PAYMENTS
Article | July 21, 2022
Contents
1. Evolution of Banking: From Brick-and-mortar to Digital
2. Multichannel Banking and Self-service Solutions
3. Demystifying Retail, Business and Corporate Banking
4. Mobile Banking: Payment Processing Overhaul
4.1 Overview of Fintech Companies in Banking Industry
5. Technology Trends in Digital Banking
6. Digital Transformation in Banking
6.1 Authentic User Experience
6.2 Blockchain Technology
6.3 Personalized Technology Services
7. Digital Banking Platforms Reaching out to SMBs
8. Future Aspects of Digital Banking Solutions
1. Evolution of Banking: From Brick-and-mortar to Digital
Digital banking has transformed the traditional banking landscape and brought about a paradigm shift in the way individuals and businesses manage their finances. The cumbersome and time-consuming nature of financial transactions that involved physical visits to bank branches and long queues for basic tasks like account opening and money transfers is now a thing of the past.
Between 2017 and 2021, 9% of all branch locations closed down, a loss of around 7,500 branches, according to the non-profit National Community Reinvestment Coalition (NCRC).
(Source: Bankrate)
With the digitization of banking, there has been a shift toward a cashless economy, with net and mobile banking gaining popularity over physical cash. With digital banking solutions like UPI, internet banking, and mobile banking, customers can access global transaction banking services directly from their own platforms, enabling seamless transactions anytime, anywhere.
2. Multichannel Banking and Self-Service Solutions
The shift from traditional brick-and-mortar banking to digital banking has become ubiquitous, making self-service approaches in digital banking solutions vital for customers. These options allow customers to access banking solutions using software resources without human intervention, enabling them to conduct transactions such as checking account balances, making online transfers and withdrawals, paying bills, loan installments, exchanging currencies, and overall managing wealth with ease.
Such solutions can be accessed through FAQs, chatbots, customer support portals, and other similar resources. The scope of self-service technology also encompasses internet banking and online shopping. Although the first and most successful self-service solution introduced by banks worldwide was the automated teller machine (ATM), the concept has now been extended to include a variety of digital banking platforms and applications.
3. Demystifying Retail, Business and Corporate Banking
Digital banking services and products consist of three main sub-categories: Retail banking, Business banking, and Corporate banking.
Retail banking, also referred to as consumer banking or personal banking, is a form of banking that offers financial services specifically to individual customers instead of businesses. It enables customers to effectively manage their finances, access credit facilities, and securely deposit their funds.
Business banking refers to a company's financial transactions with a specialized institution that offers tailored financial services such as business loans, credit, savings accounts, and checking accounts, exclusively designed for corporate entities rather than individuals. This type of banking is conducted by a dedicated business banking division within a bank, which solely caters to the financial needs of commercial organizations.
Corporate banking entails the provision of financial services to sizable corporations and multinational enterprises, which includes an array of offerings such as cash management, trade finance, corporate lending, and treasury services. With the advent of digital corporate banking, businesses can now effectively manage their financial transactions, process payments, and gain access to various financial tools and resources via digital platforms, ensuring improved efficiency and convenience.
4.Mobile Banking: Payment Processing Overhaul
Mobile banking allows remote access to a wide range of banking services. Mobile app simplifies our lives by letting bank and other financial institution users check account balances, pay bills, transfer money, manage investments, and apply for loans with just a few clicks.
Mobile banking alerts promote smart financial management, provide customization options, and enable easy monitoring for suspicious activity. A Chase Bank study revealed that 87% of consumers use their bank's mobile app monthly.
Some features of a digital banking platform:
Transfer money to friends and family within minutes via the ‘Manage Payee’ option on mobile banking apps.
Clear utility bills via banks linked with UPI-enabled apps on your phone instead of standing in long queues outside gas stations with cash.
Open Demat accounts online via the KYC process and manage all investments, deposits, and stocks in one place.
Open bank accounts by uploading documents online; skip visiting banks and filling out forms.
Get online assistance from banks 24/7 through chatbots and support systems.
Mobile banking enables smooth functioning and boosts transparency in accessing financial data.
Check account balances anytime without the need for passbook slips.
Mobile banking apps provide customers with innumerable loan options, with banks deducting loan amounts from accounts on a fixed date via the ‘AutoPay’ option.
4.1 Overview of Fintech Companies in Banking Industry
Here are some leading digital banking platforms catering to the needs of financial institutions:
Alkami Technology: It is a major developer of cloud-based digital banking solutions for financial institutions in the United States. Its solutions enable users to clients their businesses with confidence, react to changing circumstances swiftly, and build vibrant digital communities. The company provides a range of services, including retail banking and business banking, digital account opening, loan origination, and multi-payment fraud protection solutions to assist clients in their transformation. It is dedicated to empowering its clients and supporting them in achieving their goals.
Numerated: It is a fast-growing fintech that streamlines the origination process for business banking products. Over 400,000 businesses and 30,000 financial institution associates have processed $50 billion in lending using Numerated. The platform is used by financial institutions with a combined $1 trillion in assets, including Bremer Bank, Dollar Bank, Eastern Bank, MidFirst Bank, People's United Bank, Seacoast Bank, and others. The company has been recognized for its work as one of 2020's Top 250 FinTechs by CB Insights and 2021's Best Overall Business Lending Company by FinTech Breakthrough.
Zoot Enterprises: It is a global leader in providing advanced origination, acquisition, and decision management solutions to financial institutions. Its cloud-based platforms offer flexibility for specific business needs, including loan origination, fraud detection, and data acquisition. Zoot enables clients to access hundreds of cutting-edge data sources in real time, delivering decisions in milliseconds. Its origination solution streamlines loan processing, providing powerful tools and robust integrations that reduce data entry, accelerate loan processing times, and avoid costly errors.
