There are profound changes underway in the new era of banking innovation, primarily marked by the emergence of cutting-edge technologies like generative AI and blockchain. These innovations are reshaping every aspect of banking, from customer experiences and overhauling payment solutions to strengthening cybersecurity defenses, creating exciting opportunities for forward-thinking businesses.
This guide explores the major banking innovation themes, starting with the trend that rules them all and the rise of generative AI.
1. Rise of Generative AI
Generative AI is a type of artificial intelligence that can produce content, most commonly through LLMs. While generative AI can be traced back to chatbots created in the 1960s, the technology as it is understood today is still in its infancy. Going forward, we are likely to see improvements in accuracy and reductions in bias and hallucinations, all of which will be game-changers for the precision-reliant banking industry. Expect to see evolutions in Fintech, leveraging generative AI to give consumers more control and increase financial literacy. Generative AI will also likely make waves in back-office task automation, risk management, and more.
2. Process Automation
Even though the digital transformation era is solidly underway, many banking processes still rely on manual and repetitive administrative execution. With so much human involvement, tasks such as onboarding new customers, document verification, and processing routine transactions are time-consuming and prone to errors. In this upcoming year, these tasks and many more will be increasingly automated with the help of AI.
3. Shift in Approach to Staffing
With AI increasingly automating repetitive manual tasks, the role of banking employees will inevitably change. As generative AI does not replace human intelligence, there will be a greater valuation of human insight for tasks AI cannot handle. Banking institutions will place more of a focus on finding the right talent and training existing staff to leverage these new technologies.
4. Improving the Customer Experience
Customer experience (CX) is a top priority for businesses across every industry, and banking is no exception. Nowadays, it is crucial that banks provide superior customer experiences, or they risk losing out to the competition. Thanks to advancements in generative AI, banking institutions will be able to improve the customer experience by analyzing every touchpoint and making improvements where friction occurs. Customers are likely to encounter more helpful chatbots, more personalized financial planning solutions, and customized investment strategies.
5. Evolving Risks
The nature of the risks in the banking industry is constantly evolving. From cybersecurity threats to geopolitical turmoil, banks must work diligently to manage the risks. For starters, robust cybersecurity solutions, including intrusion detection systems, data encryption, and employee training, must be developed and maintained as part of the critical infrastructure. Banks need strong capital reserves and diverse portfolios to mitigate the adverse effects of geopolitical risks.
6. New Regulations
The regulatory landscape of the banking industry is always shifting, driven by technological innovation and changes in the global economy. To stay up to date and comply with regulations, banks will increasingly turn to Regtech. These technology tools make it easier for financial and insurance institutions to contend with compliance and regulation. Regtech tools include AI, blockchain, and cloud-computing solutions used to streamline and conduct compliance tasks.
7. Rise in Blockchain Banking
While exciting generative AI innovations have largely eclipsed recent developments in blockchain, blockchain is still relevant, and it is becoming more common in banking. Blockchain is, of course, essential to the management of digital currencies and cryptocurrencies, an area where banks are continuing to investigate. Blockchain will also become increasingly valuable in streamlining payments, authenticating transactions, establishing trust, and creating smart contracts.
8. Shift Towards Sustainable Financing
Across all industries, sustainability is receiving a significant amount of attention, and banking is no exception. To meet the call to action and increasing demand for green initiatives, banks will need to prioritize renewable energy use and reduce their carbon footprint. Additionally, banks will further develop sustainable financial products that allow customers to ensure their money is gathering interest in environmentally and socially responsible ways.
Embrace the Future of Banking with Encora
Encora has a long history of delivering exceptional software engineering & product engineering services across a range of tech-enabled industries. Encora's team of software engineers is experienced in catalyzing banking evolution with enhanced digital experiences, which is why fast-growing companies partner with Encora to outsource product development and drive growth. We are deeply expert in the various disciplines, tools, and technologies that power the emerging economy, and this is one of the primary reasons that clients choose Encora over the many strategic alternatives that they have.
To embrace the future of banking, contact Encora today!
