New information technologies and the rapid growth of scientific and technological progress have a direct impact on the development of the banking services market. In addition, during the quarantine, most banks had to perform a technological transformation of their business. Users of financial services are gradually moving into the digital sphere, giving preference to online services. This is an occasion to make quick decisions, apply new technologies and make changes in your work. Here everything is decided by the speed of reaction, resources and activity of the management.
After traditional banks began to massively develop their own mobile applications, challenger banks offered completely new tools to attract an audience of customers: automatic personalized cost monitoring, virtual assistants. Let us consider new trends in the digital banking products market and its development directions in 2022.
Analytics and automation of financial management
The advantages of digital online banks for users include: accessibility, convenience, the ability to avoid additional costs and commissions, as well as new budgeting tools. Much attention is paid to the automation of financial management, as well as analytics and improving financial literacy. There are several key tools for the development of financial management automation:
- Virtual assistants (artificial intelligence or automated processes) with which users can easily and clearly manage their finances. Inanimate voice assistants will be able to solve all problems. For example, the WeChat messaging app allows you to pay directly in the chat window.
- The biometric system Voice biometrics is a convenient replacement for passwords and code words, which is also expected in the field of financial technologies in the near future.
- Voice verification is a new type of customer identification using biometric data. When contacting the contact center, the automatic system will immediately recognize the user.
- Predicting the creditworthiness of the client, as well as reducing the likelihood of fraud thanks to the artificial intelligence system.
According to OpenText surveys, more than 75% of banks with assets over $100 billion are implementing artificial intelligence. Technological innovations are also widely implemented by Ukrainian banks.
Financial management automation and artificial intelligence have become widespread, about 84% of financial institutions use at least one of the tools (artificial intelligence, Internet of things, digital assistants, blockchain, budgeting application add-ons) in their productive systems.
Personalized niche microloans
Microcredit will help solve various financial problems: business development, education, treatment, debt repayment, payment for services of providers, courses and others. Previously, such loans could be taken from MFIs at high interest rates. Modern banks pay special attention to niche microloans. Thanks to online services, there is no need to go to the bank, wait in line, or waste time signing papers. Everything can be solved in a few minutes and the money immediately comes to the card.
The minimum ratio of the amount of microloans to GDP per person in countries such as Poland and Hungary is more than 100%. So far, fewer banks work with personal microloans than with businesses, although the volume of personal microcredit is growing every day. There are about 60 MFIs in Poland that provide personalized microfinance services, among them the most popular Twino, Wonga, 4finance and Creamfinance. US citizens mainly take microloans for the purpose of earning money.
Buy now, pay later
Simple and favorable conditions, increased comfort for the client have made BNPL installments a bright technology trend in Fintech in 2020-2021. BNPL (buy now, pay later) services first appeared in Europe and the USA. This is an improved alternative to credit cards, which allows you to pay for purchases with several installments and not immediately, but over a certain period. Buyers can make a purchase at any convenient time and delay payment. BNPL providers receive their share of each payment, as well as an additional amount for late payments and a percentage of the long-term installment plan. In turn, many online stores become available to their customers.
BNPL intersects with different financial sectors, gradually embracing large companies.
Let us consider examples of using services:
- Afterpay, Klarna and Affirm are BNPL in its purest form.
- PayPal, after being bought in 2008 by Bill Me Later, offered Pay in 4 as their service.
- Amazon, Shopify use BNPL to increase conversion rates and extract discounts.
It is important for users to make not only fast, but also secure transactions online. Klarna, which has become the most expensive private fintech startup in Europe, will do just fine with this task. A well-known Swedish company that operates on the principle of “buy now, pay later” offers a modern service of turnkey solutions for POS lending.
The Klarna program is in demand due to payment flexibility and zero interest rates on borrowed money. The buyer can pay for the purchase within 14 or 30 days after receiving it or open a credit line for six months. If the customer returns the item or pays the full balance during the trial period, no interest will be paid. The service guarantees the protection of the buyer from fraud and fakes. It is suitable for those who want to buy goods right now, have a credit card and a low limit, or do not apply for a credit card. The company does not charge interest or fees on its payment methods, but it does receive transaction fees from retailers.
Such quick and convenient tools are in demand among young people, as well as people who are disillusioned with traditional financial institutions, do not want to use credit cards and spend time on loans.
In addition, retailers and banks also have certain benefits. For each buyer transaction, they receive a commission. In addition, when paying in installments, people buy much more than when paying immediately, so the average bill increases by an average of 68%. The seller, in cooperation with the bank, relieves himself of the need to understand the financial and tax system.
Online banking integrates various loyalty programs, as well as rewards and sweepstakes. Reduced commissions, promotional codes for partner services, cashback, cash prizes, rewards, entertainment partnerships are working tools to attract customers.
How to survive in digital if you are a traditional bank
In order not to lose its customers and competently enter digital, a novice bank needs to pay attention to the following trends:
- Virtual assistants and artificial intelligence.
- Automation of financial management.
- Open banking.
- Loyalty programs.
- Installment in BNPL format.
- Personalized loans.
The modern financial market requires agility and innovation. Therefore, those of its players who do not respond in a timely manner to new trends in the development of online banking and digital banking products may remain in history.