TOP STRATEGIC TRENDS IN BANKING INDUSTRY TO WATCH OUT FOR IN 2023

The banking industry and its technology invariably amaze us with every invention. Not only is it rapidly changing, but it is bringing up the change that we need to upgrade our economic lifestyles. The financial services industry always looks for innovations that focus on improving their services for people. The trend in the banking market nowadays and in the coming year will be a game changer that will certainly change the status of the banking industry.

2023 has just started, so it's the right time to get to know the latest technology trends in the banking industry to watch out for in 2023. Innovation Leaders need to focus on the core problem that the world is facing and then align the technologies to solve it. Trends will automatically be visible when aligning technology to global/ social problems. For a whole decade and maybe more than that – sustainability, a green planet or the alternate planet, and reducing waste is the key. To me, every technology or social inclusion or awareness that will help in achieving sustainability is appreciated and qualifies to be on the Tech Trends 2023 list.

As a Technology and Fintech Innovation Leader, I have researched and created my list of top technology trends in the banking industry to watch out for in 2023.

1] Shapeless Banking 

Reports say, there are more than six billion smartphones today. So, it is the key target for the banking industry to look forward to. Consumers are more inclined to ease of use, so Devices of Choice are one of the major factors that will make banking shapeless (mobile, smart speakers or smart watches or wearable lenses, etc.). Another way to look at it is the Channel of Choices Now the financial services of banks are in the hands of the customer.

A person with a smartphone can make purchases, transfer money, and receive money online or even offline. If we can do the same with Smart Speakers, Watches, Smart Lenses, and Smart Cars, then it will ease the way of banking and also give rise to shapeless banking. This makes society more connected, and every connected smart device is the primary interface between the real and digital worlds and therefore gives users various options through Choices of Devices and Channel of Choices. In a way of saving energy whichever device is charged and connected, users are good to go.

2] XYZ Now and Pay Later 

Effective initiatives of social financial inclusion services have the upper edge, with the increase in the cost of living, and high-price energy, as a result, the Pay Later concept has taken a new height in Banking Industry. The BNPL is one such technology trend in the banking industry we are observing its expansion horizontally, and in 2023 we will see vertical growth as well. The BNPL has eliminated an additional step that was earlier a pre-requisite before we buy anything and that is the credit card requirement. With BNPL applying for credit step is a part of the process when a consumer reaches the checkout stage of the products, making the credit or lending business frictionless.

The Buy Now and Pay Later (BNPL) movement is taking its stance in the consumer market now, it's a scheme that benefits business owners and the banking industry. It's another line of credit for customers to buy and pay later for the product, customers can decide on any future day when they will start paying back without any interest. When a customer uses these services, he or she does not have to pay or activate credit or debit cards and simply enters other information to complete the purchase. Instead, the bank will pay for it, and then, under certain conditions, you can repay that bank when you get your salary or money from any other source. BNPL is growing rapidly in both developed and developing countries. Similarly, you might have seen, Fly Now Pay Later, Study Now Pay Later, and many such Pay Later schemes on the queue that we will see in 2023. The best part to support social financial inclusion is to equip regulators to control risk. Therefore, Regulators need to step up and amend the clauses to align with XYZ Now Pay Later framework. If we upgrade and amend the traditional regulations with innovative ideas there is a way to progress or else we won’t progress if we align innovation with traditional limitations.

3] Digital Only 

The virtual world not only sounds appealing, but it is also a game changer in the banking industry. It is the top trend nowadays because it supports a circular economy. Digital-only banks offer various services that ease the banking process in many aspects. Every person can take advantage of global payments, p2p transfers, trading with the most trending digital assets, digital currencies or cryptocurrencies, and more.

As we always expect more from our banks, we want them to innovate so that we don't have to go to banks or keep mobile as the only alternative. Whenever we need to receive money or make a transaction a well-connected device with an impressive cyber security layer may be able to solve the problem. In this situation, digital-only banks backed by smart devices are thriving to meet customers' needs that they always demand from their traditional banks. That’s the future of industry Digital Only means – superimposing Banking with the Internet and IoT in terms of reach and capability.

However, online finance comes with a threat as well. According to cyber security statistics, online financial transactions are the most common type of internet crime. In terms of digital-only, they offer more security and affordability with convenience, making them more susceptible to risks and financial fraudsters on the internet.

Despite digital-only innovation, banks must find a way to eliminate physical brick-and-mortar locations. If a customer's transaction becomes stalled or encounters a problem, the only option is to visit a physical branch. Physical and digital banking collide to deliver a very advanced customer experience. So, they are separate, but they are entities working together to make a difference.

