5 Digital Disruptions In Personal Banking

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Technology Disruptions in Personal Banking

Before the big digital changes, the Personal Banking sector used to face few basic risks. Interest rate risk, market hurdles and a slow down in the economy were its main stressors.

Today, financial technology disruption represents a larger shift in Personal Banking.

The increase of new technologies has reshaped the ways banks provide services and products and how they carry out transactions.

The spread of alternative financial companies providing niche services like trading and Crypto currencies is one example.

Shifts in customers demographics are also transitioning traditional banking into expanded digital services.

Demographics such as the Millennials are not expecting to walk into branches to do their businesses. They are looking for digital services for all their banking needs.

The fast developing technologies in Artificial Intelligence are putting the stress in banking as well.

The technologies that are remodeling this industry are many and are new hurdles to a traditional sector.

Robotics, Automation, Telecommunication, Applied Science, Data Science, High Tech and Digitization are some of the trends in this transition.

Here are five tendencies challenging the Personal Banking sector and using up banks’ spendable resources.

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Digital Banking Replacing in Person Services

Digital banking came out of the customers’ demand for efficient ways to do personal banking outside the branches. As the internet developed, banking also has been digitized.

Using digital platforms, customers can make deposits, transfers and withdrawals remotely. Virtual access to money management, investment and loan services are also attractions for customers.

These are some of the virtual banking services consumers are enjoying and that have been disrupting traditional banks.

Online Banking
Banking Cards
Mobile Banking
Mobile or digital Wallets

Implementation of Artificial Intelligence

Personal banking is using AI to provide a number of services to customers. These include products and services recommendations, insights, customer service thru chatbots and voice assistants, customers identification and authentication.

Banking is also making use of AI to streamline fraud detection, make credit decisions and risk assessments.

The AI ecosystem being created in banking includes; AI hardware, Data Analytics, machine learning and deep learning among others.

These are some of the applications using large data and algorithms in Banking AI.

Data collection and analysis
Portfolio management
Risk management
Banks Compliance

Rise in Non Banks Financial Service Companies

The non bank companies, also known as Fintech, are using technologies to compete with traditional banks and to challenge their business model.

They are providing basic consumer and investment services which have been under the control of the banks.

These start ups create proprietary technology to provide digital services for lending, payment transactions, investments and money management.

Some examples of successful start ups disrupting the banking business model include;

Education loans – SoFI and Upstart
Mortgages – LendingHome
Payments – Venmo, Stripe, Zelle
Money Management – Betterment
Transactions Banking – Moven, Starling
Payday lending – LendUp, Acorns

Growth of Cryptocurrencies

Crypto is any kind of currency that exists digitally using Cryptopgraphy to secure transactions.

Cryptocurrency is still an unregulated and volatile niche separate from the banking system. Despite of this status, many people are investing in and transacting with Crypto.

In general, banks have not adopted digital currencies. However, this doesn’t mean consumers have stopped looking at Crypto with an eye towards more efficient services.

Consumers are using Crypto currencies in niche digital platforms like the Metaverse, for NFTs and digital real estate.

There are some more traditional places accepting Crypto like PayPal, Overstock, Shopify, JC Penny, AT&T, Starbucks and many others.

The banking sector may or may not partner with Cryptocurrencies in the future.

So far, there has been some developments in potential partnerships between these sectors.

These are some traditional financial service institutions looking at Cryptos.

JP Morgan has taken two Crypto exchanges as customers; Coinbase and Gemini
PayPal now allows Crypto payments
Fidelity is establishing a Crypto fund

Rise of Quantum Computing

Quantum computers can solve problems in new ways and faster than traditional computers. Even though this technology is still evolving, some banks have started to look at it and to invest in a future Quantum financial system.

Portfolio optimization, derivatives pricing and real time fraud detection are some of the tasks Quantum computers can complete faster than traditional systems.

Banking institutions that are capable of Quantum implementation in the day to day routines will be ahead of their competitors when it gets embraced by the entire system.

Some of the traditional and largest banks that have started Quantum projects include; JP Morgan, Ally and HSBC .

Final Thoughts

The trends in new technologies in many industries are also transforming the traditional Banking system.

The use of human and financial resources to keep up with the transitions pushed by AI, Digital, Crypto and Quantum technologies, is posing challenges to banks.

Together with demographic changes, these technologies offer opportunities for banks and they also bring hurdles to a traditionally centralized industry.