Data breaches. Identify fraud. Rapid technological change. These are the challenges banks must contend with in the modern business world.
Banking is an industry that requires constant innovation to protect the finances of individuals and small business owners and to provide convenient service in a competitive marketplace. One of the primary areas of focus for banking professionals seeking to innovate their business processes is information technology. Finding new I.T. solutions can allow banks to focus on providing great service to customers and staying competitive in a changing landscape.
Here are several ways banks can employ dynamic I.T. solutions to increase profits, as well as examples of technological challenges still faced by the financial sector.
Increased Cybersecurity Pays Dividends
Banks are notoriously tempting targets for cyber attacks, which often target both financial and personal information. Even small, local banks and credit unions can easily become victims of cybercrime because they may lack security measures compared to their larger counterparts. Whatever their size, banks handle so much valuable information that any investment into improving cybersecurity is guaranteed to be a wise decision.
According to Bank Innovation, banks across the world lost $16.8 billion to fraud in 2017, with 16.7 million U.S. customers reportedly being affected by cybercrime. Investment in improving security protocols and protecting data has the potential to save customers—and their banking institutions—millions of dollars. To help financial institutions assess their risk factors, the American Bankers Association has created a cybersecurity profile and questionnaire. Using available tools like this one, banks can increase their preparedness for online threats.
Investment in Mobile Apps Builds Loyalty
Mobile banking is no longer simply an optional service. Banks with user-friendly mobile apps are in the best position to cultivate customer loyalty. Bank Innovation reports that 54% of executives are investing in technology that will allow consumers to manage their finances more easily with mobile devices. With competition from services like PayPal and Apple Pay, financial institutions face an immediate need to improve mobile banking services or else risk losing customers to the competition.
Many banks have responded by adopting convenient mobile-only options such as Zelle, allowing account holders to transfer funds quickly and easily between linked accounts. When banking is made as easy as possible, an increasingly mobile consumer base will appreciate being able to manage money on the go. Customers who are happy with their mobile banking options are much less likely to flock to another institution.
Blockchain Technology Revolutionizes Banking
The advent of blockchain technology has created a ripple effect that is being felt across multiple industries—including banking and finance. Because a blockchain is essentially a constantly updating, permanent ledger, the technology lends itself exceptionally well to facilitating secure financial transactions. Most people are familiar with blockchain through cryptocurrencies such as bitcoin, but banks are increasingly adopting the technology for financial applications to ensure safe transactions and protect personal data. As blockchain becomes more mainstream, its value for securing information while increasing accessibility will become apparent throughout the banking industry.
A 2017 Financial Times report notes that blockchain has multiple applications across several different banking sectors, including payments, trade finance, clearing and settlement, and identity verification. One respondent in the article called paper-based trade finance “literally Dickensian,” emphasizing the need for innovation in the field. Banks that invest in blockchain could potentially eliminate inefficiencies and redundancies throughout their organizations, and new-use cases will emerge as the technology is adopted more widely.
A.I. Creates New Opportunities
Artificial intelligence is another emerging technology that has the potential to create a huge impact throughout the banking industry. By collecting data and identifying patterns, A.I. makes predictions that can make banking more efficient for both employees and customers. For example, automated chatbots help customers by using machine learning techniques to respond to common queries. With each interaction, the A.I. gets better at providing solutions to customer problems.
International Banker reports that A.I. can also be used to develop effective investment strategies. It is especially useful in high-frequency trading, which is characterized by fast execution and high order rates. HSBC is also investigating A.I. technology’s potential in aiding money laundering investigations. With such a dizzying array of potential uses, it’s clear that artificial intelligence will have a huge role to play in future banking innovations.
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Banks face more competition than ever from non-bank entities such as digital wallets and alternative lenders. One feature many of these companies have in common is that their services are designed to be accessed online, often exclusively. Many consumers would rather manage their money online than go through the hassle of setting up an account at their local bank branch. Banking institutions can confront this challenge by increasing their investment in digital infrastructure and providing mobile banking solutions that attract customers looking for convenient online financial management.
Cloud Computing Adoption
Many banks have opted to embrace the increased security and accessibility of cloud services; however, those that have yet to adopt cloud computing to meet their I.T. needs remain vulnerable to data breaches and other information loss. In addition, cloud services are instantly scalable and have the potential to promote efficient communication within organizations, which is vital in an industry where time is of the essence.
Focus on Customer Experience
New I.T. solutions often come with an increased focus on user experience—and when the end user is a bank’s customer, the benefits are obvious. Traditional modes of banking ask the customer to conform to the bank’s wishes, not vice versa. However, by investing in technology that allows customers to bank more conveniently, transfer money online, and apply for loans from the comfort of their own homes, banks can send the message that they value their customers first and foremost.
New technology has the potential to create sustainable and profitable solutions throughout the banking industry. To learn more about how your financial institution can improve its bottom line by investing in I.T., call 844-44-JMARK, send us an email at [email protected] or visit the Contact Us page of our website.
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