Top 5 technology challenges for retail banks

Challenges seem to be like predictions that can never come true. But let’s try to think of 5 things that retail banks will surely have to face this and next year. We will use trends in banking as a foundation for defining the core challenges.

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Challenge 5. To unbundle or not to unbundle – that is the question

Here we mean open banking services that make banks implement horizontal business models. Old systems are becoming legacy baggage that slows down the technological development of corporations. The first ice breakers here are account aggregation that we can see in Yolt in the UK. Another variant of back-office enablement that we can watch in Cross River in the US and Clear Bank in the UK.

We can see the fragmentation of the banking services, especially by the newcomers in the market. And there are already 62 third-party service providers that can easily cope with fragmenting the value chain.

Challenge 4. Artificial Intelligence for every bank

AI gives banks a lot of opportunities, but implementing this technology stack can be a real challenge. Banks seem to talk about the difficulty and postpone the point of time for doing this. There should be ideas on how to spot banks from nagging and thinking of ways to simplify the process of change.

For example, this first step may be defining the key issues that customers would like to be informed about quickly. It can be information about monthly mortgage payments and offering customers valuable advice from an AI assistant.

Challenge 3. Mobile is everywhere

Digital transformation is about going mobile. We can see these rapid changes in China – Alipay and WeChat are the kings of such services. They conduct over ⅔ of all global payment transactions. Retail banks have to stay on a competitive edge and do something to offer mobile services to their current customers.

For example, the implementation of QR code-based mobile payments will make the lives of people much easier. And this is very helpful for the tourist industry, where a person can confirm the payment by only holding a smartphone in hands. China is the location that drives the change, and it’s useful to use the experience of retail banks and other financial organizations from this country.

Challenge 2. No more platforms

The word “platform” is becoming obsolete, and it seems that people already hate to use it. A digital transformation, in this case, will mean moving from a traditional approach to offering banking services to an accessible two-sided marketplace that makes money by bringing buyers and sellers together and driving growth through network effects.

Bright examples of such digital platforms are eBay, Airbnb, and Uber. Amazon and Apple are not fully digital platforms, while Facebook and Google are the ones. Their goal is to attract attention and sell it to advertisers. If banks start changing their traditional business models and treat their customers another way, there’s a high probability of survival in the next few decades.

Challenge 1. No more legacy

Speed and agility are the things that determine the success of any retail bank these days. If we are talking about the next few years, the implementation of new technology stacks and automation processes will let financial organizations remain on a competitive edge.

Huge corporations have long years of legacy that slows down the discussion and planning of the slightest changes. It can be truly painful to get rid of those old rules and processes for the C-level bank representatives and for all the other stuff that is used to traditional flows.

Migration from traditional banking to new processes requires the implementation and testing of different architectures. This is the case when banks outsource technology change to remote vendors instead of creating a new IT department. It usually takes less time to get started, and project management is easier thanks to the risk share.

What do banks have today?

Bank branches in their traditional form will inevitably become a relic of the past. They will still exist for a very short period. However, with further improvement of Internet communication channels and optimization of web banking programs, customers will not need to deal with land-based banks.

Besides, the cost of “live” customer service at a bank branch, including the cost of processing each transaction, is increasing. As a result, banks have to reduce the cost of maintaining a network of branches and reduce the number of branches.

Banks start losing their customers if they do not operate quickly enough. Today’s average consumer has become accustomed to various Internet banking services, which are often presented not by retail banks.

Relationship. Thus, the traditional direct relationship between the bank and its client is gradually being destroyed. The bank begins to lose money on branding and lower revenues from cross-selling its services. In this regard, banks start seeking additional funds to automate the maintenance and commoditization of their products and services.

ATM. ATMs are expecting to face the fate of telephone boxes. Due to the relatively low operating costs (in comparison with the costs of maintaining the branch), combined with the potential of the intranet services, an ATM can replace a cashier person. However, as cash and transactions using checks decrease, the value of ATMs will also decrease. And ultimately, they will also disappear, as well as the usual bank branches.

Communication. The main channel of communication between the bank and its client will be a smartphone. Even taking into account the current computing potential of such devices, in terms of information, they can give the bank’s client much more than a human assistant.

The smartphone is always next to its user and is one of the best sources of the most diverse data about its user. Consequently, those retail banks that can develop and implement effective and relevant technological solutions optimized for use in customers’ smartphones will receive a powerful advantage over any competitors.

DICEUS team accepts the challenges

We have named many things that can be real problems and obstacles on the way to attracting customers. DICEUS has been a technology partner for banks for over 7 years and has implemented solutions that allow banks to meet the challenges and accept them.

We have a team of business analysts that conduct investigations, search for the trends in the retail banking niche, and find out the current customer’s needs. This allows us to offer only robust and reliable software solutions that will help to either improve the current processes or upgrade the core banking system.

DICEUS team is not simply a remote development vendor – we are a technology partner. We deliver solutions and allow retail banks to focus on their business tasks and goals. A long-lasting partnership is key to predicting, accepting, and solving all the challenges that ever appear in the banking industry.