Not long ago, application programming interfaces (APIs) were little more than simple lines of code facilitating communication between applications at enterprises, including banks. Today, they are integral to inventive revenue models and evolution of new digital outreach modes, and are, in many cases, key to ensuring compliance with game-changing regulations.Developments such as open banking and the proliferation of new digital channels will soon make banking invisible. What then are the upcoming key technology trends that will influence and reshape banking over the next 12 months and beyond?
- Reference digital architecture evolves for greater business and customer context
Open data, API-led ecosystems, emerging technologies and regulations will continue to evolve in 2019 and beyond. To thrive in these times of continuous change, banks need an architecture that allows them to respond to changes quickly, innovate and deliver value creatively, and operate efficiently.
In 2019, the digital reference architecture will embrace “deep business focus” as a design principle. What this means is that organisations will move towards an architecture that requires minimal or no infrastructural costs and simplified code restructuring to adapt to new technologies, capabilities and devices. This architecture will lend itself to customer-centric innovation and collaboration with ecosystems. It will be truly agnostic to the underlying stack, OS, cloud, and technology, and designed for holistic automation to ensure auto-healing, auto-correction, auto-prevention, and automated upscaling and down-scaling.
Needless to say, analytics will be at the heart of such an architecture.Insights across AI systems and IoT sensors will drive context-driven experiences, insights across compute resources or technology stacks and databases will drive true agnosticism, and insights across diverse ecosystems will drive new business possibilities with data-sharing. In 2019, some banks will progress towards this modernisation by navigating their unique journey from monolith to modular to micro-services, while some will implement new digital core systems from scratch.
- AI initiatives scale up
Our second technology prediction for 2019 is the continued adoption of AI in the bank. With pervasive AI, economies of scale will no longer be a foundational principle of success in banking, and banks will look to scale data instead of traditional assets. Use cases of AI will expand to include collections, precision marketing, compliance, and even talent management, in addition to customer service and fraud management which emerged as the top areas for AI adoption in the recent Efmaand Infosys Finacle survey.
A growing number of banks will also scale their AI projects by collaborating with AI FinTechs in 2019.Although AI will redefine job profiles at banks and blur the distinction between front, middle, and back office operations, we do not foresee a massive exodus of human workforce in the near future.
- Commercial adoption of Blockchain continues its upward trend
Blockchain stepped out of the zone of experimentation, and into commercial adoption in 2018. Myriad blockchain pilots, consortia, and successful implementations at all leading and progressive banks served to demonstrate the benefits of the technology. Banks are now looking to not only save cost but also generate revenue from it.
In 2019, the consortium trend will move towards multi-industry but geo-specific ecosystems. Sizeable networks and participation of large leading banks and enterprises will be crucial to drive meaningful value. Amidst rising disintermediation in the industry, the chance to reclaim lost customer relationships by cultivating influential ecosystems will be a reason for some banks to adopt blockchain.
Lastly, with compliance and privacy becoming a boardroom discussion, building and demonstrating trust and compliance will also drive the adoption of blockchain in 2019 and beyond.
- Banks adopt the public cloud for benefits of agility and scalability
In 2018, many leading and progressive banks announced their cloud adoption plans and initiatives, a clear demonstration of the growing confidence in the cloud for benefits of scalability, agility and innovation. The growing realisation that workloads are less likely to be exposed to security threats in public cloud of leading providers such as AWS, Azure and Google as compared to traditional data centers, is reducing the apprehension around the public cloud.
2Capital One, a leading bank in the U.S. has even gone on and embraced the public cloud for its core banking applications. We expect a significant number of banks to follow the trend over the next five years.
In 2019, however, the action will primarily be driven by banks looking to expand beyond the home turfinto international markets. Cloud provides the agility to start fast with short rollouts, which is just what these banks need. Since most leading public cloud providers are also well-versed with regulatory requirements in different geographies, engaging with them for expansion into new shores helps these banks navigate compliance complexities. The demand for quick provisioning and elasticity in a world of APIs and increasing digital channels will also drive cloud adoption in banking for some time to come.
- IoT accelerates connected commerce
In the first quarter of 2018 alone, Google sold 3.2 million Google Home devices recording a year-on-year growth of 483%. So it’s not entirely implausible when industry estimates suggest that the Internet of Things market will more than double to $520 billion by 32021.
In financial services, leading banks such as Capital One, NAB, Westpac, Amex, USAA, and JP Morgan have introduced banking on smart assistants. A large number of banks will integrate digital channels for basic and advanced functionalities in 2019. Applications that require no action on the customer’s part to offer seamless banking or non-banking experiences will also flourish. An example is Barclaycard’s Dine & Dash that allows customers to enjoy supreme end-to-end dining experiences by ensuring zero wait-time at restaurants, performing payment transactions on behalf of customers and sending expense receipts subsequently.
Although IoT scenarios such as a refrigerator placing an order and making payments may not come to fruition this year, we will see definite progress towards that future, as diverse eco-systems and open APIs mitigate a key limitation for the uptake of IoT in banking, which is, the inability to integrate banking with devices, durables and equipment during the production or manufacturing process.
- Mixed Reality becomes a reality in banking
Our final technology trend for 2019 is the adoption of mixed reality (MR). MR in banking has not yet left the lab. Most pilot projectsby banks usually include AR apps that help customers with information about the nearest banks, ATMs, shops or restaurants.However, we expect use cases such as virtual branches, mobile apps, augmented with AR, and AR-enabled authentication on mobile to see the light of the day this year. Customer journey and UX design will be extremely crucial for the success of MR in banking.