The events of 2020 may have been among the most significant, but the years leading up to our current pandemic also had a major impact on banking technology trends, and the adoption of banking technology will continue into 2021 and beyond. These are the most essential shifts and trends that financial institutions should keep top of mind as they continue to evolve in 2021.
Increased Point-of-Sale Banking
Sixty percent of millennials are looking for financing options other than credit cards to make large purchases online. To capitalize on this, retailers have increased their “shop now, pay later” point-of-sale options in recent years, with the POS financing market estimated at $400 billion worldwide. These trends point to a pivotal opportunity for banks and credit unions to increase their market and their bottom lines with increased collaboration of online and brick-and-mortar retailers to provide POS lending options.
POS mortgage and wealth management products also present opportunities to attract customers and satisfy existing ones with frictionless, simplified data gathering and application processes. Ultimately, adopting POS financial services can help banks and credit unions weather the coming changes to a primary customer sales touchpoint — in-branch banking.
Opportunities to Rethink Branch Services
The effects of the global pandemic shifted the way people bank; digital banking increased considerably in the months after COVID-19 hit. This comes at a time when customers were already moving toward digital-only banking. According to research from CACI International Inc., customers typically averaged seven branch visits per year in 2017. Those same customers are expected to visit a branch just four times a year by 2022. Even more staggering, customers between the ages of 18 and 24 visited their bank six times in 2017 but will visit only twice annually by 2022.
Traditional banks and credit unions will have to adapt to survive this branchless trend. Boosting online and app-based capabilities is a crucial first step with “new normal” basics such as peer-to-peer transfers, contactless payments, snap-a-pic deposits, easy bill payment, expense management and real-time analytics being top priorities in 2021.
Mobile Will Be King
In-branch banking isn’t the only thing on the decline. CACI’s research suggests that both desktop and laptop banking will also shrink by 63% between 2017 and 2022. This shift means that mobile devices are slated to become the primary touchpoint for banking customers in 2021.
Paradoxically, this is actually predicted to increase the number of touchpoints and interactions that financial institutions have with their customers since mobile devices are more accessible and always on hand for quick balance checks, bill payments, transfers, etc. In fact, CACI estimates that mobile will make up 88% of all banking interactions by 2022.
Still, most customers will prefer some human interaction when they’re banking. A study from Treasure Data found that 75% of U.S. banking customers prefer interacting with a human or a combination of human and technology — a trend that’s not likely to change over the next year. Banks and credit unions that perfect the art of integrating digital and human interactions — such as utilizing video conferencing and live chat agents — will be best positioned to serve customers in the new digital world and maintain a strong market share. However, fully leveraging these mobile trends means taking an additional step to enhance customer engagement, increase data analysis efficiency, and boost the sales and marketing teams’ productivity.
Using AI Intelligently
Artificial intelligence has been a powerful tool in financial institutions’ arsenals for more than a decade, but the next few years will see an even greater shift in the use of AI. As we look toward the post-pandemic future, AI will become increasingly integral in processing data, engaging with customers and optimizing costs. Forecasts by Autonomous Research predict that AI technology will result in a 22% reduction in operating costs for banks and credit unions by 2030 with savings reaching $1 trillion in the next few years.
Leveraging the power of AI can help banks and credit unions provide tailored experiences across multiple channels — from the increasingly rare in-branch visit to the rising use of mobile banking apps. Using AI effectively will allow financial institutions to develop technology that helps customers choose financial products that match their exact needs and manage their money from anywhere. This will meet customers’ growing need to have all their banking capabilities at their fingertips without sacrificing customer service or personalized products.
To this end, banks and credit unions can utilize a myriad of AI technologies that benefit customers and the bottom line. These include:
- AI-based virtual assistants that can be integrated into mobile apps to ATMs, such as Bank of America’s Erica.
- Cognitive document automation and optical character recognition that automatically fills in applications and other documents with data that the customers have previously provided. These decrease the time customers spend filling out paperwork while also alleviating paper-based documentation processing challenges and cutting costs.
- Using AI to analyze customer-provided data, in-house banking behavior data and third-party information (such as credit reports) to provide near-instantaneous application approvals and matches for relevant products and services.
- Transforming back-end processes with AI that can efficiently comb through immense amounts of customer data. For example, Bancolombia’s data bots improved service time efficiency by 51%, reduced provisioning costs by $19 million and boosted customer service efficiency by 50%.
- AI that can detect and fight fraud in real-time via digital banking channels (such as spotting unusual activity and misconduct by employees).
Shifting toward the future means becoming more intelligent about customers and willing to take risks. However, one issue that financial institutions may face with these trends is a lack of technical knowledge. Finding qualified data, AI and other tech specialists can be a considerable roadblock in financial institutions’ efforts to take advantage of these 2021 banking technology trends. Banks and credit unions can overcome these challenges by partnering with a team that understands the full financial technology environment to ensure that you not only survive but thrive in the new year.
Lauren Treadwell is a fintech writer and enthusiast specializing in cryptocurrencies, blockchain technology, innovative investment strategies and financial service startups.
- Business Insider, “The Point-Of-Sale Financing Report: Research on the winning strategies companies are deploying to capitalize on the alternative financing space,” December 18, 2019. https://www.businessinsider.com/point-of-sale-financing-report
- TurnKeylender, “Retailers Can Take Control of Fees in Their POS-Financing Programs,” February 12, 2020. https://www.turnkey-lender.com/blog/retailers-can-take-control-of-fees-in-their-pos-financing-programs/
- Jeffry Pilcher, “Branches in Decline: Last One Out, Turn Off The Lights,” The Financial Brand, 2017. https://thefinancialbrand.com/66228/bank-credit-union-branch-traffic/
- Treasure Data, “Al vs. Human Customer Service: When Do Consumers Prefer a Bot?,” October 8, 2019. https://blog.treasuredata.com/blog/2019/10/08/ai-vs-human/
- Adam West, “Autonomous NEXT Report on Augmented Finance and Machine Intelligence Shows How AI is Disrupting the Financial Services Industry,” CardRates.com, October 19, 2020. https://www.cardrates.com/news/autonomous-next-shows-how-ai-impacts-the-financial-industry/
- Automation Anywhere- Bancolombia case study. “Leveraging Intelligent Process Automation: 1300% ROI Delivers Increased CSAT and $7M in New Revenue Streams,” July 2018. https://sxc.co.uk/assets/files/Bancolombia-Automation-Anywhere-CaseStudy.pdf