2023 Top Tech Trends in Banking
2023 Top Tech Trends in Banking
The banking sector has experienced significant changes over the last decade due to new technology, evolving customer expectations, and increasing competition from fintech firms. To stay competitive in the dynamic landscape, banks must strategically adapt their core infrastructure, product offerings, and digital approach to create a truly customer-centric experience.
This article examines five pivotal trends that will continue to shape the banking sector in 2024. By examining recent practices adopted by industry leaders, we will demonstrate how the once-traditional industry is ready to tackle the demands of digitalization and foster innovation.
Trend 1: Core Modernization &
Cloud-Based Infrastructure
In the forthcoming years, big banks will prioritize core modernization as a key element of their long-term strategy. With new improvements made by today’s cloud service providers, more banks will recognize the advantages of migrating their core systems from mainframes to the cloud. The cloud offers greater resilience, agility, innovation, and delivery speed than legacy systems. Its API-based architecture allows banks to better leverage their database to deliver highly personalized customer experiences.
As indicated by Accenture Research,
A significant *63% of leading banks are either in the process of migrating their core systems to the cloud or making preparations for such a transition.
JPMorgan Chase is ahead of the curve with its modernization initiatives. In 2021, it first announced the cloud transition of its retail banking systems to Thought Machine’s Vault platform. By April this year, JPMorgan Chase had spent over $2 billion on building new “cloud-based data centers” and had migrated approximately *38% of its applications to the cloud. According to Chairman and CEO Jamie Dimon, the bank’s infrastructure modernization is slated to bring in an additional *$1.5 billion in cost savings and efficiencies over the next three years.
Bank modernization is an ongoing process that requires a substantial investment. However, it paves the foundation for harnessing advanced technologies such as Artificial Intelligence (AI) to enhance efficiency and drive long-term profitability. For banks that have yet to form a cloud strategy, now is a good time to evaluate and start with feasible steps within the company’s resources and goals.
Trend 2: AI-Driven Personalized Banking Solutions
Cloud-based data centers offer numerous advantages, and one notable benefit is the greater potential of Artificial Intelligence (AI). The nature of cloud infrastructure provides banks with the computational power required to handle and analyze vast amounts of customer data in real-time. This enables banks to derive valuable insights into customer behaviors and preferences, allowing them to customize products and services to deliver a highly human-centered experience.
Bank of America (BoA) is an early adopter of Artificial Intelligence as part of its product strategy. Beginning in 2019, Erica, BoA’s AI-driven virtual assistant, has handled customer queries, provided personalized recommendations, and guided customers through various banking processes. The integration of chatbots and virtual assistants has significantly reduced wait times, improved overall satisfaction, and transformed how customers engage with banks.
By leveraging data-driven insights, BoA can provide a tailored product offering and loyalty program. Through analysis of each customer’s purchasing patterns, financial needs, and savings goals, BoA offers a personalized loyalty program that allows clients to conveniently track, manage, and redeem multiple rewards programs in a single place.
BoA’s AI-driven approach has yielded an impressive customer retention rate of nearly *99%.
In addition to Bank of America, JPMorgan Chase expects to benefit from its AI-driven strategy. The bank has made substantial investments in data analytics and AI technologies, with the expectation of generating *$1.5 billion in business impact by the end of 2023. By leveraging these technologies, JPMorgan Chase aims to enhance customer personalization and gain valuable insights into individuals’ banking preferences, saving goals, and financial aspirations.
Trend 3: Online Banking VS. In-Branch Engagement
After the pandemic, 97% of customers now conduct most of their banking activities on mobile devices, highlighting the prominence of online banking and a seamless omni-channel experience.
An omni-channel experience involves providing a consistent banking experience across multiple channels, which include mobile apps, websites, and physical branches. Customers today expect the ability to start a transaction on one platform and continue it on another without any disruption. They also expect to have access to their accounts and services anytime, anywhere, on their preferred platform.
Customers today do most of their banking on their mobile devices, with only *3% of interactions happening face-to-face.
