In 2019, financial institutions are getting more and more comfortable with digital technologies, digitizing processes, embracing big data and AI, and adopting new delivery methods beyond mobile to satisfy customer demand.
Statistics gathered by the World Bank Global financial inclusion data from January 2019 show that consumers want to find and buy products online:
- 84% of consumers search online for products to buy
- 91% visit online retail stores
- 74% purchase product online
- 42% made an online purchase with a laptop or desktop PC
- 55% made an online purchase using a mobile device
As a result, here are some digital trends shaping the financial services industry in 2019:
Digital wallets become mainstream
Digital wallets, typically mobile apps, are quickly adopted by millennials, as they offer easy, fast, and secure ways to pay and send money over the Internet. Here, tech giants like Amazon, Alibaba, Google and others compete directly with banks.
A study by Zion Market Research revealed that the global mobile payment technology market will reach USD 3,371.6 billion by 2024, at a CAGR of 60% between 2018 and 2024, and Allied Market Research revealed that global mobile payment transactions will be worth more than $4,574 billion by 2023.
Digital wallets enable peer-to-peer payments, personalization, and better customer experience. Financial institutions can also use digital wallet technology to offer customers loyalty rewards straight into their e-wallets, either as points or gift certificates. In addition, they can also use the technology to offer all kinds of products including loans, travel cancelation protection, and other services that add convenience and enhance the customer experience.
On-demand, direct banking matures
Online-only banks like Monese (UK), N26 (Germany), Pepper (Israel), Moven (USA), and others will proliferate and grow in 2019. These are online-only banks that offer a frictionless banking experience. Statista predicts 157 million clients of direct banks worldwide in 2020, with 145 million in 2019.
Direct banks cater to customers who expect an on-demand, digital, and mobile banking experience. The industry is still in its infancy, but it is expected to continue to grow beyond 2019.
Direct banking has its advantages too: better customer-centric experiences, AI integration to deliver a personalized experience for customers across all channels, use of big data to improve services, expedite speed to market, and deposit growth among others.
AI, conversational banking gains territory
Chatbots, messaging, and other forms of hyper-personalized experiences are leading the road for the fintech trends of the year. Financial services employ AI and machine learning for sophisticated uses, that boost efficiency, algorithms, pricing engines, automated self-service, and other functions. But they also use them to drive customer engagement and two provide instant answers and conversations through human-like interactions.
While conversational banking is still in its early days, it already offers support for 24/7 customer feedback, and some even have transactional capability.
The three types of chatbots in the financial sector are:
- Informational – able to provide support for FAQ and news
- Transactional – allowing authenticated users to perform transactions, like booking a hotel room, or even payments, transfers, P2P transactions, and deposits.
- Advisory – learning from customer behaviors to determine the next steps.
Big data fuels growth
Big data and analytics help intuitions distance themselves from “build-it-and-they-will-come” strategies to deliver experiences that are truly relevant for their customers. Big data offers superior advantages in customer retention, targeting new demographics, GDPR compliance that builds trust with consumers and avoids sanctions for financial companies.
It can also be used for risk management and cyber-fraud detection. Last, but not least, big data can help financial institutions make better customer decisions, eliminate inefficiencies, choose the best marketing channels, reduce idle labor time, and so on.
Open banking is a reality
In Europe, open banking was introduced in 2018 (EU Directive PSD2) – but it’s 2019 when the concept becomes a trend. Open banking makes deposit and transaction data visible to third parties (applications or APIs), but only with the consent of the consumer, who can revoke access at any time.
Open banking will transform the financial services ecosystem with application in a variety of areas, including risk management, fraud prevention, cyber security, analytics, and more. For now, open banking is an emerging trend not many consumers are aware of. Banks, however, are already investing in technology and infrastructure to support it.
Open banking advantages:
- Account aggregation – consumers can view all their financial data (from different banks and providers) from the same platform.
- Customer-centric targeting – offering tailored services based on transaction history and anticipated spend (like holiday loans based on previous travel bookings).
- Centralization of services – banks can manage advice, loans, transfers, and financing under a single administration.
Blockchain continues to grow
Blockchain was invented in 2008 by Satoshi Nakamoto, and continues to grow with potential uses for FinTech, including lowering costs for infrastructure – per TechJury, blockchain could reduce 30% of banks’ infrastructure costs.
The financial sector has reportedly spent a total of $754 million on blockchain in 2018 and worldwide spending on blockchain solutions is forecast to reach $9.7 billion in 2021 (IDC)
In June 2019, Facebook announced plans for the Calibra subsidiary to provide financial services that will let people access and participate in the Libra network. The first product planned for this project would be a digital wallet that will allow users to make payments in Messenger and WhatsApp.
Libra is a global cryptocurrency built on a secure blockchain. The Libra Association currently includes Facebook, Visa, MasterCard, Uber, Lyft, eBay, Paypal, Stripe, Spotify, Vodafone and several other companies. Facebook hopes that the association will count 100 by 2020 when it hopes to have Calibra working for users.
This move by Facebook and its partners supports what financial experts predicted – that blockchain is a growing trend that may, one day, change the way people around the world make and receive payments.
Although many of these technologies are not new, they dominate how the financial sector operates and grows in 2019. Add them to an already existing suite of platforms and technologies that either evolve or are replaced with new, more sophisticated solutions based on AI and machine learning.
Beyond tech, all the trends of the year are customer-centric – the use of AI and chatbots, e-wallets, big data, and open banking are all meant to improve and personalize services to satisfy customer demands and expectations.
As technologies continue to evolve, the trends of the year will replace outdated strategies and eventually lead to even more progressive solutions for the modern consumer.