Enterprise digital transformation: trends in mobile banking
Many aspects of our lives are becoming increasingly digital, and banking is no exception. Although there was initial hesitancy about the security of conducting financial transactions on mobile devices, the pandemic forced many consumers to change their habits, even traditionally resistant older consumers. Once customers experienced the newfound convenience, there was no turning back. Today, people all over the world use their devices and various banking apps to check their balances, make transfers, and pay bills on a regular basis. As of 2020, over 1.9 billion individuals worldwide were actively using online banking services, and experts estimate that the number will reach 2.5 billion by 2024, as banks continue to develop new, innovative features and apps.
[.emph]mobile banking customers by 2024[.emph]
Mobile banking is an extremely dynamic and innovative field with new technologies and capabilities being developed all the time. Let’s look at some of the key trends in mobile banking in 2022 and how they are impacting the banking industry.
Increased use of biometric authentication
Fraud and money laundering are ongoing risks in banking of all types, and mobile banking poses additional risks that did not exist in traditional banking frameworks. Therefore, banks utilize a variety of “Know Your Customer” (KYC) and anti-money laundering (AML) tools to manage risk in mobile banking. KYC procedures are also critical to compliance with various legal and industry requirements across jurisdictions, as well as ongoing regulatory requirements such as PSD2, GDPR, FATCA, and CRS.
However, traditional KYC processes are manual and cumbersome. They require collecting extensive personal data, which can be frustrating for the customer and negatively impact the overall customer experience if not properly integrated into a comprehensive digital journey. When using traditional KYC procedures, banks are forced to juggle compliance and risk management with customer satisfaction, one often coming at the direct expense of the other.
Biometric authentication has changed that equation, offering both banks and customers the best of both worlds. It’s faster and easier than traditional KYC processes, providing a seamless experience for customers. A simple swipe of a finger in a reader or speaking into a voice identifier can replace piles of paperwork and long authentication processes. Biometric authentication also provides added assurance and security in mobile banking, as biometric indicators are more accurate and difficult, if not impossible, to replicate or hack. Given their clear advantages, banks are likely to increase the use of biometric authentication in KYC and other security procedures in the future.
Widespread use of artificial intelligence and machine learning
As artificial intelligence (AI) and machine learning (ML) technology evolve, banks are increasingly incorporating them into new elements and applications in banking. For example, AI can be used to improve customer service by anticipating customer needs and proactively recommending products or services based on a customer's past transactions and behaviors. AI and ML can even make it easier and faster to process payments and transactions while eliminating the risk of human error that is an inherent part of any manual process.
Banks can also utilize AI for fraud detection by identifying unusual behavior patterns that could indicate fraudulent activities, providing another layer of protection for both customers and the bank itself and further improving the customer experience. And since AI and ML algorithms “learn” from past activity, they improve as they progress and their role is likely to grow over time.
Personalized banking experiences
The digital world is all about personalization, and banking is no exception. Customers have different banking needs and preferences, and they expect banks, like other providers, to offer what they want, when they want it, in a way that is most intuitive for them. They won’t settle for one-size-fits-all and generic products and services–if that’s what banks are offering, customers will simply take their business elsewhere.
Building an app or a web portal isn’t enough–consumers expect a seamless and personalized customer journey across all channels, no matter how they choose to interact with their bank. When traditional banks can’t keep up with the pace of progress, consumers look for alternatives. PWC's 2021 Digital Banking Consumer Survey found that 20%-25% of consumers would prefer to open an account digitally but cannot do so today. According to the report, younger people vote with their feet and choose to manage their money outside the traditional banking system. 57% of millennials and 64% of Gen Z consumers already have accounts with nontraditional players.
[.emph]of consumers would prefer to open an account digitally but cannot do so today.[.emph]
In order to remain competitive, banks need to be more agile and creative than ever. Customer-facing teams should be empowered to play a significant role, as they are most in tune with customer needs and preferences. One of the best ways to accomplish that goal is by enabling citizen developers with no-code platforms. No-code platforms allow non-technical staff to create and implement applications that enable a personalized experience, without being dependent on the availability and prioritization of overworked IT teams.
[.emph]As personalization becomes the norm, that capability is becoming increasingly essential. [.emph]
Proliferation of mobile payments
Cash replaced bartering, credit cards replaced cash, and mobile payments are replacing credit cards in many parts of the world. In emerging economies, where credit cards weren’t commonly used, mobile payments have become the default, the only non-cash option commonly used in daily life. In fact, mobile payments are opening up economic opportunities for millions of people who don’t have access to traditional financial services and institutions. The numbers are staggering–the global mobile payment market was valued at $1.434 trillion in 2020, and is expected to grow significantly in the next five years.
In the United States alone, the total number of mobile proximity payments users exceeded 100 million in 2021 and is expected to reach 125 million by 2025. That translates to over 50% of all smartphone users in the country. As expected, mobile payments are especially popular with younger generations, Gen Z in particular. However, during the pandemic, adoption rates in older generations also skyrocketed and the numbers are only expected to grow as mobile payments become the default for many types of transactions and commerce.
Continued growth in the number of fintech startups
The fintech market has demonstrated strong performance for several years. The Matrix Fintech Index–a market-cap weighted index that tracks a portfolio of 25 leading public fintech companies–has significantly outperformed major public stock indexes and legacy financial service providers for the fifth year in a row.
The market potential is driving entrepreneurs to focus their talents on the fintech field. In 2021 alone, there were 26,346 fintech startups worldwide and the investment value in fintech startups was $210.1 billion. That’s a lot of innovation and new services and products being developed. For banks, it can also mean a lot of competition. However, it doesn’t have to be. Many banks are partnering with fintech startups and adopting their cutting-edge technologies.
What are the future trends in mobile banking?
There is no question that mobile banking is a force to be reckoned with, and many experts believe that mobile banking will eventually replace traditional banking altogether, as more people move towards a digital-only lifestyle. However, whatever the future of mobile banking holds, one thing is for sure–the customer experience will be at the forefront. In order to succeed in the competitive financial landscape, banks need to invest in building the right customer journey and providing savvy consumers the seamless, personalized experience they’ve come to expect.