Despite the dominance of online banking, in-branch services remain pivotal for maintaining customer stickiness and strengthening relationships. Accenture’s survey reveals that customers prefer in-person meetings when opening new accounts or products. An in-person meeting remains the preferred option when opening new products— *27% of consumers said it was their first choice, ahead of mobile apps (22%) and websites (21%).
This finding demands banks re-evaluate where physical branches fit into the overall customer experience and reach a balance between hi-tech innovations and in-person interactions. By blending digital convenience with personal engagement, banks can offer the best of both worlds, providing customers with the flexibility of self-service while maintaining the human touch and expert guidance that branches offer.
Trend 4: Embrace partnerships with FinTechs
Moving forward, we’ll witness a significant shift in the dynamics between traditional banks and fintech players, shifting from competition to collaboration. Fintech companies, once perceived as threats, are now viewed as strategic collaborators, particularly as open banking regulations gain traction in the United States.
Recent data indicates that leading banks have begun to recognize the value of partnering with fintech firms to drive growth and foster innovation. Through the secure sharing of customer data via open Application Programming Interfaces (APIs), the collaboration enables banks to leverage the expertise of fintech and technology partners to offer innovative products and services tailored to individual needs.
89% of banks believed partnerships with FinTechs as somewhat important.
According to a recent survey, *89% of banks consider partnerships with fintech to be somewhat important. Major players like American Express and JPMorgan Chase have already made significant moves in this direction through acquisitions. JPMorgan Chase has acquired multiple fintech startups, including Renovite, a payments startup. American Express also made a strategic purchase of Nipendo, an Israel-based company, to bolster its B2B payments network. *
By joining forces, banks can access innovative solutions, agile technologies, and disruptive business models offered by fintech companies. At the same time, fintech can leverage traditional banks’ established customer base and regulatory knowledge. This collaboration paves the way for traditional banks to enhance their capabilities and expand their market reach, creating a win-win situation that drives innovation, enhances customer experiences, and propels the industry forward in years to come.
Trend 5: Advanced Cybersecurity Measures
As the banking industry embraces digitization, the need for robust cybersecurity measures becomes increasingly important. Investing in advanced technologies like biometrics, encryption, and behavioral analytics becomes crucial to protect customer data and mitigate cyber threats.
An EY / IIF survey finds that:
*72% of global Chief Risk Officers (CROs) view cybersecurity as the top year-ahead risk, followed by credit and environment risks.
Major banks are actively investing in cybersecurity measures to stay ahead of evolving threats, including advanced biometric authentication to build trust, improve customer confidence, and protect against fraudulent activities. This year, J.P. Morgan will begin piloting biometrics-based payments with select retailers in the U.S., bringing speed and efficiency benefits to U.S. merchants and their customers*. According to Goode Intelligence, global biometric payments are expected to reach $5.8T and 3B users by 2026.*
Major cloud service providers are also playing a crucial role in enhancing cybersecurity, which provides access to advanced security controls. Incorporating a multi-cloud approach can also further enhance security and avoid the risk of a single point of failure. Integrating artificial intelligence (AI) and machine learning (ML) technologies also holds immense potential to revolutionize the field of cybersecurity. By leveraging AI and ML, banks can significantly improve the speed, accuracy, and efficiency of threat detection and response.
As the banking industry continues to evolve, banks face enormous opportunities to drive innovation and deliver customer-centric experiences that will position themselves for success in 2024 and beyond. BORN XDS, with its rich expertise in the banking sector, is well-equipped to help banks navigate challenges and implement innovative solutions. Visit our website to learn more about our offerings and how we can assist your business in delivering exceptional customer experiences. Stay ahead of the competition and revolutionize your financial offerings today.
We Can Help and we’d love to show you how!
