In recent times, there is a significant change in the way we handle our banking activities and finance in India. With 68 percent of Indian consumers now embracing online and mobile banking, digital financial transactions have become the new normal.
The COVID-19 pandemic played a pivotal role in this shift, as 48 percent of respondents anticipate a future where they will opt for contactless payments over cash or traditional cards.
In 2023, we are on the brink of significant changes in the financial landscape. The coming year promises a wave of technological advancements that are set to revolutionize how we interact with banks and manage our finances.
In this blog, we will delve into the top 8 banking technology trends of 2023, exploring each trend's potential to reshape the industry and enhance our financial experiences in an ever-evolving digital world.
1. Artificial Intelligence (AI) and Machine Learning (ML) in Banking
AI and ML continue to be at the forefront of banking technology trends. Artificial intelligence enhances efficiency and trust in banking, giving modern banks a competitive edge by lowering costs and automating processes.
AI and ML drive can help in the growth of the banking sector through customized credit assessments, accessible AI services in remote areas, robust fraud prevention, personalized financial advice, streamlined microfinance, improved rural banking, and broader investment access.
The AI industry in banking is rapidly growing, with a projected CAGR of 32.6% from 2021 to 2030, set to reach $64.03 billion by 2030 from $3.88 billion in 2020.
2. Blockchain and Cryptocurrency Integration
The central bank plans to incorporate blockchain technology into its core banking system as a demonstration of its potential. The banking industry recognizes the value of distributed ledger technology (DLT) in ensuring secure decentralized digital databases.
McKinsey estimates that blockchain could lead to substantial cost savings, including around $4 billion in cross-border payments, $1 billion in retail bank operating expenses, a reduction of regulatory fines by $2-$3 billion, and annual fraud-related losses by $7-$9 billion.
3. Cloud Computing
By 2024, nearly 80% of corporate banks in India are projected to operate their trade finance and treasury workloads on the cloud.
Cloud computing is now a driving force for innovation in the banking sector. Banks are leveraging the cloud to reduce costs, expedite new initiatives, and adopt new business models.
Both traditional and challenger banks are using the cloud to thrive, and the benefits include cost reduction, faster innovation, risk mitigation, and digital transformation.
4. Robotic Process Automation (RPA)
RPA, or robotic process automation, is a hyper-automation technology that employs bots to automate repetitive tasks by interacting with digital systems.
RPA is making a significant impact in banking by improving efficiency, reducing costs, accelerating processes, and enhancing quality. Many global banks are adopting RPA, which has the potential to cut costs by 70-80% and perform tasks up to five times faster than humans.
These bots can handle tasks like data extraction, report generation, and more continuously, 24/7, without the need for breaks.
5. Open Banking and API Integration
Leveraging APIs, Open Banking stands as a significant leap forward in the financial sector, offering businesses and consumers seamless access to tailored banking services. It also concurrently enhances security measures and boosts operational efficiency.
Financial institutions can achieve substantial profit potential by implementing Open Banking APIs, leading to an estimated 20% increase in revenue for each bank. This proves highly advantageous in the present era of expanding digital solutions.
6. Cybersecurity Advancements
As banking technology evolves, so do the tactics of cybercriminals. The Indian Banking, Finance Services, and Insurance (BFSI) sector has faced a significant rise in cyberattacks, particularly in the Asian region.
Government data revealed a sharp increase in attacks on the banking and financial industry, with 248 successful data breaches occurring between June 2018 and March 2022. Among these breaches, 41 were reported by public sector banks, 205 by private sector banks, and two by overseas banks.
Banks can enhance data security and regulatory compliance by utilizing advanced cybersecurity solutions, which include data encryption, key management, Hardware Security Modules (HSMs), and tokenization.
7. Personalized Banking with Big Data
Customers today demand realistic and convenient banking solutions that offer faster, streamlined processes, personalized advice, and access to correct, timely, and relevant information.
Big Data plays a pivotal role in helping banks meet these expectations through advanced analytics, artificial intelligence, and machine learning.
It mainly addresses three core areas:
1. Enhancing personalization and convenience through faster credit risk assessments and customised services across all channels.
2. Ensuring security by detecting and preventing fraud, monitoring suspicious transactions, and enhancing overall safety.
3. Tailoring offers to match customer financial goals, providing personalized discounts, and boosting customer engagement.
8. Internet of Things (IoT)
The Internet of Things (IoT) connects physical devices through the internet, enabling customized and efficient banking services. Smart devices like smartphones and smartwatches, when integrated with IoT, enable banks to offer personalized notifications and services based on location and preferences.
Furthermore, real-time data from IoT devices allows banks to swiftly analyze and detect anomalies or suspicious activities in customer accounts, enhancing account security.
Conclusion
The year 2023 is poised to bring transformative changes to the banking and financial landscape in India. The adoption of cutting-edge technologies, such as Artificial Intelligence and Machine Learning, Blockchain, Cloud Computing, Robotic Process Automation, Open Banking and API Integration, Cybersecurity Advancements, Personalized Banking with Big Data, and the Internet of Things, signifies a dynamic shift in how financial services are delivered and managed.
These advancements promise enhanced efficiency, security, and personalized experiences for customers, while addressing critical issues like data security and climate change. The banking sector plays a crucial role in aligning with global norms, making banking more accessible, secure, and tailored to individual needs.
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