The need for a digital revolution in the banking sector was always apparent. However, the last decade saw tremendous growth in digital banking. Then the pandemic happened, and it only nudged the digital revolution further. While it has been interesting to witness the change so far, with the new year upon us, banks need to brace themselves and prepare for trends that will define the digitalisation of the banking space in 2023.
Trends of the future’s digital financial services
2023 is the year bankings fully incorporates the customer-centric approach. As a response to the many consumer trends, banking as a field has already become highly digitised and is capable of quickly adopting any new innovation that comes along. Emerging technologies means constantly improving banking. Here are some of the biggest trends that will shape digital banking in the future.
1. Experience-oriented industry
In 2023, banking will become more experience-oriented for customers rather than transactional. Although there would be harmony between human and technological interfaces, they would be merged so that consumers have more control over how they perform banking. Banks will have to set themselves apart from their competitors by being able to predict client demands and deliver excellent services. In 2023, putting the customer experience first becomes crucial. This means evolution and advancement in convenience, security, comfort, and engagement.
In addition, As the “digital maturity” of banks increases, the trend toward digital banking will continue to gather momentum, forcing many of them to close significant sections of their branch networks. When this occurs, banks will have to assume responsibility for educating those unwilling to embrace the new methods about the advantages of digital banking.
2. Banking in the Metaverse
Online is a default setting for many customers today. Any service or product they seek gets their full attention if it is completely online. We live in a world where Facebook’s Meta is slowly becoming a new normal virtual reality. From marrying their loved ones to playing their little games, Meta is that virtual world where people are existing comfortably. Meta is also going to be big for banking.
Banks such as HSBC have already integrated Meta capabilities into their retail banking offering to make it more convenient for their customers. JP Morgan Chase is another global bank which has established themselves in the decentraland platform, similar to Meta.
3. Aligning banking objectives with a product approach
Would you rather, your bank spent time building the best platform or concentrated on the core activities? In the current world, where platform-based banking is hailed as the unlikely hero, having a product strategy is a lot more effective. It is easier to create, maintain, and advertise products. Whereas, a platform-approach needs a more complicated architecture that can manage various services and users, whereas a product-approach can concentrate on developing a specialised solution to a specific problem.
Concentrating on product-focused solutions requires less technical expertise and less cost and manpower. While giving the bank more control over the user experience and the features that are included. Platform-approach means allowing third-party developers into the bank’s system, and it usually never aligns with the bank’s vision and goals. These are the reasons why 2023 will see a rise in product-approach banking.
4. Expansion of digital wallet
According to McKinsey’s 2022 Digital Payments Consumer Survey, nine out of ten Americans now use digital payments in some capacity, interacting with these quickly evolving technologies in an increasing number of ways. In the future, every individual will have two or more digital wallets simultaneously. As it is a drastic change from the heavy usage of cash or cards, it poses a challenge for businesses if they want to meet the consumer demand for new payment methods to stay competitive.
According to a survey, 54% of responders still prefer a digital wallet provided by their banking partner. However, it only partially rules out digital wallets from a smartphone manufacturer/tech startup or retailer.
The same survey revealed that more than 25% of the respondents were open to digital wallet services from their smartphone manufacturer or other tech start-ups.
5. Reimagining retail banking customers experience
According to Deloitte, Retail banks will have challenges in the future from rising rates, inflation, and slower GDP. Retail banking customers will demand more from their banks in the interim. They mainly require a better cross-channel experience and more focused support while dealing with difficult circumstances. Banks will need to offer customer experiences that are data-driven, consistent across channels, and include individualised counsel to meet these increased needs, which will ultimately push them beyond a product-centric perspective.
Although the continuous integration of digital payments comes as no surprise, the retail banking industry aiming to extend or establish relationships must consider how consumers incorporate these services into their financial lives. This can further help in understanding what else is expected.
6. Improved wealth management
The wealth management sector is at a critical place, with banks offering intelligent personal finance management tools (pfm tools). Numerous factors, including the openness of advice and demographic changes, particularly generational wealth transfer, are reshaping long-established corporate structures and ways in which they provide wealth management services to their customers. Customers increasingly expect holistic advice to help them through their financial journey.
Banks are expected to adopt new and emerging technologies quickly to create better wealth management products and services. The influx of Gen Z consumers will only increase going forward. Banks must thoroughly understand their needs and spending and saving habits to allow them to break free from bad spending habits. Gen Z consumers are digitally savvy and constantly looking for tools to make their lives easier. This is the right time for banks to offer pfm tools with innovative features like virtual bots.
7. AI-based customer relationship with more human touch
Sinch conducted a study to understand the digital banking trends of the future. They found that while customers are ready to take their banking experience to the next level with AI-based relationships, they still expect a touch of human interaction. 40% of the respondents agreed to wish for a real human agent when they feel frustrated or helpless. The study also shows a significant link between trust and positive interactions.
Which means that along with integrating smart technologies, banks must show that they care about their customers.
Connected customer, empowered experiences
For the first time in 2023, there will be roughly half as many adults in the Gen Z generation as millennials. Since this generation was born into the digital age, they will continue to rely primarily on it for financial transactions. Players in the banking industry must take immediate action to secure the business of adult Gen Zers while simultaneously attempting to maintain relations with older customers.
In addition to technological advancements, several realistic best practices can significantly enhance the customer experience in banking. This includes collecting client feedback regularly and letting people talk about their experiences, analysing customer feedback and behaviour, creating a space where employees express their feedback, and exploring customer issues.