In the decade since the financial crisis, the banking industry has undergone some drastic changes. The industry has become larger, more profitable, and more resilient to the crisis. As of 2018, the total banking assets gained 124 trillion dollars. The objective of this article is to see a complete picture of the current development in the banking sector.
Despite the quite favorable situation in the banking industry, there are some forecasts from the International Monetary Fund about the possible deceleration of the economic growth in 2019-2020.
To stay competitive in the ever-changing environment, banks started to cooperate actively with different technology companies and fintechs embracing the digital transformation. Many banks have taken an interest in artificial intelligence, cloud computing, open APIs, blockchain. Some of them have already implemented new technology in their institutions. Though, there’s one big question – did these innovations have a purposeful character?
Change initiatives from year to year should become a new model of running a bank since external changes are happening faster than never before. Any changes should be made with one question in mind – how would we like to look like in a couple of years?
Deloitte recommends financial organizations to review their positions and consider the true transformation. In their report, Deloitte researchers provide their insights about the need for changes in technology, risk management, regulatory compliance, tax, privacy, human resources. Let’s take a closer look at a few of those insights.
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State regulations for banks differ from country to country. The laws and standards for banks are rapidly changing. The growing divergence in regulations is a fact. Let’s take a closer look at the changes that happened in different countries these years.
The USA. The states continue to change their regulations actively. A new bill was signed to the law – it is called the Economic Growth, Regulatory Relief, and Consumer Protection Act. Some proposals for the Volker Rule are still pending. The Community Reinvestment Act is expected to undergo some revisions.
Europe. GDPR that stands for General Data Protection Regulation protects the personal data of EU citizens. The Payment Services Directive which is also known PSD2 opened the opportunities for fintech organizations to compete with banks. The directive has obliged banks to open their APIs.
Great Britain. Because of Brexit, Britain features an unclear situation surrounding its banking sector. Within the approved contingency, the banks have already developed special plans.
Asia. Culture, accountability, and conduct have become the main focus of the Asian banking sector. Recovery planning was also among the most popular regulations. Chine made the first steps toward merging banking with insurance.
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Among the major challenges faced by banks in 2021, there’s still digital transformation. To stay on the competitive edge, financial institutions have to shift from legacy software to modern systems. Understanding that many banks have already started their journey to the public cloud, began to implement AI and modernize infrastructure.
Effective data management and getting the greatest value from it are of core issues banks are now taking care about. They’ve already started investing in new sophisticated software systems that can keep data secure and manage it in the most effective way.
The first question that arises in the process of digital transformation is what software banks should modernize first. Each bank has its own pace and vision in this process. Some banks consider customer experience as the top priority in transformation, the others think that it’s better to adopt AI and RPA to improve productivity and lead generation.
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Among the main finding of Deloitte’s research on talent acquisition in the banking industry, there are the following statements:
- Financial institutions need fresh eyes to look at their approach to transformation. Automation that has become one of the most trending things in almost every industry shows the perspectives of not only cutting operational costs. It also aims to help companies provide better customer services with improved problem-solving.
- Today, the modern reality of the banking sphere requires not only industry expertise but also the eagerness to embrace changs, trends, and innovations. People should be flexible and ready to act in the ever-changing environment.
- Fast learning should become a top priority in banks’ strategy of growth and transformation. Thanks to automation, manual work can be now done by machines whereas problems should be solved thanks to the specific set of skills like empathy, persuasion, judgment, and creativity.
To sum it up, we see the rapid growth of innovations in the global banking sector. The main focus is on regulations, automation, and new technology implementation. Banks keep improving their talent acquisition with a deep belief in the efficiency of “scalable learning”.
Since our company builds software products for retail and corporate banking, let’s take a closer look at these types of banking are changing.
Here are the major changes and trends we would like to highlight from the Deloitte’s report:
Trend 1. In the USA, banks got benefits from the increased number of loans and cut taxes.
Trend 2. In other countries, banks saw a similar growing interest in loans.
Trend 3. To stay competitive banks required new technology. A lot of fintech companies appeared.
Trend 4. European Payment Services Directive that is known as PSD2 has obliged banks to open their APIs. That will obviously create a highly competitive environment among financial institutions.
Trend 5. Retail banks are shifting to the mobile-centric customer experience. Consumers like to have instant access to their accounts via mobile phones. So, no wonder that banks keep investing in mobile banking.
Trend 6. Retail banks improve ATMs, branches, digital channels, and call centers using the latest technologies like AI, cloud computing, and open banking.
You can easily compare the above-mentioned trends with those presented by the DBR Research in 2018.
Below are the major trends specified in the report. Check it out!
Trend 1. America saw a substantial lending growth in 2015-2017 (by 19.5%).
Trend 2. Europe, the Middle East, and Africa, on the contrary, experienced some decline (by 0.8%).
Trend 3. It was expected in 2019-2020 that the credit underwriting procedure will be eased.
Trend 4. Like retail, corporate banks also invest in digital transformation (in front-end, mainly).
Trend 5. Similarly, they consider the implementation of new technologies such as artificial intelligence and cloud computing.
Trend 6. Bankers tend to be more expert in different solutions and business domains that adds value to their position in the conditions of automation growth.
To sum it up, we can obviously observe how banks are trying to understand better the needs and pain points of their customers. It affects the pace of digital transformation. People are offered new features, products, and options. Banks are getting more revenue. To remain competitive and get the maximum value from digital transformation, banks should work closely with regulators and fintechs.
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If you are about to start investing in new technology, we’re here to help you choose the best way. Our company is experienced in building software systems for retail and corporate banking with high performance and scalability. Our developers are conversant with the latest technology trends for the financial industry. Based on thorough business analysis, they will recommend you the best-suited technology and the stack to develop the project.