Over the years, there’s been a lot of investment flowing into the digital transformation within the banking and financial services industries. We take a look at how this digitization in banking is helping to improve the overall landscape and what digital priorities will look like next year.

What is digital transformation in banking and finance?

Banks and financial institutions are accelerating their digital transformation efforts, pouring more money and resources into their initiatives—including artificial intelligence (AI), data and analytics and enhancing their mobile offerings—in an effort to not only reach current and potential consumers, but also elevate the current digital experience. 

A multitude of fintechs, insurtechs, wealthtechs, and other financial services start-ups, are cropping up on the scene to offer customers more seamless experiences and steal market share away from established financial institutions. What’s more, the pandemic pushed many consumers to try digital banking, contactless payments, and other digital channels for the first time as part of social distancing and health and safety precautions. To have any chance at competing in this new landscape, incumbent banks must either partner with their new tech-savvy competitors or modernize their own legacy systems.

Digital banking transformation demand due to COVID-19

During these past 12-18 months, there’s been a digital shift occurring within the banking and financial services sector. This is thanks in large part to a change in the way consumers have had to access their funds and transact with these companies because of stay-at-home orders, as well as the fact that many retail bank branches and businesses were closed. 

This shift in behavior has also shown many banks and financial institutions the opportunities that are out there in terms of how they can reach customers—whether that’s providing customer service through a mobile app, a chatbot interaction, or even by leveraging big data to better understand consumer needs.

Benefits of digital transformation in banking

Being more digitally-forward comes with many benefits, including reaching a wider breadth of consumers and overall, creating more seamless experiences. 

When it comes to priorities and use cases, it’s not a one-size-fits-all approach, and what may work for one company may not necessarily work for another. For example, digitizing the supply chain may take precedence for a particular financial institution, while another is planning to add new payment models into the mix. 

But overall, all these priorities may lead to customer retention, which is something all companies aspire for.

How AI is accelerating banking’s digital transformation

Artificial intelligence (AI) has become an important solution for banks and financial institutions. In fact, Bank of America’s fast-growing, AI-powered virtual assistant, Erica, was one of the key highlights in the company’s recent Q3 earnings. Erica helps Bank of America’s customers keep up-to-date on their finances by checking their balances or alerting them of account changes.

And Wells Fargo recently announced that it will update its app to feature an AI-powered virtual assistant next year, which will not only answer any customer experience questions, but also help them complete tasks, including paying their bills, as well as sending money.

How mobile banking is driving digital transformation

Because more consumers have adopted digital banking, and are now managing most of their finances this way, their expectations are higher than they once were. As a result, banks and financial institutions have rolled out features to meet consumer needs, including expanded mobile app capabilities. This is especially vital given how much time people are spending on their mobile devices. 

According to October 2021 data conducted by Morning Consult on behalf of the American Bankers Association, mobile banking has become an even more frequently used channel because of the pandemic. The study found that before the pandemic, 33% of respondents used mobile apps to bank digitally and that figure increased by 11 percentage points since the pandemic. 

Mobile banking features have become even more sophisticated over the years as the reliance on this channel increases. Consumers can do everything from the simplest action such as checking their balance, making payments, to even using their mobile device to access an ATM.

Trends & future of digital banking & finance

By and large, it’s going to be critical for banks and financial institutions to invest heavily in digital transformation, whether that’s by leveraging AI or chatbots to boost the customer experience—or by leveraging data and analytics to get a more holistic view of who their customers are. 

Improving customer acquisition and retention will be key for many and consumer behavior continues to shift to digital offerings.