Published in: Banks | March 20, 2019
5 Trends to Watch for in Banking and Technology
As tech and banking join forces, here are some major trends that could impact your finances.
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What happens when technology and banking join forces? Last year was a record year for the FinTech -- or financial technology -- industry, and 2019 is poised to produce continued growth for the sector.
As start-ups, tech companies, and machine learning further disrupt the financial sector, consumers can expect to see some major changes in the way they bank. Here are the top trends to watch out for in 2019 and how they could affect your wallet.
1. Brick-and-mortar banks will have to change in order to compete
Online banks have been on the rise for several years now. Their rapid growth can be attributed to something very simple: superior products. Online banks are able to relay lower overhead costs into higher returns and lower fees for consumers.
Fully online banks like Ally Bank and Synchrony Bank will continue to gain popularity in 2019, as will the best online stock brokers, but savvy traditional banks will finally start to up their game in order to compete. A few have already started paving the way by opening online-only entities. Goldman Sachs recently launched Marcus by Goldman Sachs, an online-only institution that offers low fees and high yields for everyday consumers.
2. Stripped down banks will target niche markets
Banks traditionally succeeded by offering a full range of financial services so that customers could use the banks as a one-stop-shop for all of the financial needs that arise throughout their lifetime. However, with the rise of online banks, we’re starting to see more institutions that specialize in just one or two services and don’t offer the robust array of products you might get at a brick-and-mortar bank.
Instead of trying to do it all, newer online banks will continue to offer a small range of highly competitive products. For example, banks like Ally Bank offer some of the highest rates on savings accounts and the best low-fee checking accounts, but they can’t always compete with traditional banks when it comes to diversity in lending and financial management services. As a result of this trend, we should see more consumers who hold multiple bank accounts, each one tailored to meet a specific need.
3. Banks will leverage artificial intelligence for better customer service
Folks who are tired of sitting on hold with their bank for an hour just to ask a simple question should look forward to the improved implementation of artificial intelligence. Banks have been experimenting with artificial intelligence for several years now -- in 2017, Wells Fargo even set up an entire team devoted to developing and implementing artificial intelligence solutions. But in 2019, we can expect to see these banks start to leverage artificial intelligence more aggressively to create more efficient customer service experiences.
This will almost certainly include further widespread use of chatbots as well as chatbots that are more functional and capable than the ones we’re used to dealing with. We may also see the implementation of more Siri-esque virtual assistants in the banking industry -- AI bots that assist customers in making basic decisions about what to do with their money.
4. Big data will lead to a more personalized banking experience
The financial services industry is finally starting to take advantage of all of the consumer data they have at their fingertips. As they do this, we should expect to see more personalized financial planning advice from our banks.
Algorithms that analyze your spending and savings habits will be able to offer recommendations for accounts that might better suit your needs, whether it’s choosing the best savings account for you or scoring more rewards with a credit card that matches your spending patterns. Automation is allowing for the increased availability of personalized financial advisors -- something that was once only available to wealthy people. Also known as robo-advisors, these bots may soon be a standard part of every consumer’s banking experience.
5. More targeted offers
Mailers offering cash bonuses to new customers who open a checking or savings account have become ubiquitous, and they’re not going anywhere. Traditional banks that can’t afford to offer the high yields will have to provide additional incentives in 2019 in order to continue acquiring new customers.
On top of that, as the banking industry grows more sophisticated in the way it leverages artificial intelligence and big data to provide personalized service, targeted marketing for the purposes of customer retention will become more prevalent as well. For example, if you open a new high-yield savings account and start transferring all your funds over there, your old bank might suddenly send you an email offering you a higher APY.
In the end, increased competition from new online banks and the introduction of more technology in the financial sector should lead to better deals and more personalized service from consumers.
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