Tech Trends Transforming Banking and Financial Services
Banks have always been at the core of the global economy. But they were also the first ones to adopt new technologies in order to facilitate operations, improve the customer experience and cut costs. That was decades ago…
Today many long-established banks rely on legacy systems. As a result, their tech hinders growth and customers turn to contender banks that are more agile. Revolut, Starling Bank, Adyen, and others have their own problems, but they still manage to grab a big chunk of the market. And it's the younger generations who more often choose fintechs over traditional brick-and-mortar banks to organize their finances.
However, the biggest issue with conventional banks is that they put new tech into an old core. They believe that simply adding new technology on top of what they already have will make it easier to compete. But in reality, they should find a balance and see what has to be improved before implementing new products.
The edge that old banks have over their new “enemies” is the abundance of data that can help them understand their clients on a much deeper level. They know how client behaviors developed over decades and young companies simply don’t have access to this information.
Zero trust is necessary
The number of cyber threats is steadily growing and banks will surely be targeted by some of them. That’s why they have to focus much more on improving their security. The Zero Trust approach means that we can’t trust anyone or anything that’s trying to access our system. Each and every request has to be validated (by user identity, location, etc).
We believe that all enterprises should incorporate a zero-trust architecture. Especially if their business model is based on trust, like in the case of banks and financial institutions. It’s time to take a proactive approach to security and stop just responding to incidents.
Some companies have embraced Zero-Trust already - but it’s not an easy thing to do if you have a robust IT environment already in place. This is the case of banks - with their legacy systems next to layers of new tech. But even under these conditions, companies can follow best practices. Start with using least-privileged access and automation to detect suspicious behavior. Aim to standardize and automate as much as possible, so the security team will be able to concentrate on complex issues instead of putting out fires.
Focus on your core
In order for banks to remain competitive and use their full potential, modernizing legacy systems and embracing the cloud is crucial. It was a mistake that some banks made to obsess over new technologies while forgetting about the legacy systems they relied on. Now, those institutions have to adapt and connect these two worlds to create a seamless customer experience.
It’s expensive to maintain legacy systems. The number of engineers who know old programming languages is shrinking. Young engineers don’t want to learn about old tech. It’s the last call to connect these different generations. Seniors can still teach juniors how the system works and juniors can teach seniors about new possibilities. This way the whole workforce will be more productive and the banks won’t suffer as much.
There is also good news: the number of tools that support modernization efforts grows. Responding to the banking needs of new generations is not as difficult as it was 10 years ago. It can be cheaper than expected to put more emphasis on digitization, new tech, and self-service digital channels. More and more institutions consider this approach as one of the best ways to improve operations and deliver more value to their customers.
Data and personalization are everything
Banks gathered a lot of data over decades and now they have the technologies to make full use of it to improve their services. Utilizing this data is usually the best way to step up their game. Today, banks can process data faster than ever before and discover new insights and patterns - which will help them make better recommendations to customers. In some cases, the data will even make the implementation of automated decision-making possible.
Meanwhile, legacy systems were designed for human decision-making. Fortunately, with new tech and the move toward automation, it already started to change. Financial institutions nowadays can capture data in various new ways. They have the opportunity to leverage their cloud architecture and advanced analytics to connect dots nobody else can see. These insights will make automated decisions possible at scale and in real-time, at the same time improving the quality.
Another thing is personalization. Twelve years ago one-to-one personalization was almost impossible. Now it’s easier than ever. All humans want personalized experiences and the same applies to their finances. With AI, ML, and predictive analytics, every interaction is a new insight that can lead to a tailored offer, designed specifically for a given individual. But to do that effectively, banks have to achieve the right balance so their clients won’t think someone is reading their minds.
Modernize, analyze, integrate and secure
In order to stay competitive, banks have to modernize their systems. Analyze what’s working and what has to be improved, and then start integrating new tech into their environment. But most importantly, at each step, they have to look at security. The risks are growing and having a secure system is mandatory to keep the customers.
If you work at a bank, then you probably are already on the journey of digital evolution. But are you doing it right? We’ve seen transformations in banks up close and know that the first step is to focus on the people. But if you are looking for ways to optimize costs in the recession, contact us. Our consultants can tell you what to focus on to cut costs while improving operational efficiency!