Banking Technology Radar 2023
- An LTIMindtree Crystal Report
The banking industry is undergoing a monumental shift. Success in this rapidly changing landscape requires proactive action and staying one step ahead. Explore the key trends shaping the banking industry’s future, both today and for the next decade.
The world of banking is rapidly evolving and embracing new technologies. By adopting AI, analytics, blockchain, IoT, cloud, and quantum computing, banks can provide efficient and cost-effective services to their customers. Staying ahead of technological trends is critical for any financial organisation looking to remain competitive.
Banking Technology Radar 2023 - An LTIMindtree Crystal Report acts as a guide for the banking industry, providing a roadmap for future IT strategies. The report offers a comprehensive view of the latest transformative technologies shaping the banking landscape. It presents 63 trend elements across four segments, ranging from architecture, cloud, and data to digital. It is rated based on three parameters - adoption phase, horizon, and application scope.
The report comprises three horizons, each representing the length of time between the emergence of a new trend and its adoption by the mainstream market.
Explore some interesting technology trends across three horizons
Horizon 1: The trend is expected to reach the mainstream market within a year
Banking-as-a-Service (BaaS)
Explore some interesting technology trends across three horizons
Horizon 1: The trend is expected to reach the mainstream market within a year
Banking-as-a-Service (BaaS)
Banking-as-a-Service (BaaS) has arrived and is poised to lead the future of financial services by offering API-led, transparent, and customer-centric alternatives. BaaS provides banks with simplified compliance, speed, security, and cost efficiencies, but it’s worth noting that many banks still rely on legacy core and product platforms. Banks can deploy cloud-based digital solutions using microservices through platforms to bridge this gap and extend their products and components. As the financial industry evolves, BaaS and platform solutions will play a pivotal role in meeting customers’ needs and driving success.
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Cognitive & Adaptive AI
Embracing AI and digital innovation at scale is essential for banks to maintain their competitive edge. Through AI and machine learning, financial institutions can utilize predictive analytics, anomaly detection, and shared learning models to bolster system stability, identify fraud, and offer top-notch customer-centric experiences. The advantages of adopting these technologies are self-evident, making it a key consideration for banks that wish to stay ahead of the curve.
Digital Lending
Digital Lending
The digital lending landscape is in flux as customer demands evolve and disruptive technologies emerge, compelling banks to reassess their regulatory and compliance policies. Obtaining a loan was traditionally a complicated process, with extensive paperwork, slow approvals, and limited credit options presenting obstacles for customers. But with technology integrated into banking and financial services, loan applications can now be processed in minutes, dramatically streamlining the digitized lending process and paving the way for new trends in 2023 and beyond. Banks must embrace the future of lending to remain competitive!
Insights
- Tech-savvy legacy banks can protect themselves against fintech competition by venturing into the Banking-as-a-Service (BaaS) sector, leveraging their data and infrastructure to stay ahead.
- Leveraging cutting-edge technologies like AI and ML, the banking sector can achieve remarkable advancements. These technologies enable banks to better understand client needs and identify challenges within the digital banking landscape.
- Account aggregators are expected to disrupt the lending industry, much like UPI revolutionized payments, within the next few years.
Horizon 2: The trend is expected to reach the mainstream market within one to two years
Quantum-safe Card Tokenization
Horizon 2: The trend is expected to reach the mainstream market within one to two years
Quantum-safe Card Tokenization
Tokenization is crucial for securing sensitive data while preserving its utility, which is vital for a safe and secure digital future. It can significantly improve security measures, lower operational costs, and enhance the overall customer experience, providing businesses with a competitive advantage. A survey by the PCI Security Standards Council found that 60% of merchants and 44% of banks use tokenization to protect their customers’ payment card data. This highlights tokenization’s importance as a fundamental resource for businesses striving to maintain a secure and competitive position in the digital landscape.
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Banking of Things
Banking of Things simplifies account opening, management, and transactions by integrating devices with financial institutions. Despite being in its early stages, there is substantial interest and investment in this field. The technology offers customized services, biometric authentication, and real-time fraud detection, improving convenience, accessibility, and security. However, data privacy and security are still major concerns that must be addressed as Banking of Things advances.
Cloud Payment Acceptance
Cloud Payment Acceptance
The adoption of cloud technology is critical to providing advanced buying experiences that are essential for all businesses to succeed. Cloud migration opens opportunities for innovation within the payment ecosystem. However, cloud solution providers must continually address data security threats as a crucial aspect of their service offering.
Insights
- Credit card transaction tokenization has the potential to transform the industry by offering improved security, convenience, compliance, savings, and fostering trust.
- The Banking of Things market is experiencing moderate growth, with increasing demand anticipated as more devices connect and consumers prioritize seamless experiences.
- Cloud payment acceptance is pivotal for the future of payments. Embracing cloud technology fosters innovation within the payment ecosystem, but it necessitates ongoing efforts to address data security threats.
Horizon 3: The trend is expected to take more than two years to reach the mainstream market
Open Banking APIs
Horizon 3: The trend is expected to take more than two years to reach the mainstream market
Open Banking APIs
Open banking APIs enable financial services and personal data integration across different devices through open-source software and network protocols. A crucial advantage of this technology is increased competition, which results in a broader range of financial products and services. The global adoption of open banking services is expected to double between 2022 and 2027.
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Cloud Sustainability
Cloud sustainability promotes environmental sustainability and minimizes the banking industry’s carbon footprint by using cloud computing technology. This can be achieved through energy-efficient hardware, renewable energy sources, and workload optimization. Cloud providers must adopt a transparent climate strategy and roadmap due to increasing pressure. Carbon emissions from hyperscale cloud services are a top criterion for choosing cloud services.
Real-time Fraud Detection with Graph Neural Networks (GNN)
Real-time Fraud Detection with Graph Neural Networks (GNN)
Knowledge graphs and high-performance computing (HPC) are facilitating the use of AI on large datasets, with unstructured data growing at an average annual rate of 23%. Graph Neural Networks (GNN) are advanced machine learning techniques deployed for real-time fraud detection. By analyzing interconnected entities such as customers, accounts, and transactions, GNNs can identify fraudulent activity in the banking and financial industry.
Insights
- Building strategic partnerships within larger ecosystems enables banks to increase their visibility and be present to sell their offerings whenever and wherever opportunities arise, creating mutually beneficial outcomes.
- The banking sector, as heavy data users, can accelerate their journey towards ambitious net zero targets by prioritizing the adoption of cloud technology. Leveraging the speed and sustainability of cloud solutions becomes a key strategy for achieving their sustainability agenda effectively.
