Banking Innovation Trends We’re Watching in 2019

As the pace of innovation accelerates within the financial services sector, banks and credit unions must remain competitive by investing in these leading-edge technologies as a top priority. Advancements in a wide range of areas from payment technologies and new financial solutions to delivery platforms and core processes continue to redefine the industry. The publisher of The Financial Brand and the Digital Banking Report has identified key areas that will have the most significant impact on the digitization of banking this year. Successful integration of these various practices will enhance the functionality and value that they provide to financial institutions and consumers alike, and will serve as a catalyst for further innovation.

Advanced targeting criteria: Until recently, banks and credit unions typically operated with limited means to differentiate consumers for all practical purposes. They had focused primarily on the patterns of specific demographic groups, such as millennials or baby boomers. But with the availability of rich data and advanced analytics made possible by digitized processes, financial organizations are able to develop experiences, content and messaging based on more personalized factors such as lifestyles, goals, values, mindsets and more. Leveraging individualized data for the purpose of “serving a segment of one” allows providers to better assess consumer needs and deliver the right solutions at the right time.

Open banking enables consumers to securely share data with third parties: Among the many new mandates enacted by a swiftly-changing regulatory environment, financial institutions are increasingly required to give consumers greater freedom and control of their account and payment data. Through secure application programming interfaces (APIs), consumers have the ability to share their banking information with other providers in order to gain access to outside services that can make it easier to manage their financial lives. For instance, an individual may decide to integrate their Visa card with a mobile app that allows them to easily split a check for dinner or invest their spare change in an investment account. For those curious to discover the most popular APIs in finance, check out “The 5 Most Useful APIs in the Financial World.”

Alternative delivery formats: With escalated pressures to reduce costs to meet increasingly tight margins, a growing number of traditional financial institutions have begun launching a strategic mix of new formats for service delivery. These run the gamut from entities that use digital-only methods to collect deposits to firms that offer lending, investing and specialty services exclusively online. Regardless of the chosen delivery format, forward-thinking banks and credit unions seek to create an immersive experience with plenty of opportunities to engage with the brand on a more personalized level that delivers enhanced value for the consumer. A highly effective approach blends the digital with the physical to maintain the thread of communication across all channels. This practice has become increasingly known as a phygital (physical plus digital) or omnichannel experience.

The rise of virtual agents providing real-time solutions: The ability to instantly analyze millions of data points to form connections and patterns is enabling banking institutions to build predictive profiles of consumers and offer customized solutions in real time. Virtual agents powered by AI such as robo-advisors and chatbots can provide timely and highly relevant advice delivered via the consumer’s preferred method of engagement. For instance, someone whose account balance dips below $100 for the first time in two years and reads about his account conditions on his smartphone might be prompted by the mobile app to open a special savings account that can prevent him from amassing  overdraft fees. As The Financial Brand emphasizes, even greater potential for innovation can be realized when financial institutions integrate AI-driven predictive banking with open banking and interconnected devices.

The payments landscape continues to evolve: As an area of financial technology where some of the most sweeping changes are occurring, payment innovation will be increasingly driven by data and analytics in 2019. We can expect to find less of a focus on specific products to a more pronounced overall shift in the ways in which we make and receive payments. Not surprisingly, this trend will intersect with new developments among the Internet of Things (loT), point of sale (POS), mobile wallets, digital currencies and the blockchain. What’s more, organizations that provide payment technology will gain an edge in the growing field of financial technology, as they are well-positioned to harvest vast amounts of data that can be used to refine their strategic approach.

With a continual investment in innovative technologies, credit unions and banks can more proactively satisfy consumer needs, and empower their members and customers with access to new tools and services that can help them improve their financial lives. To be sure, providing the most effective solutions requires a large commitment of capital and resources in order to build and maintain the necessary infrastructure, strategic partnerships and organizational structures. However, leveraging the right mix of solutions tend to amplify the value that the various components could provide on their own as a stand-alone product. This creates the potential to unlock even more powerful capabilities that will continue to build consumer value, increase engagement and strengthen loyalty among customers and members.