*Reference Index
1. https://newsroom.accenture.com/news/accenture-research-finds-four-in-five-banks-planning-to-or-already-migrating-mainframes-to-the-cloud-are-doing-so-quickly.htm
2. https://www.thestack.technology/jpmorgan-cloud-migration-jamie-dimon/
3. https://newsroom.bankofamerica.com/press-releases/consumer-banking/bank-americas-unique-approach-loyalty-rewards-translates-record
4. https://newsroom.bankofamerica.com/press-releases/consumer-banking/bank-americas-unique-approach-loyalty-rewards-translates-record
5. https://www.thestack.technology/jpmorgan-cloud-migration-jamie-dimon/
6. https://www.accenture.com/us-en/insights/banking/consumer-study-banking-reignite-human-connections
7. https://www.accenture.com/us-en/insights/banking/top-10-trends-banking?c=acn_glb_eminence-retailleader_13349052&n=smc_1222#accordion-60340377fc-item-d343cbcb29
8. https://www.pymnts.com/news/banking/2023/us-open-banking-regulations-will-force-more-bank-fintech-collaboration/
9. https://www.jpmorgan.com/news/jp-morgan-to-acquire-renovite-technologies
10. https://nilsonreport.com/mention/1761/american-express/#:~:text=Commercial%20payments%20account%20for%2045,mostly%20driven%20by%20small%20businesses.
11. https://www.ey.com/en_gl/news/2023/01/cybersecurity-is-number-one-risk-for-global-banks-but-geopolitical-risk-tops-european-banks-concerns
12. https://www.jpmorgan.com/solutions/treasury-payments/insights/biometrics-checkout-us-pilot
13. https://www.jpmorgan.com/solutions/treasury-payments/insights/biometrics-checkout-us-pilot
The Future of Retail Part III: Navigating Today’s New Landscape
The Future of Retail Part III: Navigating Today’s New Landscape
We conclude our three part exploration into our future relationship with retail and how do we navigate this “new Normal”.
Stores And Malls Will Need To Rethink Existing Spaces
Before the pandemic the US had the most retail square footage per capita in the world, but now with more people shopping online, retailers don’t need such an abundance of store space. Walmart have created automated fulfilment centers in some of their larger outlets, while in the UK both John Lewis and Marks and Spencer announced plans to downsize their flagship Oxford Street stores and convert entire floors into office space. It’s likely that other large retailers will follow suit, either entering partnerships to share space with other brands or local businesses, selling off space, or finding other uses for it, concentrating on tech-enabled service and online ordering, rather than having huge amounts of stock on site.
As stores like Macy’s and Sephora steer away from new mall openings and test stand-alone stores instead it seems like malls will also have to find new purpose.1 Their future again is likely to be mixed use, with office space, gyms, warehouse space, entertainment venues and more. Who knows, in the future maybe that ugly out-of-town mall will devote some of its space to becoming a market garden.
Local Produce, Digital Fashion and Re-use Goes Mainstream
It’s not just local neighbourhoods that will see an increased focus but local products too, driven by ethical and environmental considerations but also perhaps by practicality. After years of globalization, the world has been experiencing a supply chain crisis caused by an endless list of problems: Covid, trade tensions between the US and China, the Suez Canal blockage, rising shipping costs, a shortage of truck drivers, and in the UK’s case, Brexit.
Some may scoff but digital fashion is another growing area, giving brands an opportunity to interact with customers at home who can show off their items online. Balenciaga have created digital fashion for Fortnite.2 Farfetch are gifting influencers in digital garments from pre-order collections, saving on shipping costs and gauging interest before investing in stock.3
The impact of consumption on the environment is increasingly on consumers’ minds, and It’s likely that resale options will move further into the spotlight. IKEA are already offering a buy-back service, finding new owners for resale goods in their ‘bargain corner’, while the original owner gets an agreed value loaded to a card they can spend in the store.4 FarFetch and Zelando have also added pre-owned sections to their online businesses.
Conclusion: New Opportunities For Retail In A Time Of Change
All the above paints a complex picture. Change is happening in every aspect of the retail landscape. Consumers and retailers will need to get adjust to the ‘new normal’: where online shopping is an efficient way of meeting needs, but physical shopping is a treat, where we shop locally but the big platforms become bigger, where retailers need to build their operations on agile technology platforms that connect every aspect of their business from inventory to marketing.
