The banking sector is undergoing a revolution thanks to technology. Digital banking technologies such as online payments, data analytics, artificial intelligence, machine learning, banking as a service, and the internet of things have become the norm for financial institutions and essential for success.
This increased digitalization results from increased demand for digital banking products and services from the client base. Statistics show that the share of the population relying on digital banking in the U.S. increased from 61% in 2018 to 65.3% in 2022.
Apart from bringing in more revenue, these digital technologies are important for banks that deal with commercial clients. In addition, it meets the needs of Gen Zers and millennials who prefer using mobile banking.
This blog looks at the different capabilities financial institutions should have by the end of 2023 to grow quickly and get more customers.
- Mobile banking and payments
- Digital onboarding
- Advanced security measures
- Artificial intelligence and machine learning
- Real-time analysis
- Advanced digital payments
- Open banking
- Compliance and regulations
- Cloud-based services
- Advanced analytics
10 Capabilities Financial Institutions Should Have by the End of 2023
For your bank to thrive in 2023, here are some areas to focus on:
Mobile Banking and Payments
Mobile banking is quite popular because it's a convenient way to manage money on the go. Millennials and Gen Z use mobile banking apps to budget, create saving goals, make account transfers, and shop. Therefore, to tap into this market, your bank needs to have the capability to provide this niche market with secure, easy-to-use mobile payment solutions.
A survey by Insider Intelligence shows that almost 80% of the respondents who have used mobile banking use it to access their accounts. Financial institutions should take time to find the mobile features their clients need and include them in their product portfolio.
To grow your client base, you need to make your onboarding process much easier and faster. Customers prefer digital services instead of visiting a physical branch. Additionally, you need this capability to compete with neobanks that don’t have any branches.
You can make identity verification more seamless by adopting biometric authentication technologies. Technologies like fingerprint authentication, voice and face recognition, and heart-rate sensors use unique individual characteristics, making it harder to hack customer bank accounts.
Advanced Security Measures
Data from the Federal Trade Commission (FTC) shows that there were over 2.8 million consumer fraud reports in 2021, up by 70% over 2020. To protect your bank from fraudsters, you need to assure your customers that you have advanced security measures in place to protect their financial information.
Banks should rely on secure payment systems that have features like tokenization to prevent the misuse of customer information. In addition, they should use a system that has check verification to protect the bank from accepting bad checks.
Artificial Intelligence and Machine Learning
Financial institutions that will use artificial intelligence (AI) and machine learning (ML) in 2023 will benefit from services such as risk management, fraud detection, and personalized customer service. These technologies are used for customer authentication and can be used as chatbots and voice assistants.
Machine learning models reduce the scope of identity fraud and help banks modernize their core systems. You need them in your bank because they discover customer patterns, generate insights, and make predictions which is vital for your operations.
Real-Time Data Analysis
As a bank, you should have the means to collect, process, and analyze data in real time. This helps you gain insights into customer behavior and improves decision-making. With the rise of data-driven technologies like AI and ML, banks can capture and distribute data across all divisions in real time.
Once the data is analyzed in real time, bank managers can make automated decisions. This capability speeds up the core bank processes.
Advanced Digital Payments
Digital payment methods will reach $9.47 trillion in 2023 as more people switch to contactless payments. Financial institutions should offer their commercial and individual clients digital payment options such as digital wallets, blockchain, and cryptocurrency payments.
To make digital payments possible, banks need to adopt solutions such as:
- Hosted Payments: A hosted payment gateway for your bank will make it easy to accept both ACH and credit card payments online. This gateway is secure and PCI-compliant to protect customer information and can be customized to fit your branding.
- Virtual Terminals: A virtual terminal allows you to process secure transactions through the gateway through a secure web interface. You can accept multiple forms of payments, process recurring transactions, and verify checks instantly.
- Check Verification and Account Validation: Check verification technologies help banks accept payments from commercial clients and avoid any fraudulent activities. Modern check verification systems will check the validity and identify any fake checks in real-time to prevent fraud.
- Mobile Payments: To expand your bank revenue, you need to accept payments via mobile apps. You need a mobile app that securely accepts credit card transactions, ACH, and remote deposit capture (RDC) anywhere from a mobile phone.
- Plugin and Developer Tools: With API, plugins, and developer tools, you can create a payment platform that is customized to the bank. This secures your payments and improves customer service.
The open banking model allows customers to share their financial data with third-party institutions using APIs securely. With this model, banks can share details such as credit score, account information, location, age, transactional information, and income with the customer's consent.
Banks need this ecosystem because an open banking model allows them to partner with other companies, making it easier to access innovative payment solutions like email invoicing, IVR, and SMS payments.
Compliance and Regulations
Financial institutions must comply with the ever-changing regulations and abide by data privacy laws to protect customer financial information. For instance, banks should adhere to industry standards such as PCI compliance. To make things easier, they can partner with a payment processor that’s PCI-compliant and is preferred by Nacha.
If your bank complies with the set regulations, it's easier to safeguard the data from potential threats like identity fraud.
Cloud-based services will boost your bank’s operations if you are looking to achieve flexibility, scalability, and cost-efficiency. With such systems in place, you can safeguard your data and save money on expensive hardware.
Additionally, cloud-based services make it easier for your bank staff to access all the information. This automates decisions and improves customer service, boosting efficiency in the long run.
Once you have the customer data, you need to perform advanced analytics to gain insights into customer behavior. The report from the analysis can then be used to identify growth opportunities. This can help with customer acquisition and the introduction of new banking services and products.
However, if you don't have these tools in-house, you can partner with a reliable technology partner to get started.
Focusing on data integration services will help your bank thrive in 2023. With new developments expected this year, such as FedNow, you’ll need to offer efficient payment services to your clients. However, you need the right software to provide these services.
To leverage digital technologies and services like FedNow, you should partner with payment gateways like iCG that can help you with the adoption process. To learn more about advanced payment processing solutions to adopt in 2023, download our catalog!