Banking Industry: IoT, AI, Neobanks, Autonomic Systems, and Open Banking

Emerging Technologies in the Banking Industry

Many banks use IoT for efficient data collection, automating banking processes and enabling real-time event response. IoT also helps banks detect security breaches and mitigate risk.

Banks are also beginning to offer customers in-the-moment advice on how to spend their money, like which payment mechanism is best or which utility provider can offer a cheaper rate. This type of technology is referred to as private AI.

Artificial Intelligence (AI) and Machine Learning (ML)

Modern banking services rely on AI-powered tools to streamline operations, improve customer experience and strengthen security. From front-end chatbots, personalized products and analytics to intelligent service robots, market trackers, automated transactions and robo-advisors. AI also enhances anti-money laundering and know-your-customer solutions, reduces fraud detection time, simplifies loan form processing and automates processes in the back office.

These emerging technologies are increasingly popular for banks of all sizes – from large-scale institutions to tiny credit unions. ML algorithms also facilitate improved credit score models and financial forecasting, while computer vision technology streamlines document analysis.

Similarly, privacy-enhancing computing (PEC) technology allows bankers to collaborate with external model developers in a private fashion for remote data science and app development without physically sharing datasets or signing manual partnership agreements. This enables them to innovate at speed and scale that gives them a competitive advantage. They can build, test and launch new features in days and weeks instead of months and years.

Neo or Digital Banks

Neobanks or digital banks provide a range of digital financial services, including credit cards, debit and savings accounts, currency exchanges, and prepaid options. Unlike traditional banks, they often charge lower fees and don’t require a branch to operate.

These digital banking institutions are known for their customer-centric approach and personalised services powered by technology. They are also fast to adjust their features and products to meet client demands. They are typically lean and agile, with a focus on developing cloud-based platforms with modular architectures.

As a result, their customers enjoy great user experiences and a faster transition to the digital economy. They are also able to offer cheaper costs and service fees, higher interest rates, and seamless international payments and money transfers. Many neobanks also incorporate crypto services into their offerings, which results in improved engagement and revenue streams for them. This enables them to compete with traditional banks and fintech firms. They also make it easier for unbanked consumers to open an account and access the digital economy.

Autonomic Systems

Autonomic systems are self-managed physical or software systems that monitor, manage and control themselves with minimum or zero human intervention. They dynamically change their algorithms in real-time to optimize their behavior in complex ecosystems, according to the market research firm.

These technologies are enabling banks to provide better customer service, streamline processes and achieve efficiencies that can save millions of dollars. While chatbots and AI are the most visible applications of these technologies, they are also helping banks with back-office tasks like risk evaluation, data entry and loan form processing.

Banks need to use these emerging technologies wisely. Too many tools can cause a cumbersome technology stack that limits agility, slows development and increases costs. Using technologies that haven’t been designed for the specific task at hand can also lead to performance issues, a lack of ownership and confusion for both customers and employees. For instance, banks should avoid using process automation tools that were not developed for banking.

Open Banking

With consumers demanding more digital tools to support their financial journey, banks are responding by introducing open banking APIs. This new system allows developers to create apps that securely access consumers’ banking data. This can simplify their online payments, provide budgeting tips and help them achieve their financial goals, such as tracking spending or saving money.

This new system also provides extra security, replacing screen scraping and requiring consumer consent to share data. This means that consumers only allow regulated firms to use their data, and they can withdraw permission at any time.

Examples of open banking providers include Cleo, Cake and You Need a Budget, all of which offer AI chatbots to help track spending, manage finances and set savings goals. Plum and Moneybox streamline savings and investments, while Tully is the first fully-digital debt adviser. These third-party companies can access your data using open banking APIs, which you consent to when agreeing to their terms and conditions.

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