4] Innovation in Cloud Technology 

As we know, the biggest problem a bank can face is space, service, speed, and cost associated with it. For that matter, Banks buy millions of dollars worth of online space to store every entity involved with their institutions. Cloud technology is the quantum leap in that citation. It enables businesses and banks to keep all information in a virtual space, free of physical space constraints. This is fascinating from the bank's perspective because they will now add more data regarding anything, including customers and what they do with their accounts. Furthermore, cloud technology offers better storage scalability and collaboration, delivering the best banking services through customer relationship management (CRM). This certainly has more efficient customer data consolidation and interaction. So far, adopting a cloud solution meant recognizing factors like cost, scalability, and latency for end-users. However, carbon emission is a different and unique factor that deserves to be at the top of the merit and approach for cloud migration.

In 2023 investors and innovation leaders will be interested to see automation and acceleration in Cloud Migration, that is, Migration with a minimal number of clicks with high speed. Energy and resource reduction in cloud migration efforts will help in channelizing Innovating better solutions like getting sports streaming powered by 5G and web 3.0. Web 3.0 Innovation toward making Cloud Decentralized will draw attention and the need to align it with green energy, and sustainability is the key. Similarly, the customer communication domain in banking would be powered by 5G and Metaverse (an area to watch out for).

5] Interlacing Baas (Bank as a Service) Through Non-Banking Channels 

Bank as a Service is another disruption in the technology trends in the banking industry. It is a system in which the banks can provide services to other institutions through open APIs, 5G, and other related technologies. This creates a greater consumer service list and an open ecosystem for the banking industry. The industry is observing an increase in the number of financial organizations, non-Bank financial business houses, and vendors focusing on a range of innovative financial services with the help of Banking-as-a-Service.

In 2023, we may see a great volume of BaaS getting interlaced with non-Banking platforms like Amazon, eBay, and many eretailers and the reason is consumers explore banking services more through these channels but visit Banking websites or App only for a limited transaction or account balance check purpose.

We may see an underwriting risk as one of the areas that will have major shifts in credit card issuing. For example, Goldman Sachs and Wells Fargo & Co. are the credit card issuer for Apple Inc., for Bilt Rewards, an emerging fintech company (a rent payment fintech) respectively.

 Another one is Merchant onboarding at scale, which will enhance its framework as a high volume of merchants/ start-ups is expected in 2023 with the right focus on sustainability.

 6] The Zero Trust Policy and Cybersecurity Technology 

Another outbreak of technology trends in the banking industry is the "Zero Trust" policy. Most customers have always been concerned about bank cyberattacks. They are right, although banks have finally introduced much better technology that will force them to strengthen their data security measures, the concept of "Zero Trust" means that no devices, networks, or anything related to them will be trusted. Every bank system access request will be validated and checked with a complete authentication process. This has made the banks more secure than ever. As we have read the concept of shapeless banking with more devices getting included in the banking system the Zero Trust policy will become an integral part of banking.

7] Intellectual Property as New Revenue Generation Channel 

This one I have taken from my last year’s prediction as it is still relevant. Intellectual Property refers to the creation of the Human Mind. The most popular forms cover - Copyrights, Patents, Trademarks, and Trade Secrets. 

This needs thorough research to understand - what is available in the market and what is not. Accordingly, decide your area of work as we all know - it is a time-consuming process, and research is the basis of the invention. A grant takes at least 18 months (including all examinations and hearings process). Lots of legalities, better hire a reputed patent attorney as it requires legal knowledge at every step, right from Novelty Reports to Patent examination hearings until the grant.

The First Technological innovation/ patent fight was between Steve Jobs and Bill Gates

Then another example is the controversial Google Earth, which is again similar to the product invented by two young men in the 90s is the "Virtual representation of the Earth through Satellite"

During the patent fight between Samsung and Apple, people were simply aware of one thing - only big organizations have the minds to innovate (Apple, IBM, Google to name a few) rests are just a replica. 

Time has changed, the mindset has changed, and now the power of Human Creativity and Innovation will see new heights in 2023, and it will be on the positive side in coming years as possibilities of infringement will decrease with more awareness.

8] Green and Sustainable Web 3.0, Blockchain, Metaverse, NFTs 

Blockchain is another great technology trend in the banking industry. It consists of some unique characteristics, such as the data involved in the banks being stored on multiple computers with no single person having overall control. Other than that, the data will be encrypted, which means these entities will only be upgraded by the people who have the cryptographic keys. Last but not least, the changes can only be made when everyone with a say in them agrees. The blockchain has made financial services for customers more secure and safe. Every bank entity that opens up the overall data will be in the hands of owners and stakeholders, not everyone.

