Every facet of our life, from information access to shopping, receiving medical care, and doing financial activities, has been altered by information technology. Digital choices including net banking, payment wallets, UPI, and credit cards are used for financial transactions like money transfers, bill payments, insurance, and investing of cash. Online services are becoming more and more popular as they are not only practical and user-friendly but also constantly available to us.
What are the latest banking trends for 2023?
The banking and financial services sector is putting more emphasis on future innovation, which will be driven by technology more and more. Collaboration with FinTech, ongoing digital transformation, and an expanding role for AI and robots are among important factors that are propelling these breakthroughs. Institutions should reposition themselves in terms of becoming adaptive technology users as consumer needs and lifestyles change.
Here are nine key trends that will define the “new normal” for the financial industry in the upcoming year as a result of digital technologies advancements in the financial sector and the rise in tech-savvy consumers.
1. Online financing:
With the use of digital finance, both individuals and businesses can easily access financial services, such as credit or payment options. The way that money moves has been redefined through technological application. This transformation gave rise to online wallets, UPI, and mobile payments.
Indian clients may be contacted digitally thanks to the accessibility of low-cost smart phones and data, and there is a significant opportunity for lenders to create user-friendly customer journeys for communicating with them. Institutions are now able to complete the KYC, underwriting, and verification processes digitally thanks to the growth of the API-based data ecosystem. The design of loan products has also received a great deal of attention; examples include checkout financing, click payments, and buy now pay later credit options. The number of transactions and the size of transactions that are completed entirely digitally will both rise as a result of this trend.
Cross-sell and up-sell initiatives at various lenders will move more quickly as a result of the rising adoption of digital demand to digital fulfilment or digital demand to digital decisioning journeys. The availability of industrialized behavioral data on a lender’s portfolio, comprehensive credit bureau data for a targeted customer, updated digital customer profiles, and established disbursement and repayment channels would all be advantageous for these customer interactions. As businesses attempt to optimize the lifetime relationship value from a chosen customer, this will enable an increasing number of lenders to pick and choose which consumers they spend money on.
2. Credit decisioning and underwriting in real-time:
Real-time credit decisioning will enable quick, hassle-free, and entirely online loan funding. With the use of this technology, lenders may digitize their credit policies and provide customers an easy online application as well as the benefit of quick account financing.
With the use of sophisticated technology and data analytics, real-time credit decisioning alters the conventional and physical loan application and approval process. The need for real-time decision making, digital KYCs, and digital underwriting has undergone a significant change.
Cross-sell, up-sell, early warning portfolio actions, and collection portfolio actions are just a few of the post-acquisition customer interaction points where real-time decisioning will be more noticeable. In the medium to long term, lenders that design data architectures that enable them to keep both structured and unstructured data—for example, collection call notes—will develop durable sources of competitive advantage through more precise portfolio segmentation.
3. Loans to the mass market will increase:
Consumers are increasingly repaying their small-ticket, brief-term loans using various digital lending platforms, as is the current trend. Due to their digital connectivity, lenders can provide services to this group of clients. As the majority of the data is available on API in real time at a low cost per unit, the cost of gaining these customers and underwriting them has decreased. The volume of transactions shows that lenders providing buy now, pay later and short-term sachet loans have a good product-market fit and are anticipated to expand through 2021.
One of the government’s top priorities is home ownership, which is consistent with the expansion of job possibilities. Through measures by the government and regulatory agencies to encourage the bottom of the economic pyramid sector to dream of having a home, the demand for affordable housing is anticipated to increase in the upcoming years.
Similar to that, the government initiatives and digital solutions provided by the fintech NBFCs are projected to spur growth in another sector, rural finance. Increased use of mobile devices, the emergence of new fintech companies, and technological advancements have made it simpler and more user-friendly for people in less developed regions to acquire finance.
4. The banking sector is evolving to emphasize experience.
Customer experience is anticipated to play a significant differentiating role for financial services providers in the future, both in terms of brand and for luring and keeping clients.
During their digital transformation, many banks put a strong emphasis on the customer experience, making sure the solutions they develop will satisfy all of the needs of their customers in terms of ease, security, comfort, and engagement.
Customers already anticipate more individualized offers, including the incorporation of their suggestions and preferences into the development of a service that provides them with even greater ease. By 2023, what will set banks apart from their competitors will be their capacity to foresee client demands and deliver exceptional experiences.
Applying cutting-edge analytics to customer experience improves service while lowering expenses. Soon, banks’ understanding of their consumers will be so enhanced by advanced analytics that they will be able to adapt offerings, anticipate demands, and provide higher-quality services.
