The banking sector is undergoing massive technological changes at the moment. This is facilitated by the increasing competition among technology companies hence increasing the threat of cybersecurity. This creates unique consumer experiences around the banking sector and other financial services. This change is also enhanced by the changing consumer expectations and improved technological capabilities in the global marketplace. These technological transformations have forced the banking sector to respond to specific innovations. Besides, the threat of cybersecurity has forced banks to be more agile than they were before. This paper will evaluate various innovative technologies that will shape the banking sector currently and in the future.
Discussion
Before these innovations happened, the banking sector was reluctant to adopt new systems that would transform the industry. This happened since the current systems were developed through years of research to meet the unique needs of the consumers. As such, the banking sector used the same transaction, savings, investment, and loan systems for a long time. However, these systems were not suited to the current digital age where competition is facilitated by technology-based FinTech start-ups (Uddin, Shawon & Nayeem, 2017). If banks need to be sustainable in the global market, they need to move with the new trends in the market. Specifically, banks and other financial institutions need to respond to the various digital and innovative initiatives in the market. These programs use technological innovations to develop a consumer-centric perspective as opposed to the traditional programs that were more profit-driven.
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Online banking is among the innovations that have recently happened in the banking sector. Currently, the purchase behaviors and payment methods have dramatically changed in the last few years. The adoption of online banking strategies has partially phased out paper-based and cash banking. Most people have moved towards online, mobile, and internet banking (Uddin, Shawon & Nayeem, 2017). Banks and financial institutions have reacted to this change by offering a wide range of new features and facilities. The new cashless technology uses electronic devices by adopting the internet as the main feature. At the moment, most of the users can manage their bank accounts over the internet as opposed to visiting the traditional brick-and-mortar banks.
Online banking has extended all the online features offered by regular banks in the digital space. For example, individuals can deposit cash, withdraw or access loans from online platforms. Smartphones have become necessary devices that facilitate online banking. Essentially, smartphones have extended the scope of virtual banking to encompass transactions over mobile phones, digital payment methods, and pre-paid debit cards (Uddin, Shawon & Nayeem, 2017). Digital banking technologies are easier to design, build and sell, offer more flexibility and a wide range of features, and cheaper than traditional computer-based technologies. Further, mobile banking is facilitated by the involvement of many mobile applications that offer safe and secure transactions to the users.
Online banking facilitates advanced self-service capabilities to the consumers. Consumers do not have to make long queues in banking halls to fill paperwork to access their money. All they have to do now is access a smartphone and access a range of self-service digital banking solutions that are fast and pleasant. The COVID-19 crisis has portrayed the need to have digital banking technologies globally (Uddin, Shawon & Nayeem, 2017). After the COVID- 19 pandemic, most people will use digital banking channels to access and deposit their money and perform other transactions. Besides, the digital platform allows users to perform other self-service activities such as self-registration, remote opening of accounts, access to loans, and purchasing insurance policies.
The use of Application Programming Interfaces (APIs) is another innovative strategy that has happened in the banking sector. In the current society that is highly connected, the growth of the banking sector heavily relies on its ability to participate in the digital world. One of the main factors that will facilitate this is the ability of banks to integrate their internal and external services with third parties (Benmoussa, 2019). The APIs facilitate this system by enabling two soft wares and applications to share data and communicate with each other. For example, APIs enable the Core Banking Systems to receive requests for money transfers from consumer smartphones, cards, and third-party financial providers.
Further, APIs enable banks to adapt themselves to the consumer-centric banking industry. For instance, consumers would expect the smooth integration of the banking systems such as the applications, devices, and channels. APIs allow banks to develop a well-connected experience for the users. Also, APIs offer data insight by enabling banks to collect and combine consumer data (Benmoussa, 2019). Through this information, organizations can track consumer behavior and target the appropriate audience and financial services. Besides, APIs enable banking organizations to target new revenues by monetizing raw data and banking services into alternative sources of revenue. Additionally, APIs offer banks the agility required to create new products and deliver them to the market promptly.
Another innovation in the banking sector involves instant payments. The movement of the banking sector into the digital world has changed the banking experience among users. Currently, consumers expect to have digital products that work fast. Banks have adopted instant payment systems that offer real-time, convenient, and effortless payments among users (Uddin, Shawon & Nayeem, 2017). Instant payment happens when money is transferred between two accounts electronically. Currently, electronic transfer of funds takes seconds as opposed to the 1-3 business days. Moreover, the payer and the payee receive mobile phone notifications through short messages or emails that the transaction has been completed successfully.
Cloud computing is another innovative technology that has occurred in the banking sector. Banks that adopt cloud computing have a competitive advantage against other organizations that have not adopted the system. Cloud computing enables banks to store data and applications in specific storage software’s on the internet. Some cloud providers include Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (Lakshmi & Rani, 2018). Cloud platforms reduce the costs that banks need to use to implement cloud systems. Also, cloud networks enhance the development and launching of new products. As such, banks can respond to client demands promptly. In addition, cloud services enable banks to store big data. This happens since cloud systems use complex data analysis and machine learning techniques that accommodate many data.
Biometric technology is another innovative strategy that has occurred in the banking sector. Banks are some of the institutions that store valuable personal client information. Consumers expect banks to offer the highest level of security and protection to their money (Agidi, 2018). Biometrics are physical human characteristics (such as voice, fingerprints, and iris) that can be used to identify a person. Providing biometric technology enables banks to offer secure, fast, and convenient services to consumers. Banks use biometrics in mobile banking, digital onboarding, and ATM transactions.
Conclusion
The current technological innovations have sparked a transformation of the banking sector. Most of the banks have adopted technologies that satisfy consumer needs. Some of the innovations that have occurred in the banking sector include online banking, Application Programming Interfaces (APIs), instant payments, cloud computing, and the use of biometrics. The future of each bank will depend on how well it can adopt the latest technological innovations that are more consumer-centric.
References
Agidi, R. C. (2018). Biometrics: The future of banking and financial service industry in Nigeria. International Journal of Electronics and Information Engineering. 9(2): 91- 105.
Benmoussa, M. (2019). API “Application Programming Interface” banking: A promising future for financial institutions (International Experience). Revue Des Sciences Commerciales. 18(2): 31- 43.
Lakshmi, S. & Rani, J.P. (2018). Cloud computing in banking: An overview. International Journal of Multidisciplinary Studies. 3(10): 802- 806.
Uddin, B., Shawon, S. S. & Nayeem, A. R. (2017). Challenges and opportunity of online banking services and products: An empirical study of Bangladesh. International Journal of Advanced Engineering and Management Research. 2(5): 1391- 1402.