It’s been a strange and worrying time, but now more than ever there is a chance to make changes that not only keep online and physical retailers afloat, and consumers supplied but that create a low-carbon future that protects the planet. Yesterday and today has brought much turmoil, but there’s no reason we can’t be optimistic about tomorrow.
- Labour To Scrap Business Rates and Replace With A Fairer System, Labour, https://labour.org.uk/press/labour-to-scrap-business-rates-and-replace-with-fairer-system/
- High Digital Fashion Drops Into Fortnite With Balenciaga, Epic Games, https://www.epicgames.com/fortnite/en-US/news/high-digital-fashion-drops-into-fortnite-with-balenciaga
- Vogue Business, Influencers Are Wearing Digital Versions of Physical Clothes Now, https://www.voguebusiness.com/technology/influencers-are-wearing-digital-versions-of-physical-clothes-now
- A Circular Economy Starts With A BILLY Bookcase…Or INGO Table, Or NORRARYD Chair, Ikea, https://www.ikea.com/gb/en/this-is-ikea/sustainable-everyday/buy-back-and-resell-service-pubcc071810
How to Increase Customer Lifetime Value With Visual Product Discovery
How to Increase Customer Lifetime Value With Visual Product Discovery
The global pandemic prompted a huge shift in consumer behavior — including notable breakdowns and disruptions in customer loyalty.
As supply chains suffered a shock that restricted inventory and forced long-time customers to look elsewhere, another important transformation was taking place.
Brands and retailers that hadn’t been focused on their eCommerce presence suddenly went “all-in.” And those that already had strong websites and solid operations in place to serve online shoppers took things up a notch.
The resulting advancement in customer experience created a new breed of consumers. These shoppers have sky-high expectations from brands when it comes to everything from product recommendations to fulfillment to customer service, and more.
Building Loyalty in the Post-Pandemic Landscape
Now that the initial “shock to loyalty” is leveling out, the onus is on brands and retailers to create customer experiences that are so intuitive, delightful, and memorable that they’ll entice these new, more demanding shoppers to come back time and time again.
The brands that invest in keeping the new business they’re seeing in the long-term — or those that crack to code on how to increase customer lifetime value (LTV) — are poised to be at a tremendous advantage in the coming months. Today’s blog post with BORN partner Syte helps illustrate that advantage by going into detail on LTV and how visual product discovery helps win over shoppers.
LTV is so essential because loyal customers don’t just return to your website more often, they are also more eager to spend with your brand. In fact, 39% of loyal customers will spend more on a product, even if there are other, less-expensive options available elsewhere.
Still, when looking to build lasting relationships with customers, brands and retailers often overlook the most critical element of the customer journey: product discovery.
After all, if shoppers can’t find what they’re looking for in the first place, why would they come back?
Why Visual Discovery Wins Over Shoppers
Innovative brands and retailers are increasingly using visual AI to take their product discovery experience to the next level. This emerging technology, which includes image recognition capabilities, allows retailers to pinpoint specific details about each product in their inventory and to use that unique visual data to surface the most relevant items for each shopper.
Visual discovery tools that leverage AI, including camera search and smart recommendation carousels, enable shoppers to easily find products that suit their tastes, even when they don’t have the right search terms or the time to navigate through dozens of product listing pages.
Connecting shoppers with their ideal products so seamlessly leads not only to a higher conversion rate but also to a dramatic rise in customer lifetime value.
In fact, Syte’s data analysis from July-December 2020 found that when shoppers interact with on-site visual product discovery tools — specifically those powered by visual AI — they are more likely to become long-term, high-value customers:
- Compared to high-intent “add to cart” shoppers, those who engaged with on-site product discovery tools had a 12% uplift in retention rate at the end of a 30-day period
- The higher retention rate among users of visual discovery technologies also translated to a 19% uplift in customer LTV within a 30-day period, compared to all customers.
These numbers demonstrate that today’s shoppers deeply value brands that help them find what they want intuitively and quickly — and that they see this process as a core element of an improved customer experience.
Brands that rise to the challenge of creating an outstanding product discovery experience will become a trusted destination for shoppers and drive long-term value from new customers. To learn more about how these solutions impact customer experience and drive business value, take a look at our partner Syte’s blog.
