4 emerging technology trends that will revolutionize retail banking

Modern technologies such as AI, cloud, robotics, AR and the metaverse are creating opportunities for financial institutions. They are helping banks, credit unions and non-traditional providers introduce new products and services, improve customer engagement and achieve efficiencies that can save millions.

Technological advancements are driving significant changes in the way banks engage with customers, streamline processes and deliver financial products and services. Despite economic uncertainties, banks and credit unions can’t afford to ignore several emerging technologies that are poised to revolutionize the retail banking landscape for decades to come.

The importance of developing and deploying new digital services, building new business models and transforming from a product-centric to customer-centric culture should be the focus for the deployment of these advanced technologies. No longer can these initiatives be simply long-term objectives, they must be deployed now – and at digital speed and scale.

The future belongs to the technology-enabled

Neobanks, fintech firms and big-tech platforms have benefited from the recent surge in digital banking adoption and usage. Although younger demographic segments still show a stronger preference for digital-first solutions, the increasing use of alternative financial institutions as a primary financial source is a cause for concern among traditional banks and credit unions.

Another area of concern for traditional financial institutions is that many advanced providers can integrate multiple financial solutions within a single, easy-to-navigate platform with a higher degree of contextual personalization. As consumers increasingly diversify their financial product portfolios across multiple organizations, the need to leverage modern technologies becomes even more critical.

Unfortunately, many organizations lack the confidence and skillsets needed to effectively leverage these technologies and quickly upgrade their capabilities. In addition, economic uncertainty has stifled some investments that can’t be ignored.

In research done by Deloitte, only 11% of financial institutions globally said their organizations had fully modernized their core. When asked whether there are significant challenges adopting new technologies, more than half of the organizations surveyed had challenges with each major technology needed to succeed in the future. Most alarming is the fact that over four in five organizations are having challenges deploying artificial intelligence (AI) despite an influx of solution providers available to assist.

A major component of the challenge in deploying advanced technologies is the difficulty in finding and developing a more modernized workforce. According to Deloitte, four in 10 financial institution executives said their workforce was not yet ready to adapt, re-skill or take on new roles while hiring new employees with niche technical abilities is harder than ever. To address this challenge, many financial institutions have partnered with third-party providers to assist in up-skilling internal teams.

Technologies such as intelligent decisioning, cloud computing, robotics and automation, artificial reality (AR) and metaverse solutions present the opportunity to differentiate banks and credit unions in 2023 and beyond. In each technology deployment, the focus must be to increase digital customer engagement, improve the innovation process and create efficiencies at speed and scale.

Intelligent decisioning with AI and machine learning

There has never been a time when the application of AI and applied analytics has been more important. Beyond providing in-depth reports, data and analytics must be used to identify opportunities, facilitate innovation and support contextual customer engagement. With a focus on democratization of insights across the organization, there will be an enhancement of value transfer within and outside of organizations.

AI, in particular, will help banks to streamline their operations, improve decision-making and offer personalized financial advice to customers. With the ability to analyze vast amounts of data in real time, AI-powered systems can quickly identify patterns and trends, enabling banks to proactively offer customized products and services that meet the specific needs of individual customers.

By combining machine learning algorithms with business rules and decision models, intelligent decisioning systems can provide banks with a comprehensive view of customer needs and preferences, enabling them to make data-driven decisions that improve customer satisfaction and drive revenue growth.

The use of data, AI and applied analytics can also facilitate customer access to financial tools, advice and embedded solutions that can improve trust and differentiate a brand by empowering the customer to partner on their financial wellness journey. This level of sharing also can assist in protecting customer privacy and security.

The importance of the cloud

The banking industry is increasingly leveraging cloud computing to improve operational efficiency, scalability and agility. According to a 2022 report by Accenture, 94% of banks have already moved some of their operations to the cloud with 80% of banks planning to increase their cloud investments over the next three years. This trend is being driven by several factors including the need to reduce costs, improve innovation and enhance the customer experience.

To address the need for capacity and speed, banks and credit unions must look to cloud computing solutions to store data and support applied analytics. The result is increased customer insights, improved efficiency, enhanced innovation, greater agility and a reduced risk of security or business continuity breaches. As an overarching organizational advantage, cloud solutions can augment human productivity, providing insights that can positively impact both front-office and back-office transformation.

