Traditional banking is changing for the better, and many consumers are embracing the digital transformation. According to a recent survey, 71% of Americans are now banking online, whether via desktop or through a mobile app. In addition, the rise of Web3 ecosystems, cryptocurrencies, and NFTs demands the financial technology to support them.
As such, it’s vital for banks and other financial institutions to stay up-to-date on the latest developments and banking technology trends. This guide will explore the key technologies that will dominate the banking industry in 2024.
The origins of digital banking began with the start of neobanks. Neobanks are digital-first financial institutions. These banking providers don’t have any physical locations and operate completely on the internet.
Neobanks are lean organizations, meaning they don’t have as many operating expenses as traditional banks that have to maintain physical branches.
Neobanks appeal mostly to millennials and Gen Z because they usually have lower or no banking fees and higher interest rates on saving accounts. In addition, they offer user-friendly digital experiences via mobile apps and Internet of Things (IoT) devices.
However, digital-first banks still haven’t usurped traditional banks in terms of popularity. While people are keen to leverage online banking for convenience, 83% of people still prefer to use traditional banks, as they value face-to-face interactions.
This presents a massive challenge in digital banking. Digital bank startups have to overcome the human barrier in delivering personable banking services. While many online banking customers enjoy the convenience factor, they still want the option to talk to someone in person when they have an issue.
Financial institutions that want to embrace digital banking must first undergo a digital transformation. Nowadays, this process is essential due to the shift in consumer demands toward modern fintech solutions.
Rather than focusing solely on revenue-generating initiatives, traditional banks must compete with neobanks by creating a digital ecosystem that prioritizes customer needs and wants.
Modern banking features like mobile apps and digital wallets allow people to access their money anywhere, and the demand for banking convenience isn’t going away anytime soon. Thus, traditional banks have to invest tremendously in creating convenient digital banking solutions to meet consumer demands.
Artificial intelligence (AI) and machine learning (ML) are two of the most rapidly growing new technologies in the world. The banking sector uses them extensively to deliver personalized customer experiences, improve risk management, and detect fraud.
AI is also a key tool in the crypto space. It helped Coinext create its patented Smart Wallet, which allows Brazillians to invest specific monetary amounts in bitcoin with the help of AI automation.
Artificial intelligence is also used in personal banking. Financial brands like SoFi offer robo-investing services, enabling investors to receive financial advice from “robots.”
Meanwhile, machine learning empowers banking systems to evaluate potential loan customers based on a defined credit system. This eliminates the human margin of error in providing costly banking services, such as mortgages and auto loans.
Finally, AI and ML can work in tandem in the realms of fraud detection and credit scoring systems. Modern bank security systems rely on both technologies for real-time detection of suspicious anomalies that point to fraud.
AI has a myriad of use cases in the banking industry, which include:
One of the most innovative technologies of the 21st century is blockchain. A blockchain is an immutable, public, digitally-distributed ledger.
To function, a blockchain collects financial information and creates third-party verified blocks. The blocks are linked together using cryptography to create a chronological chain of information that is both transparent and unalterable.
Traditional banks, on the other hand, internally control all the financial information they receive. This complete monopoly of information naturally creates public distrust and increases the risk of cyberattacks, money laundering, and fraud.
Blockchain is the basis of cryptocurrency and digital assets like NFTs. However, banks are also using blockchain technology to enhance security and transparency for things like:
Ultimately, blockchain is helping banks deliver efficient financial services and maintain transparency in the public view.
Blockchain technology has a wide range of use cases in banking, such as:
The future of banking is bright, and new technologies are paving the way for several advancements that will improve modern banking. These emerging technologies include:
Open banking refers to an ecosystem where multiple financial platforms can integrate. With the help of APIs, banks can connect to third-party financial partners to give customers a broader banking experience.
For example, Chase Bank offers its customers a credit monitoring feature. Accessing this feature triggers an API that integrates with Experian, a credit monitoring tool. With more partnerships between financial companies, customers can access important information without cycling through multiple apps.
Blockchain technology enables banks to tighten their security and eliminate fraud. Financial institutions can lean more on this technology to invigorate their cybersecurity defenses.
Blockchain eliminates duplicate and suspicious double transactions by time-stamping each transaction separately. Transactions can also be executed through smart contracts without the need for intermediaries.
Using a blockchain makes all financial transactions public, eliminating the shadow that potential cyberattackers and criminals operate under. Banks can even use the technology to comply with federal Anti-Money Laundering (AML) and regulatory compliance laws.
Traditional banking utilizes obsolete data warehouses that are susceptible to natural disasters, server downtime, and inefficient reporting. Cloud computing solves these problems by keeping all financial data on a secure cloud network.
Cloud computing ensures safe storage and instant retrieval of resources, while cloud banking relies on data algorithms and software to deliver tailored financial solutions. Generally speaking, cloud computing allows banks to build and deliver customized services quickly.
By migrating to the cloud, financial institutions can achieve superior speed, operational efficiency, customer service, and processing power.
Hyperautomation is the vast automation of routine tasks. It aims to reduce human intervention by streamlining as many repetitive processes as possible. Modern banking could involve a great deal of hyperautomation in the future.
In fact, banks are already putting hyperautomation into practice to improve tasks like data collection, cleaning, and analysis. Removing these tasks from human hands lowers the margin of error and frees up time for employees to focus on core business tasks and initiatives.
Due to the rising popularity of cryptocurrencies and digital assets, investors will undoubtedly need more digital asset platforms. A digital asset platform is any software that enables people to interact with digital assets. These platforms include cryptocurrency exchanges, digital wallets, and brokerage platforms.
Fortunately, there’s no need to build a digital asset platform from scratch. AlphaPoint offers white-label software that banks and financial institutions can leverage to build secure, scalable, and cost-effective digital asset platforms quickly.
The landscape of global finance is constantly changing. The onset of blockchain technology, AI, ML, and cloud computing are making banks more efficient, secure, and capable of meeting shifting consumer demands.
Customers now expect convenient digital experiences from their banking partners. To accommodate them, financial organizations can take advantage of white-label digital asset management software.
AlphaPoint provides cutting-edge white-label software for financial institutions. Our high-performance technology is scalable, secure, and battle-tested in over 35 countries.
If you’re ready to embrace the digital future of banking, request a demo today.
AlphaPoint is now a member of the FinTech Association of Hong Kong (FTAHK), an NPO that focuses on policy and advocacy work benefiting Hong Kong's FinTech ecosystem in the city and internationally.
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