As tides shift towards digitalisation, banks are under pressure to keep up. From hyper-personalised customer service to cybersecurity solutions that increase consumer confidence, the opportunities to modernise are significant. However, according to a report from the Boston Consulting Group, 75% of financial institutions have found themselves ‘stuck in siloed pilots and proofs of concept’.
Last year, the Current Account Switch Service was used over 1 million times by consumers ready for change. With loyalty lacking, the race is on to maintain a competitive advantage. Those that fail will see a direct impact on their return on investment (ROI) and brand image.
Innovation for Competition
As with any significant organisational change, having a clearly defined strategy is fundamental to AI success as any. At present, less than a quarter of banks have applied AI’s capabilities in their long-term plan. Instead, they’ve fallen at the first hurdle and struggled to get back up.
To overcome these challenges, banking decision-makers must be prepared to invest in the removal of outdated, legacy technology, making room for a decomposed and a future-proof IT infrastructure.
But How?
Consider how you see the future of your bank. What are your big goals for the next decade? How do you want customers to feel after interactions with your customer service? How do you want to be perceived by prospective clients? By outlining the value you want, and the modernisation to bring, it becomes simpler to map out your first steps.
For example, if consumer attraction and retention are top priorities, data will be pivotal to creating a seamless customer experience. By embracing APIs, and ridding the bank’s infrastructure of siloes, AI can work with all available data, reducing the likelihood of mistakes or hallucinations and showcasing the benefits of hyper-personalization, from quicker fraud detection to tailored advice.
However, with opportunities comes challenge. The rising popularity of embedded finance software, which enables financial capabilities to be integrated into other platforms for the ease of the consumer, will force banks to increase their marketing efforts to ensure their brand is seen by their target demographic.
Amid innovation excitement, the best way to get ahead of these is by proactively embracing emerging technology. Building AI, LLMs, and IOT into a future-facing strategy can help banks to put themselves ahead of the competition, cater to consumer needs, and retain customers in the long term. This is where the coreless banking principles comes in, with open standards, and the use of APIs and micro services, paving the way for flexible banking infrastructures.
The Future of Banking
The most successful banks of the future will be those that prioritise customer expectations, ensuring that their brand continues to be prominent in conversations, even as innovations like embedded finance hide it away. By shifting towards AI, open standards and APIs in 2025, banks can be proactive in creating a flexible foundational infrastructure where data feeds into everything, and interoperability drives change as and when it’s needed.
Hans Tesselaar, Executive Director at BIAN