Technological innovations are spurring bank and nonbank competitor activity, influencing customer demand for products and services, and redefining the global banking industry.
FREMONT, CA
Studies on digital banking transformations show that banking-as-a-Service (BaaS) will see extensive adoption in the near future. These banks aim to generate and diversify revenue streams or, to a lesser degree, aspire to extend previously dropped regulatory investments like PSD2 in Europe into revenue-generating machines.
BaaS is one of the four technologies posing a high potential for transformation in the banking sector and will advance in the coming years. BaaS is gaining momentum from banks and nonbanks aspiring to establish or enhance direct and intermediated revenue streams. Today, it is imperative for bank CIOs to consider how key innovations are shaping their industry and prioritise their technology investment strategies appropriately.
Other technologies transforming the banking sector include chatbots, the public cloud for banking, and social messaging payment apps. Technological innovations encourage bank and nonbank competitor activity, influencing customers' preferences for products and services and shaping regulators’ actions globally.
BaaS
BaaS can be a distinct or broad set of financial service functions exposed by chartered banks or regulated entities to fuel new business models deployed by other banking market participants like fintech, neobanks, traditional banks, and other third parties. Market participants are increasingly drawn to collaborative models, enabling enhanced customer experiences, including richer features, a broader set of products, and innovative customer experiences. On the other hand, nonbank participants benefit from a quick onramp to the banking market by leveraging a regulated entity’s licence rather than pursuing their own charter.
Chatbots
Chatbots represent one of the significant artificial intelligence (AI) use cases in banks and are likely to impact all areas of communication between machines and humans. Chatbots' benefits are incredibly diverse, especially in customer service, IT management, and human resources. The change from the user learning the interface to the chatbots learning what the user wants has wider implications for onboarding, training, productivity, and efficiency inside the workplace.
The sophistication of the organisation's conversational AI platform has enhanced tooling for banks to develop and maintain chatbots using non-IT resources. Operationalisation in the business units outside of IT makes chatbot production more productive.
Public Cloud for Banking
Since banks can obtain greater efficiency and agility by moving workloads to the cloud, public cloud adoption is becoming highly transformational to the banking industry. Public cloud for banking offers banking-specific software within a public cloud landscape by integrating those applications with different degrees, from cloud-based to fully native.
Banks achieve agility by quickly ramping up and down to support changes in demand and meet regulatory compliance by delivering on temporary needs. Resources are freed up for the digital assets' development by centralising and leveraging them. Furthermore, fixed costs are reduced by eliminating oversized infrastructures, and cost structures are optimised. Moreover, banks are able to centralise applications and platforms that ease development and testing, circumventing overlaps or duplications.
