Digital Account Opening (DAO)
DAO is the technology in banking which process opening an account without stepping foot inside a bank. At its core, DAO must be able to perform the following steps:
- Collect a user’s basic personal identity information.
- Evaluate and approve (or reject) applicants from a risk or fraud perspective.
- Verify an account applicant’s identity.
- Collect funds digitally in real-time, either through a debit/credit card or with a mobile deposit.
- Sync with an institution’s core banking system (CBS).
According to the report What’s Going On in Banking 2020 by Cornerstone Advisors, Digital account opening (DAO) has been the most popular technology for three consecutive years, with a third of banks and credit unions expecting to add new or replacement systems in 2020. An additional 46% plan to modify or enhance their existing DAO systems, up from the 39% who said they would do so in 2019. This means that the current state of DAO remains sluggish, and banks will be willing to throw piles of money to improve such a system in the near future.
The primary cause of this situation is an ineffective process design. Many banks approach the account opening process from a regulatory compliance perspective. It takes very little information to get an account open. Banks should redesign the process to allow the simplest account opening process and funding possible – and then work on reducing risk and meeting regulations. This will be the key advancement of DAO in banking in the next few years.
Apart from it, some key features of DAO can be improved:
- ID verification: Instead of relying on in-branch visits to show ID or knowledge-based authentication which asks obscure questions, new technology shall allow for AI-powered ID authentication. New customers can take a photo of themselves and their ID, and let technology do the rest.
- Interactive forms: Make it easy for customers to fill out documents online, through responsive intake technology. Banks send new clients a text message with a link to an online questionnaire. There’s no need to use cumbersome fill-out forms or to print out a PDF, as now it can all be done electronically without wasting extra paper, and time.
- eSignatures: Customers can sign using their fingertips when the time comes to seal a seal. It’s as simple as swiping across their smartphone screen.
Peer-to-Peer (P2P) Payments
P2P payment is a service that allows one user to make a transaction (paying bills, sending money to another, etc) using an app or website. These apps are linked to users’ deposit accounts or through one’s debit card, allowing the transfer of funds between two parties using their individual banking accounts or credit cards.
Most are available as stand-alone apps that can be downloaded, still, some P2P apps are built into or available through mobile banking apps or smartphones. Users in the US can even send money through Facebook Messenger by adding a debit card to their Facebook profile.
P2P is flourishing due to the convenience of being able to immediately and safely send and receive funds, pay bills, and make purchases anytime, anywhere. The convenience, speed, and ease-of-use remain at its forefront of strength.
Low cost is also a key benefit. Unlike many other payment solutions that involve several middlemen, P2P payments involve only two parties. This means that users don’t have to pay for the expensive transaction, processing, or service fees.
However, despite being an advantage to the majority of the users today, P2P payments still have to address a lot of disadvantages which include unpredictability, frauds, security, and time taken to clear a transaction. This technology in banking leaves room for growth for P2P payments in the future.
>> Must read: Creating A Robust P2P Payment App For Banking Industry <<
As per Cornerstone’s study, more than a quarter of the survey respondents indicated that they plan to add video marketing tools in 2020. This would more than double the number of institutions deploying this technology, as just one in five institutions say they’ve already implemented video marketing platforms to date.
Vendors – and some analysts for that matter – have been hyping video for a while now. A report from Frost & Sullivan found that more than three-quarters of bank executives surveyed said that video technology helps accelerate decision making, improve productivity, boost product innovation, and improve customer experience.
Despite those seemingly inherent benefits, it has taken so long for most banks to make investments in videos because nearly every technology promises the benefits listed above. However, as video platforms start to explode (take Tik Tok as an example), followed by the surge in promotion-integrated content (there are a lot of finance-related contents on Tik Tok, and users seem to happily internalize such info naturally), banks start to get serious about the video transformation – some even setting it as the key tactic in its marketing strategy.
Still, some critical questions need to be examined before a bank adopts video marketing:
- What’s the goal of the video? (Create buzz? Promote a product? Share values? Build trust?
- Who does this video benefit? (Existing customers? The bank? New users?)
- How does this video tie into existing strategies? Can it be used to cross-promote other efforts?
- How does the visual content tie into the audience?
- On which platform shall the video launch? (Building a new, unique platform belonging to the bank? Utilizing the normal community platforms?)
A quarter of financial institutions plan to invest in or implement cloud computing technologies in the next year. 40% say they’ve already done so, and 50% of those will enhance or modify what they’ve got.
Despite these numbers, many C-level executives still oppose cloud computing. Cloud proponents fail to sway the holdouts because their arguments run counter to the holdouts’ experience – and you can’t fight experience-based perceptions with theory.
Many reports have proved that the banking industry is on an inevitable journey to the cloud, however. Three trends are driving this include:
- AI adoption: Without a sufficient quantity and quality of data, AI tools are hampered. Banks will need to turn to and rely on data sources from third parties, partners, and vendors to feed their AI appetites. Bringing all that data in-house won’t be feasible and, in many cases, won’t be an option at all. Cloud apps and tools will become requirements.
- The platformification of analytics: Over the next five to 10 years, data and analytics services will be provided “as-a-service” by open platforms that aggregate analytics tools, data sources, and data management services. This will force even more institutions to move to cloud computing to enhance their analytics capabilities.
- Financial health as the basis of competition: Competing on who can best manage and improve consumers’ financial health and performance is becoming more prevalent. This will require more integration of both data and services between players in the banking ecosystem – again forcing more financial institutions to the cloud.
In summary, strategically implemented cloud computing services allow banks to utilize resources in a highly flexible and efficient manner with the help of data analytics, data storage, and batch processing. Further, cloud technology also helps the banking industry to improve revenues, operational efficiency, and the client servicing department.
Cloud computing also creates an opportunity for bankers to connect with their users directly. Digital services maintain customer relations anywhere and anytime through cloud computing. With the help of the internet, many services like storing, managing, and accessing information have become easier for both bankers and consumers.
Yet, banks have been hesitant in adopting cloud computing as there are apprehensions regarding reliability, regulatory, and security risks. But slowly, cloud computing is changing the way consumers interact with banks, which is going to accelerate the trend for Cloud computing in 2021.
Application Programming Interface (API)
API is a group of tools and protocols used to build software and applications. In terms of banking, APIs allow programming experts to create applications that help financial institutions exchange data with third-party financial technology organizations.
Based on a study, one in four community-based financial institutions is planning to invest in or deploy APIs, on top of the 35% that have already done so.
So what are they hoping to accomplish? Ron Shevlin of Forbes once commented:
“APIs will become central to the competitive dynamics of the industry. Banks must rapidly assess fintech’s offerings, integrate them, and deploy them to their customer base.”
APIs are about speed, agility, and personalization. A bank is dead in the water if it takes 9 to 12 months to integrate partners’ products and data, or if the partnership process requires significant time and resources to negotiate legal matters, revenue sharing, pricing, etc.
And for all the talk about personalization in banking, nothing that exists today comes close to what’s possible in an environment with a robust set of partial-stack fintech providers and smart full-stack banks integrated through APIs.
Hence, the current situation is clearly far from ideal, therefore, the year 2021 and even further will witness a stronger surge of APIs investment, with a lot of improved technology being put into advanced use.
In case you are looking for a partner that could help you capitalize on the forthcoming technological trends in Banking, feel free to contact us – a tech consultant who has been in the industry for 11 years and has been verified for an innovative mindset, strong commitment, and outstanding skills. We promise to not only deliver the best banking ideas to accelerate your business but are also capable of translating those initiatives into a seamless, comprehensive, and competitive package of solutions.
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