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Welcome to BORN’s Partner series! Through this program we look to highlight thought leadership from our vast array of technology partners. Follow along using the hashtag #thisisBORN and #BORNpartner!
Today, we’re happy to call attention to our visual search partner, Syte, and talk about how they help transform Customer Lifetime Value with effective visual product discovery.
BORN Partner Post: Avalara and 2020 Sales Tax Changes
BORN Partner Post: Avalara and 2020 Sales Tax Changes
Our Work
Riding that Wayfair wave
The number of states requiring remote sellers to collect and remit sales tax more than doubled in 2019. By the end of 2018, six months after the Supreme Court of the United States overruled the physical presence rule in South Dakota v. Wayfair, Inc. (June 21, 2018), 19 states were enforcing economic nexus. As of December 2019, 43 states and the District of Columbia have economic nexus laws or rules requiring out-of-state sellers with a certain amount of sales in the state to collect and remit sales tax.
The last two holdouts will likely cave in 2020. Only two states with a statewide sales tax haven’t adopted economic nexus: Florida and Missouri. Both have economic nexus legislation drafted and ready for discussion during their 2020 legislative sessions, which start in January.
A state with no general sales tax may beat them to the punch. Close to 20 local jurisdictions in Alaska have signed the Alaska Intergovernmental Remote Seller Sales Tax Agreement, which was created by members of the Alaska Municipal League and will be managed by the Alaska Remote Seller Sales Tax Commission. The agreement allows local jurisdictions to “implement a single-level, statewide administration of remote sales tax collection and remittance.” Remote vendors could be required to collect and remit sales tax in some parts of Alaska by early 2020.
The rise of the marketplace
If the Alaska Municipal League, Florida, and Missouri all succeed in their efforts, marketplace facilitators will be required to act as the tax collector for third-party sellers in those locations. And Florida, Missouri, and municipalities in Alaska aren’t the only ones looking to implement marketplace facilitator laws in 2020.
Like economic nexus, marketplace facilitator laws exploded in 2019. Only seven states required marketplace facilitators to collect and remit tax on behalf of their third-party sellers as of December 2018, and most allowed marketplaces to opt out of collection by complying with use tax reporting requirements. By contrast, 37 states and D.C. have marketplace facilitator laws now. And counting.
One benefit of marketplace facilitator laws is that they reduce or remove the burden of compliance for the smallest sellers. Another is that state tax authorities don’t have to deal with auditing individual marketplace sellers — they can focus on the larger marketplace facilitators instead.
There are similar benefits when businesses outsource sales tax collection and remittance to a certified service provider.
Simplifying compliance with certified service providers
Before states won the right to tax remote sales, the Streamlined Sales and Use Tax Governing Board came up with a way to encourage voluntary compliance.
Streamlined Sales Tax (SST) member states simplified sales tax compliance for remote sellers by establishing a central, electronic registration system; uniform definitions, rules, and tax bases; and more. They also compensate certified service providers (CSPs), like Avalara, for providing sales tax software and services for businesses that qualify as a volunteer seller.
The CSP program has been such a success that other states are emulating it. Pennsylvania already has a CSP program up and running. Connecticut, Illinois, New Mexico, and the Alaska Municipal League are developing similar CSP programs of their own. Expect more states to follow suit in 2020.
Other sales tax changes
Though they grab headlines, taxes on remote sales aren’t the only news in the sales tax world. As did 2019, 2020 will see changes in exemptions, product taxability rules, sourcing rules, and more. Expect to see sales tax developments in:
- Bitcoin: How states treat it and whether tax departments accept it
- Digital products: If they’re not already taxed, ebooks and streaming services likely soon will be
- Food: Marketplaces that deliver food may be required to collect sales tax
- Tampons: More states are likely to exempt feminine hygiene products in 2020
- Transportation: More states will look to tax personal transportation services (e.g., Lyft and Uber)
And, of course, there’ll be sales tax rate changes. There are always sales tax rate changes.
Want to know more about 2020 sales tax changes? Get the report.