Banks cannot afford to fall behind in this trend of online banking. They must change to become institutions focused on the customer experience, encouraging patrons to be devoted and to give them their business.
5. Digital fingerprinting and credit scoring embedded
An efficient, effective technique to evaluate potential customers and their loan applications, avoid fraud, and automate the pre-approval process is required by banking institutions, internet lenders, and different sorts of investors.
New fintech innovations like digital fingerprinting and AI-driven credit scoring make the procedure more cost-effective across the fintech sector, even if it can be labor-intensive with a potentially high margin of error. For instance, using digital fingerprinting, organizations may swiftly extract the most important user and customer data from their website and incorporate it into their in-depth customer profiles and reports. Everything from the device type to the location, ISP, and cell phone provider might be included in this data.
Banks and lenders may quickly and reliably determine whether or not to trust a user using smart credit scoring, which aggregates additional data including social media information, IP analysis, geodata, and income and spending power forecast.
6. Use of AI, ML, analytics, and alternative data to boost credit approvals:
Institutions want to be able to use the available data objectively to satisfy their business objectives as the sector becomes more data-rich.
For example, phone data, e-commerce transaction data, and cash flow data may not have a history of indicating risk, but they are nonetheless available to lenders. Artificial intelligence and machine learning risk assessment models have made it possible for lenders to ingest the vast datapool that is available on their potential customers because the variety, velocity, and volume of this data make it difficult to use traditional approaches to build predictive models.
Machine learning and artificial intelligence can combine to identify patterns that forecast behavior and assess a borrower’s credit worthiness. Lenders can enhance profits per loan by using AI to decrease the costs and delays associated with underwriting. Digital technologies powered by AI/ML will revolutionize lending in the future by drastically cutting the time and cost associated with loan underwriting. AI-based chatbots can also deal with low-ticket items and client inquiries for a quicker turn-around.
7. A new round of competition will result from digital change.
Peer-to-peer (P2P) lending platforms, digital wealth management tools, and other new players have all emerged as a result of the traditional financial services providers’ digital transition. The open banking APIs, which enable users to effortlessly manage multiple accounts through digital self-service channels, have given these projects a boost.
Companies in the fintech sector were among the first to pioneer digital innovation in a variety of fields, including loans, payments, and money transfers. As they grow their customer bases and service offerings, many of these companies are now banks’ main rivals.
To support their own digital transformation programs and keep up with startups that are successfully disrupting the financial industry, banks are already forming partnerships with fintech firms.
8. Online data protection and security:
Concerns about and an increase in cybercrime are on the rise as a result of our rising reliance on technology and cloud computing. The use of remote operations has facilitated the cloud sharing of sensitive and important data, particularly financial data.
Cybersecurity and access management will be crucial to securing data, minimizing or eliminating loss, and ensuring regulatory compliance. To further protect the future distributed workforce, organizations will keep implementing more security measures including data encryption and embracing cutting-edge edge and remote technologies.
In order to survive, financial institutions had to hustle and digitize their customer-facing activities in 2022, the year of adaptation. A renewed emphasis on digital will occur in 2023 and give rise to connected banking. To be current, competitive, and prepared for the future, the moment is right to accelerate digital and use technology.
9. Smart contracts bring everything together
Think about two parties who consent to a transaction. In the past, they would hire a lawyer to draft the contract’s provisions on two pieces of paper. They would then invite witnesses to confirm that the signees faithfully fulfilled their obligations under the agreement after that. Any violations will result in them being subject to any resulting legal action.
Parties to a smart contract digitally sign the agreement using cryptographic keys. The contracts are written in computer language rather than on paper. The codes are practically unbreakable. Additionally, they promise to carry out in a precise, predictable manner.
Numerous computer devices that each obtain a copy of the initial digital contract serve as the analog of a smart contract for witnesses. Because of this, it is essentially impossible to violate the contract’s legitimacy. Not only that, but these systems—which today make up what is known as a public blockchain—would oversee the contract’s execution until all of its conditions are met.
You can see how smart contracts eliminate a lot of the drawbacks of conventional contracts. This expedites financial transactions even more from virtually any location and at any time.
Conclusion
The financial services industry is changing quickly. The nine factors mentioned above will hasten this evolution and fundamentally alter the sector during the next 12 months. Financial organizations cannot afford to lag behind, even temporarily, due to the rapid rate of change.
The greatest method for financial players to future-proof their firm is to collaborate with creative partners that comprehend and adopt new technology and trends. Global business executives and consumers have new opportunities thanks to the new financial solutions, technology, and trends.
Fintech will see several exciting developments in 2023, including safer cryptocurrency trading, better digital payment choices, effective credit scoring for banks, and compliance for the industry as a whole.
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