Before the pandemic, many financial institutions were either initiating, or making major progress with, digital banking transformation. Since the pandemic, banks and credit unions have had to accelerate their digital transformation efforts to respond to accelerating consumer expectations.
With a hybrid workforce being a new normal, and new technologies impacting both back-office and front-office processes, the complexity and pace of change to a financial institution’s existing business model has never been greater. The question has moved from how do we catch up, to how can we become more future-ready?
Tech Mindset Shift:
The past few years have forced financial institutions to be reactive as opposed to proactive with regard to technology. That must change moving forward.
Banking leaders must approach the future with a challenger mindset, looking beyond today, building a plan for technologies they must consider going forward. To evaluate where emphasis should be placed, we use the 2022 Gartner Hype Cycle as a foundation. This annual analysis identifies 25 emerging technologies that could drive competitive differentiation and efficiency in the next two to ten years. We offer a perspective of which technologies may be the most important to banking in the near term.
Explore a three-month view of consumer transactions and trends during the 2023 holiday spending season, including BNPL activity and mobile wallet purchase performance.
Does the value outweigh the risk? The three key considerations for evaluating whether to invest in growing an internal program or exploring an outsourced solution.
The Opportunity (and Risk) of Emerging Technologies
When Gartner discusses the hype cycle for ’emerging technologies’, they reference that there is not a proven path to adoption or certain return on investment. As opposed to technologies where there are already established use cases, emerging technologies are more disruptive, with mainstream adoption occurring in as little as two years or as long as a decade or more.
According to Melissa Davis from Gartner, “Emerging technologies are at an early stage, but some are at an embryonic stage, and great uncertainty exists about how they will evolve. The embryonic technologies present greater risks for deployment but potentially greater benefits for early adopters.” For financial institutions, priorities should be on evolving products and channels to meet customer needs, accelerating investments in new technological capabilities, and improving automation processes.
While most emerging technologies have multiple use cases, financial institutions must prioritize based on greatest potential benefit using proof-of-concept projects to test the feasibility of a technology for any target use case, according to Gartner. Rather than looking at all of the emerging technologies referenced in the Gartner Hype Cycle, we look at some of the more likely technologies that should be tested by the most progressive banks and credit unions around the key themes of immersive experiences, accelerated use of AI, and optimized product, service and solution delivery.
Traditional product and channel silos do not facilitate the customer experiences demanded by today’s consumer. People want a financial institution partner that will help them reach their goals, on a personalized basis, across the entire customer journey. Modern technologies must be used to improve product and channel design, deliver contextual content, automate processes and deliver actionable insights in real-time.
The future of customer experience goes far beyond simply customer satisfaction with a physical branch or digital application. Building an immersive experience business strategy involves integrating user experiences on both the digital and human engagement level, providing the tools and resources for employees to easily engage with customers. The focus moves beyond transactions, to partnering with customers for greater financial empowerment and wellness, which increases two-way engagement.
According to Nicole Sturgill from Gartner, organizations must leverage existing and emerging technologies to understand the context of customer financial situations. This approach uses both internal and external data to deliver solutions that are both proactive and hyper-personalized based on timing, channel, and solution desired. The focus moves from product-centric o customer-centric, leveraging both digital and humans across the entire customer journey.
The emerging technologies that support immersive experiences in the future include the metaverse, super apps, Web3, decentralized identity, digital humans, digital twin of the customer, and internal talent marketplaces.
Accelerated Use of AI
Despite the vast benefits of using data and AI to improve products, services, processes, and solutions, the deployment of data and advanced analytic solutions in financial services is far less than required for success going forward. Deployed at speed and scale, AI can improve back-office efficiency and automation, realign humans for more effective utilization, and create more accurate predictions and decisions that improve customer experiences.
AI and machine learning can also have a significant positive impact on identifying fraud and money laundering risk. By leveraging large, world-class data sets on how fraud is perpetrated, it enables more accurate prediction, detection, and assessment of trends.
The number of areas AI and machine learning are being leveraged in financial services continues to grow. From automated customer support and real-time fraud detection, to marketing strategy planning, the opportunities are endless.
The Gartner Hype Cycle emerging technologies that support accelerated AI automation are autonomic systems, causal AI, new business models, generative design AI, and machine learning code generation.
To overcome internal hesitation and lack of AI inertia, banks and credit unions need to consider third-party data and AI vendors who are creating new financial services applications and case studies. Organizations also need to continue to build AI talent within existing teams as well as test and learn capabilities.
Use the Cloud to Enhance Product, Service and Solution Delivery
Beyond the power of data and AI, one of the most impactful ways to optimize and accelerate product, service and solution delivery is with cloud-based ecosystems. While many financial institutions remain concerned about security, control and compliance implications of the cloud, many of these challenges have been addressed by early movers and the third-party providers that support this transition.
Some of the most tangible benefits of cloud computing include:
- Speed. Cloud ecosystems have the ability to capture, store, process and analyze an enormous quantity of customer data in real-time.
- Security. While initial implementations of the cloud had challenges, existing security protocols have surpassed what traditional infrastructure usually offers.
- Insights. Cloud technology is able to generate granular, detailed and rich customer insights faster and with greater accuracy than existing systems.
- Efficiency. The greatest benefit to moving away from an on-premise setup comes from the removal of day-to-day tasks that can quickly consume IT resources.
- Reduced cost. Cloud hosting allows organizations to scale IT deliverables as needed without buying expensive on-site infrastructure. Organizations can not only decrease fixed and variable expenses, but also increase the financial health of IT infrastructure.
Beyond the power of the cloud, other emerging technologies that impact the speed of delivery in the Gartner Hype Cycle include other cloud-based technologies, cybersecurity mesh architecture, dynamic risk governance, OpenTelemetry, and platform engineering.
At a time when the direction of the economy is still uncertain, dedicating resources to emerging technologies may not seem like a priority, especially since so many of the technologies on this year’s Hype Cycle are at an early stage. That said, many of the technologies also provide the potential for the greatest benefits for early movers. At a time of rapid change in competition and customer demands, testing many of these technologies is a strategy that can make a bank or credit union more future-ready.