactions, ensure even complex customer journeys can be handled completely digitally across all product lines and services, even those that currently may be offered only in the branches.
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