Referring to the Cambridge Bitcoin Electricity Consumption Index - the volume of electricity consumed by bitcoin mining a year could boil enough water for all cups of tea consumed in the UK for 30 years. Therefore, the need for green and sustainable blockchain arises. Eco-friendly NFTs are also in demand, and Ethereum 2.0 may be a game changer in this field. CHIA, IOTA, Cardano, and more are a few cryptos that are environmentally friendly and support green sustainable blockchain that uses smaller devices, with less energy consumption, and reduces e-waste to align with the circular economy. Research also suggests that Metaverse in Customer Communication may play a major role and support the circular economy.

9] Customer Experience - Super App 

Super apps are those that contribute to the services a particular company offers. The most common services are food delivery services, digital wallets, Uber, and more. All these services are brought together in one app, which provides accessibility to ease the customers' pain.

The best example is India’s Adani One - an integrated travel platform that packs in convenience, control, and comfort. It offers poshness to book flights, meet & greet assistance, pre-order duty-free products, cab services at airports and hotel stays. These all are from the Embedded Finance domain. Similarly, in 2023 Customer Experience through Banking One will be the primary focus. It may include the spectrum of services that banks offer - all customer services, such as current balance, transactions, loans, mortgages, trading, cross-border remittance, digital assets, digital wallets (crypto or CBDC enabled), and so on.

 10] AI-powered Inclusion 

This AI technology has achieved some great levels in the banking industry. Not only that, it has some great social advantages as well, especially for people with disability and who need assistance or making banking easy for all. Right now, over 51% of bank users use this technology. The voice-enabled virtual assistants use users’ smartphones to get help and understand the banking policies and how to proceed with a particular task.

Similarly, those who cannot speak or hear can do banking through smart devices that are visually rich with banking emojis – withdraw money, transfer money, invest money, gift cards, and more.

Another worth mentioning is the inclusion of GenZ and Gen Alpha, by introducing them to sustainability driven financial services through AI-powered gamification.

11] Sustainable Future of Money

In the last couple of years, we have witnessed a revolution in digital currencies globally. Swift progressions in technology and people across the globe reduced using cash transactions, an outcome of the pandemic, and have accelerated it. The way Social Distancing & Lockdown has become a part of our daily vocabulary, similarly, in the coming days’ Stablecoins, Cryptocurrency, Central Bank Digital Currency, and Sustainable & Circular Economy will become a part of the daily vocabulary in the Banking and Financial Services domain. Here is the description of each term that will define the Future of Money -

a) Stablecoins

Stablecoins are cryptocurrencies devised to lessen the volatility regarding the value of the stablecoin, comparable to any "permanent" or "stable" asset. A stablecoin can be clinched to a cryptocurrency, authorization money, or exchange-traded materials this means it can be expensive minerals of modern alloys.

Examples of Stablecoins - There are more than 190 confidentially revealed stablecoins for example Tether, USD Coin, TrueUSD, Gemini Coin, DAI, and so on. There is an event for all authorization currencies to possess an equivalent digital currency.

JPMorgan's JPM Coin, which has been announced recently is one of the examples where unique organizations promoting their private essentially a competitive and agile means of compensation.

b) Cryptocurrency

Cryptocurrency is an internet-based mechanism of change that uses cryptographic functions to handle monetary events. Cryptocurrencies leverage blockchain technology to realize decentralization, transparency, including immutability

c) CBDC - Central Bank Digital Currency

The digital fiat currency that is Central Bank Digital Currency is the digital mode of authorization currency that means establishing a currency as the capital by government regulation and the law. It will reduce a layer and may work in B2B and B2C and peer-to-peer environments effectively. Since CBDC works on the principle of the circular economy - reuse, recycling, and reducing waste (e-waste, paper waste, physical storage waste, and more), can be trusted as a potentially regulated future of money.

Final Viewpoints 

During the pandemic, digital transformation has been triggered and every bank is walking on the digital transformation street. From 2023 onwards, Banks have to move with speed on the Only-Digital highway that will be powered by 5G and Web 3.0 (Blockchain, Metaverse, and CBDC). Products like BNPL that enhance customer experience and reduce friction will be on top. Efforts in making minimal digital waste, interlacing circular economy, and sustainability from a technology point-of-view is on the track to qualify the uptrend list from 2023 onwards.