Geezeo: The company delivers enriched digital banking experiences, processing, and augmenting transactions for over 500 financial institutions. Its insights enhance the overall customer experience, seamlessly integrating within online and mobile banking environments while allowing financial institutions to maintain ownership of their personal financial management (PFM) brand. It focuses on technology solutions that engage audiences with enriched data and offers expertise in digital banking, marketing, and technology.
TurnKey Lender: It is a global leader in Unified Lending Management (ULM). Its intelligent software products automate the entire lending process, including traditional and alternative lending, SME financing, grant management, money lending, leasing, trade finance, in-house financing, and more. With customers in over 50 countries, TurnKey Lender is gaining traction as a pioneer in AI software development for lenders in regions like the United States, APAC, and the EU. The company’s solutions are used by all types of lenders, including large/mid-size banks, digital lenders, multi-finance companies, trade finance operators, traditional and non-traditional lenders, and telecoms.
5. Technology Trends in Digital Banking
Banking technology is rapidly evolving. Advanced technologies like AI and ML will enable banks to analyze large data sets in real time and offer personalized solutions to customers.
The market size of the global digital banking platform was valued at USD 20.8 billion in 2021 and is expected to expand at a CAGR of 20.5% from 2022 to 2030.
(Source: Grand View Research)
The increasing digital savviness of the global population is prompting the adoption of technological advancements. However, some individuals are still in an adaptive mode due to a lack of time and knowledge. AI and ML technologies enable banks to analyze large amounts of data, make informed decisions through predictive analysis, and improve lending patterns by analyzing consumer spending patterns.
6.Digital Transformation in Banking
Financial institutions must leverage big data to automate business processes and reduce costs in light of falling interest rates and banking fees coupled with rising consumer demands. Adopting artificial intelligence, cloud technology, and automation in modernizing their applications could enable banks to develop omnichannel products, services, and capabilities, ultimately improving the user experience.
Now, let's examine digital transformation in the banking industry:
6.1 Authentic User Experience (UX)
Banks must share genuine customer experiences to retain loyalty. To achieve this, they must embrace the latest trends, technologies, and well-designed UX.
6.2Blockchain Technology
To improve customer satisfaction, banks must reduce the intermediaries between them and their customers. This can be accomplished through increased transparency using blockchain technology, enabling untrusted parties to agree on a shared database and eliminating the need for transaction intermediaries.
6.3 Personalized Technical Services
Key points about the benefits of personalized services such as automation, AI, and cloud computing in the banking industry:
Automation minimizes human intervention and reduces errors, resulting in faster and more efficient service.
AI helps banks predict outcomes based on past data, such as identifying fraud and making customer recommendations.
Cloud computing enables banks to adopt new business models and create secure applications that meet regulatory requirements.
About 27% of Americans use an online-only bank. Of those at online-only banks, 88% reported they are satisfied with the bank’s services. Meanwhile, only 66% of consumers using traditional banks report being satisfied with them.
(Source: Bankrate)
7. Digital Banking Platforms Reaching Out to SMBs
Digital banking platforms have revolutionized business operations by providing enhanced convenience and adaptability. Fintech firms have customized their platforms to meet the unique needs of small and medium-sized businesses (SMBs), offering mobile apps that facilitate financial management, transaction processing, and access to a range of financial tools and services at all times and from any location.
The following is a list of notable digital banking applications that have garnered significant popularity over time:
Betterment: It is an online financial advisor that offers personalized, fiduciary advice for retirement planning, building wealth, and achieving financial goals. By utilizing advanced algorithms and technology, it offers automated investment services that are tailored to each client's unique investment objectives and risk tolerance. The platform offers a diverse range of investment options, low fees, tax-efficient investing, and access to financial advisors. Betterment's mission is to make investing accessible and affordable to everyone, with a user-friendly online platform that is easy to use and offers high-quality investment advice.
Mercury: It is a startup-focused banking platform that provides a comprehensive range of financial services tailored to companies of any size or stage. The platform offers free checking and savings accounts, debit and credit cards, domestic and international wire transfers, treasury and venture debt, and other essential financial products, all with an intuitive user experience. In addition to its suite of banking services, Mercury also provides vibrant community programs that offer founders the resources, advice, and connections needed to build successful companies.
Bluevine: It is a financial technology company that specializes in providing working capital financing solutions tailored to small and medium-sized businesses (SMBs) in the United States. With a suite of financing products, including invoice factoring, lines of credit, and term loans, Bluevine enables SMBs to secure the necessary funding to drive growth and expansion. The company's platform is designed to facilitate a seamless lending experience, with streamlined applications and fast approvals that can be completed in as little as 10 minutes.
Novo: New York-based fintech firm, Novo offers digital banking services to small businesses in the United States. Its suite of products includes mobile check deposit, online bill pay, and debit card issuance for employees. The company has also integrated with popular small business software tools such as QuickBooks and Xero, providing businesses with greater financial management capabilities.
Relay: Relay is an online banking and money management platform dedicated to giving America's small businesses the tools they need to grow and gain visibility into their finances. The company recognizes that traditional banking services often underserve small businesses. As a result, it has built a platform that gives entrepreneurs the power to control their cash flow by giving them a clear picture of their income and expenses.
8. Future Aspects of Digital Banking Solutions
As technology continues to advance, the traditional banking system is expected to undergo significant changes in the coming decades, with neobanks rapidly gaining popularity among tech-savvy customers for their personalized services. These digital fintech companies, often referred to as 'challenger banks', operate without physical branches and offer a range of attractive services, blurring the line between traditional banking and financial systems. As a result, retail banks may adopt an omnichannel approach and leverage the robust infrastructure of fintech enterprises to enhance the customer experience.
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