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This post 6 Trends to Watch in Banking: Meeting Customer Expectations with Insight and Analytics was originally published on the Silverline blog.

From AI to APIs, the banking industry is constantly changing. Ensure your organization is prepared to meet your most pressing customer needs with these 6 important banking trends. 

1. Removing friction from the customer journey

Banks need to shift the goals of digital transformation from cost reduction and operational efficiencies to enhancing the customer experience. In order to do this, banks must:

  • Provide a highly personalized experience (i.e., a “Segment of one”)
  • Enable customers to engage with the bank using the channels they prefer at the times they want to engage (i.e., “Be where their customers are”)
  • Proactively deliver advice and product offers rather than simply reacting to customer inquiries
  • Engage with their customers at every point in the customer journey

2. The emergence of challenger banks

Banks are no longer competing solely against other banks. For both product and customers, they compete with everyone offering financial services. From an experience perspective, banks are competing with the likes of Amazon, Netflix, and Uber, all of which create compelling and efficient customer experiences.

Some banks have made strides building the fintech experiences their customers expect, such as frictionless digital account origination and seamless integration with peer-to-peer payment networks.

Today, the biggest threat Silverline’s typical banking clients face is not from fintech startups but from emerging challenger banks and the disproportionate spending of large banks. The boundaries between banking and the rest of the digital economy continue to blur. We expect to see some of the big tech players make some definitive moves in late 2019.

3. APIs and open banking

The proliferation of open banking — a term that describes the creation of common interfaces among banks and third party service providers — has continued into 2019. As open banking regulations become more widely adopted, fintechs and other large tech companies (e.g., Google and Amazon) will gain wider access to consumers’ financial data that will enable them to develop compelling offerings such as real-time finance management tools. With consumers 35 and under becoming increasingly receptive towards adopting non-financial services companies to meet their banking services needs, open APIs pose a significant threat to traditional banks.

Banks must recognize that the proliferation of APIs also represents new business opportunities if they are prepared to take advantage of the shift. Banks must move to unbundle their services and capitalize on this opportunity to infuse innovation with their existing range of products.

4. Big data, AI, and advanced analytics

Banks have a treasure trove of customer data that can be leveraged to inform individual recommendations. Combining analytics technology with the availability of real-time transactional data allows financial institutions the opportunity to create personalization at scale.

In order to use data to create experiences customers value, banks will need to develop customer facing AI that provides relevant and real-time advice. Recently, Chase sparked significant backlash when they issued a tweet admonishing customers for spending too much money on eating out, taking cabs, and drinking coffee. Customer sentiment for this type of advice is negative, but truly value-added services like alerting customers when they are paying more for utilities than their neighbor or pointing out when a customer has an overly high mortgage payment based on their individual factors is compelling.

5. Expansion of digital payments

Payments is one of the most disruptive and dynamic businesses in banking today. Innovations from fintech startups and incumbent banks alike are lifting customer expectations and intensifying competition for payments volume. Frictionless payments — the integration of checkout and payments as simply and seamlessly as possible into consumers’ everyday activities — continues to be the leading goal for payments companies.

Volume-based fee growth will become increasingly challenging. Losing volume to lower-cost digital alternatives coupled with the expensive reward programs many traditional card issuers rely on to attract and retain customers will make it difficult to maintain the pace of increased fee income.

6. Finding and retaining talent

Due to a robust economy, the U.S. has been operating at or near full employment for the last several quarters. As a result, many banks are struggling to find and retain the critical talent needed to execute their digital transformation roadmaps. Demand for talent outstrips supply in several key roles such as cyber security, data science, and user experience design. The talent shortage in banks is not limited to technology roles, according to a recent Compensation Survey issued by Bank Director. 43% of bank executives and board members stated there aren’t enough talented commercial lenders in their markets. Additionally, over 67% expect to actively recruit commercial lenders in 2018.