While there are some challenges associated with cloud adoption such as data security and regulatory compliance, the potential benefits of cloud computing are substantial, and banks that leverage this technology are likely to gain a competitive advantage in the marketplace.

According to IBM, “organizations have an enormous opportunity to leverage cloud computing to drive innovation and improve their competitive position. Cloud computing – whether private, hybrid or public – enables organizations to be far more agile while reducing IT costs and operational expenses. In addition, cloud models enable organizations to embrace the digital transformation necessary to remain competitive in the future.”

Automating the back-office

Process automation tools such as robotic process automation (RPA) and digital process automation (DPA) are becoming increasingly important, helping banks and credit unions to streamline their operations, reduce costs and improve the customer experience. Automation technologies have been shown to help banks reduce operating costs by up to 30% while improving productivity by up to 80% and improving compliance and customer satisfaction.

RPA is helping open accounts, improve customer onboarding, process payments and handle service requests. Banks and credit unions are increasingly realizing that repetitive tasks can be left to the bots while employees focus on exception-based reviews.

DPA, on the other hand, is a more advanced automation technology that enables banks to automate processes such as loan origination, mortgage processing and claims management, improving efficiency and reducing the risk of errors.

The future of artificial reality and the metaverse in banking

Augmented reality (AR) technology and components of the metaverse have the potential to revolutionize the financial services industry by enhancing the customer experience, improving decision making and enabling new business models. In the future, AR is expected to play an increasingly important role in financial services as banks and other financial institutions seek new ways to engage customers and create value.

AR can enable banks and credit unions to provide highly personalized, immersive experiences that allow customers to visualize and interact with their entire relationship portfolio in new ways. AR can also be used to enhance financial literacy, providing customers with interactive educational content that can help them to better understand complex financial concepts.

Finally, AR can be used to improve decision making in financial services by providing real-time, contextualized information to internal decision makers, further democratizing the ability to serve customers on a personalized basis.

While there is potential for financial services in advanced technologies associated with AR and the metaverse, a perceived pullback is seen as organizations currently focus on more immediate needs and priorities such as digital transformation and cybersecurity during this time of economic uncertainty. It is also believed that there is need for more evidence of the business value of AR and metaverse technologies before financial institutions will fully commit to them. Adding to this concern is a lack of a uniform platform for AR and metaverse engagement by demographic groups with higher use of financial services.

That said, the competition for device supremacy remains intense and very fluid and the use of AR continues to increase. AR has become a viable tool for advertisers, retailers and enterprises with over a quarter of the U.S. population now using AR in some fashion – thanks to its easy accessibility on smartphones.

With 90 million users in 2023, AR is roughly on par with smart wearables (89.6 million users) and smartphone health and fitness apps (88.9 million). Smart speakers are just a bit ahead with 105.5 million users, according to Insider Intelligence.

Insider Intelligence finds that more than two-thirds of AR users experienced it on social media in 2022, and that share will approach three-quarters by 2027. Social networks also make AR accessible to developers and brands through their widely used developer platforms.

The future of advanced technologies in banking

Banking leaders must approach the future with a challenger mindset, looking beyond today, building a plan for technologies they must consider going forward. Leaders must commit to technologies that could drive competitive differentiation and efficiency in the next two to 10 years while doubling down on technologies that will be the most important to banking in the near term.

Often, there is no proven path to adoption or certain return on investment. As opposed to technologies where there are already established use cases, emerging technologies are more disruptive with mainstream adoption occurring in as little as two years or as long as a decade or more.

According to Melissa Davis from Gartner, “emerging technologies are at an early stage, but some are at an embryonic stage, and great uncertainty exists about how they will evolve. The embryonic technologies present greater risks for deployment but potentially greater benefits for early adopters.”

To be future-ready, financial institution priorities should be on evolving products and channels to meet customer needs, accelerating investments in new technological capabilities and improving automation processes.

Jim Marous is the co-publisher of the Financial Brand, the owner and publisher of the Digital Banking Report and the host of the top-five banking podcast, Banking Transformed. As an author and recognized industry futurist and authority on disruption in the financial services industry, Marous has spoken to audiences in over 50 countries on how individuals and organizations must respond to the digital transformation of financial services.