Areas of tech innovation banks should consider in 2021
- Financial institutions have been upgrading their technology to navigate the pandemic. But new tech demands new ways of managing risk.
- Robotic Process Automation, blockchain, and quantum computing are the three tech innovations that help banks stay competitive in the post-pandemic landscape.
Being one of the oldest businesses in the world, the banking industry has been evolving for centuries. And as with any historical field, innovation has changed the way banks operate over the years. Progressively there is less of a need for brick-and-mortar branch offices and decentralization of services has opened up the formerly staid sector to new opportunities.
The majority of banks responded quickly to the need to deliver basic digital solutions as physical banking capabilities shut down. However, experts reckon that this year, financial institutions will need to determine their commitment to improving digital banking experiences and prioritize technological transformation.
McKinsey in its September 2020 report stated that the current Covid-19 crisis has significantly accelerated the need for financial institutions to adopt innovative technologies. “Indeed, customers had no choice during the lockdown but to migrate to a digital-only world.” Another study by PwC indicated that nearly 81% of banking CEOs are concerned about the speed of technological change, more than any other industry sector.
Internally, the challenge to maximize efficiency and keep costs as low as possible while also maintaining maximum security levels has also increased. There are of course tech innovations that can help ensure that banks stay competitive in the post-pandemic landscape.
Robotic Process Automation
Banks can reduce human errors by automating tasks that humans tend to flub. Data entry, counting coins, and screening for fraudulent transactions can all be done through Robotic Process Automation (RPA). According to a report by FinTech, “RPA isn’t the solution for every task, but as banks continue to transition to digital models in 2021, there are more opportunities to automate rote tasks than in the past, which is good news for the people in your organization who are more interested in building relationships than data entry”.
RPA has been significantly adopted in this sector, for making the time-consuming banking operations more organized and automated. According to reports, the largest revenue share for 2019 was dominated by BFSI segment in terms of the application of RPA.
As it is known for its rapidly advancing and fundamental leap in computing that can solve exponential problems in ways that a traditional computer cannot, quantum computing is expected to be embraced by more banks.
Theoretically, quantum computing technology can predict what will happen in the market when the next crisis or when the next pandemic hits. Hence, banks can leverage this technology today and into the future to improve portfolio management through rebalancing and allocations, cash management, arbitrage, and capital allocations. FinTech in its report said, “Quantum computers have a decided advantage in analyzing scenarios that include nonconvex discontinuous values, such as interest-rate yield curves, transaction costs, trade size, and quantity restrictions”.
Blockchain technology has apparently brought a level of transparency in financial transactions that once was unachievable. It has made transactions much more secure and has allowed the customers to trust the fintech companies that have this technology in place. Experts reckon blockchain technology to play a key role in transforming the banking sector in 2021. It can especially reduce the cost of overhead by making expedited processing – nearly instantaneous clearing and settlement – the new norm.