The Monticello team joined Gartner’s New Rules to Maximize Growth in Banking discussion last week. The conversation highlighted that what has been successful in the banking industry is now being disrupted by major technological and societal forces as FinTech becomes a force in both retail and commercial banking. Additionally, Decentralized Finance is becoming more popular and technologies such as Data & Analytics and Artificial Intelligence are redefining customer-centricity and customer interaction.
In a recent Gartner survey, 74% of financial services leaders expect “substantial” or “significant” industry transformation by 2026. This trend and its impact will force many banks to change existing and introduce new products & services, value propositions, sales & service channels, customer experiences, technologies, and talent management practices. Customers are now empowered to change to their bank of choice and enroll in innovative banking products and services in a quickly evolving market.
Recently, Decentralized Finance (DeFi) is gaining popularity. DeFi has the potential to transform finance, enabling a wide array of banking functions on the blockchain. It solves some of the problems associated with traditional finance, such as a lack of inclusion, interoperability, inefficiency, opacity, and high transaction fees. According to a recent Gartner survey, 13% of U.S. adults in last 12 months purchased or traded cryptocurrency; however, only 2% received information about cryptocurrency from a broker or advisor. Banks are monitoring this development by evaluating the opportunities and risks associated with entering the market via in-house capabilities or pursuing vertical integration with DeFi solution providers under a scaled ecosystem framework. A few banks plan to introduce new products, services, and infrastructure to accept or send cryptocurrency and stable coin payments in the next few years. Some of them are accelerating their plans to build new revenue streams through the issuance, custody, and trading of cryptocurrencies and similar assets.
Technologies such as Data & Analytics and AI (Artificial Intelligence) enabled Natural Language Processing (NLP) and Machine Learning (ML) applications to radically redefine customer-centric interactions in banking. During the pandemic, Bank of America’s AI augmented virtual assistant, Erica, exploded in popularity and saw a 476% increase in the number of interactions compared to 2019, driving customer engagement and retail banking revenue growth. The same holds true for Bank of America’s CashPro digital cash management and payment platform. The digital transformation and transition to a customer journey-centric engagement trend also played out at other banks in the U.S. and abroad in the last few years.
At Monticello, our consultants continue to participate in industry thought leadership events to ensure our clients are advised on the emerging trends, impact of these disruptions, leading practices on how best to execute transformation journeys and facilitate organizational changes necessary to compete. Monticello has recently published an Insight on Financial Services Industry Leading Blockchain Adoption and a Case Study on Using NLP to Mitigate Compliance Risks and Improve Internal Controls. We look forward to working with our Banking and Capital Market clients and partners to support their transformation initiatives in 2022 and beyond.