The banking industry of 2030 will look completely different from what it is today. The inevitable and ongoing hype around Fintechs and Big-tech firms in banking and other financial services have been in the news for quite some time now.
Even though the future seems uncertain, there’s no doubt that the 2030 landscape will be far more competitive, innovative and efficient in delivering customer experiences. By 2030, banks will be more invisible, connected, insights-driven, and purposeful.
How Will Banks Evolve in the Future?
With changing consumer expectations, emerging technologies, and new business models, banks will have to put forward specific strategies now to help them prepare for the future.
There will be more changes in the banking industry than what we have seen in the past 100 years. This is not only due to the advancing technologies but also due to a confluence of factors like demography, socio-economic, regulatory, and environmental changes.
However, these changes are likely to result in people living longer, changing jobs frequently, being healthier, having better access to services to support mental and physical wellbeing, and being wealthier than their present-day counterparts.
There will be four primary areas that will enhance financial services for delivering improved financial wellbeing:
It is expected that by 2030, data will fundamentally transform the nature of financial services and most banking sectors. So, it will be at the heart of how banks will deliver value to customers.
Customers are becoming more aware of the value of keeping their personal data safe and secure. As they turn to be more data-aware and conscious about the data they share, with whom, how, and for what purpose- they will need to be assured that their data will be safely preserved. Hence, as banks have long become the safest place to keep consumers money for hundreds of years, this could even become the safest place for their personal data as well in the near future.
2. Business Model
By 2030, traditional boundaries within the financial services will disappear, wherein the banks will allow customers to choose the services from a range of service providers based on their needs. Account aggregators will be meant to facilitate the free flow of credit in the economy, giving lenders the resources to improve decision quality and efficiency. For this, banks will become the boss of various alliances and capabilities.
The digital interactions will be more streamlined, enabling fintech and banks to re-bundle relevant services around key customer needs and experiences that extend beyond the realms of traditional financial products.
By 2030, regulation is likely to move away from a product-specified focus towards monitoring the activities of institutions and focusing on the outcomes. There will be major shifts to require regulating bodies to come up with completely new ways to identify and manage risks. Banks will need to respond to the delivery of financial services that will become embedded in a service operating outside of the regulatory perimeter.
New Regtech tools, powered by AI, will enable more efficient and effective supervision of the banking processes. Regulators will use this to share information across national and international boundaries, supporting efforts to combat financial crimes. Blockchains will become the source of trust, wherein it locks data from transaction histories, contributing to more sophisticated risk assessment models.
Technology will make banking experiences more personalised and omnipresent across many devices and applications. This will not only make banking more convenient but also more accessible to the vast unbanked population of today. This will be used by a number of innovations that are transitioning from being emerging into transformative.
Some of the technologies that will have a greater impact on the financial service industries in the next 10 years are- Artificial Intelligence, Blockchain, Biometrics, 5G, Cloud Computing, Internet of Things, AR/VR, Quantum Computing. These will transform the nature of services as well as the way they are delivered and consumed.
The Impact of Technology in Digital Banking
By 2030, technology will redefine bank-customer relationships forever. The technology will have advanced again by 2030 as our lives and communications change.
The rising technologies can have an impact on the broader business landscapes in the following ways:
1. Everything Will Be Connected
A hyper-connected world will be the norm by 2030. Smart speakers such as Google Home and Amazon echo have already captured everyone in today’s household. Customers will be interacting with their service providers through voice and personal assistants, facial recognition, and wearable devices.
The debit/credit cards to tap at a dedicated point of sale or today’s mobile payments will be replaced by secure voice command or a facial expression. Many of the smart devices still emerging will become a common thing by 2030.
2. Distributed Trust
In the future, banks will have to reconsider their position as mere financial service provider. This means banks will need to go beyond money and integrate with a broader ecosystem of alternative services.
It will lead to the redefinition and monetisation of trust, leveraging their heritage and experiences to gain a distinct advantage over new entrants. In the future, customers should be able to trust that the automation and decisions made on their behalf are traceable, reconcilable, and transparent to them.
3. Digital Currencies
The rise of digital currencies issued by the central banks and corporate players will further accelerate the transformation of products and services. This digitisation will bring greater financial inclusions overall, along with broader transparency and better real-time transaction processing.
These will also help eliminate many issues involved in cross-border payments and currency exchange, delivering value and experiences to consumers. As cash disappears over the next decade and digitisation reaches its next logical step, opportunities for a shadow economy, worker exploitation and fraud will continue to be reduced.
Rewards, partnerships, and loyalty points will become the key differentiators among payment platforms, thereby providing maximum benefits to customers. Payment terminals will be removed in favour of integrated real-time payment transfer solutions. In the future, customers can just walk into any store, order items, and leave- all that without worrying about the payment options. Payment terminals will be removed in favour of integrated real-time payment transfer solutions within the point of sale systems.
The biggest change will be in the global B2C space as consumers will be free to spend overseas with the international merchants without incurring foreign exchange fees.
Even though the COVID-19 pandemic has hit and seemingly threatened the traditional banking models, banks have become more resilient. Banks will have to adapt to individual customer desires for control and knowledge.
Finezza is a leading lending lifecycle and credit evaluation platform that helps banks streamlining and optimise their performances. Contact us today to know more about our customised solutions.