Change, Disruption, Opportunity: The Future of Digital Retail Banking in 2024

Generative artificial intelligence (AI) took the world by storm in 2022 and 2023, spearheaded by OpenAI’s ChatGPT. As the banking sector looks to get ahead of the curve, ebankIT explores which emerging technologies are set to lead the way, as outlined in The Fintech Times news. 

Renato Oliveira is the chairman of ebankIT, the fintech firm enabling banks and credit unions to deliver the same humanized, personalized, and accessible digital experience on mobile, web, and voice banking.

Here, he uses his extensive experience from the likes of Millennium BCP, Caixa Geral de Depósitos and Standard Bank, to explain which technologies could transform the future of banking.

Renato Oliveira, chairman of ebankIT, states, «Everything is changing – fast. Economies are being buffeted by macroeconomic headwinds and rocked by geopolitical shocks. Customers are making different demands, societies are shifting unpredictably, and technological disruption is creating new competitors that are posing a potentially serious challenge to incumbents.»

He adds, «Add to this the fact we’re still living with the aftereffects of the Covid-19 pandemic and the complexity of the business environment becomes even clearer.»

«The volatility and dynamism of the world economy have left the industry feeling unsure about what’s ahead. The IMF’s World Uncertainty Index, which is calculated by counting usage of the word ‘uncertain’ or its variant in Economist Intelligence Unit reports, is currently at its highest point since springtime back in Q2 2020 when the world went into lockdown at the beginning of the Covid-19 pandemic.»

Oliveira emphasizes that uncertainty creates opportunity, stating, «Those who make the right decisions in difficult times will reap the rewards when calm returns. I argue that this era of change is the perfect opportunity for banks to rethink their digital strategies to compete with the cutting-edge customer-centric services, experiences, and journeys delivered by fintechs, big tech, and other emerging competitors. Put the customers first when deploying technology and you will be able to increase acquisition, reduce costs, and drive growth as well as increased revenue.»

«The financial services sector deserves huge praise for the way in which it responded to the great shift to digital which took place during the pandemic. We’ll need to remember that innovative spirit and willingness to push forward under pressure as we move into 2024 because there are difficult and important decisions to be made,» says Oliveira.

He continues, «Most organizations will be looking to enhance their digital offerings to win new business and deliver value to existing customers. However, many financial services institutions have adopted an efficiency-focused strategy in which digital channels are primarily used to carry out day-to-day transactions at scale. This approach drives down costs, ramps up productivity, and gives banks the chance to win new customers. Yet it does not reflect the true potential of digital banking, which has a proven ability to create customer value and an underutilized growth potential.»

Oliveira underscores that digital channels can be differentiators and growth engines, stating, «Which means they deserve to be allocated time and money. Inflation, sluggish growth, and tightening customer budgets should not act as a deterrent to investment in the future.»

«Artificial intelligence is a technology that has dominated the conversation in 2023 and looks certain to continue to do so throughout the next year. ChatGPT – the most famous example of a Generative AI model – launched at the end of 2022 and now has more than 100 million users,» Oliveira highlights.

He adds, «The McKinsey Global Institute (MGI) estimates that gen AI could add between $200 billion and $340 billion in value to the banking, wholesale, and retail sectors by unlocking greater productivity and other benefits.»

«The rise of AI will enable other trends such as hyper-automation – the automation of as many processes as possible through the orchestrated deployment of multiple tools, platforms, or technologies including machine learning, event-driven software architecture, robotic process automation, business process management, and more.»

Oliveira predicts, «We are expecting to see a big year for open banking, with new regulation in the US as well as the PSD3 in Europe and further innovations in Brazil, the UK, and other innovative ecosystems. The 2022 Gartner CIO and Technology Executive Survey found that 54 per cent of senior technology leaders from banking enterprises said they are increasing their investment in application programming interfaces (APIs) that enable data-sharing.»

He concludes, «Next year, up to 60 per cent of finance organizations are predicted to deploy composable finance applications, using modular technology solutions delivered by a range of vendors. Cloud will remain a key investment priority for financial tech leaders and there is likely to be a growing focus on blockchain.»

«Digital native generations represent a huge opportunity for banks. In a report called Millennials and Gen Z Still Need Bank Branches, Gartner reported that younger generations are ‘not as inclined toward digital channels as they once seemed.’ Surprisingly, Gen Z retail banking customers are ‘significantly’ less likely to begin their interactions with a bank digitally than older generations. The survey found that 33 per cent of Gen Z customers’ first interaction with a bank was in a branch – a higher percentage than both Gen X and Millennials and just one per cent behind the Boomers,» Oliveira points out.

He explains, «Younger generations may be new to banking and will certainly not have the lifetime experience of boomers. They would clearly benefit from face-to-face interactions with bank staff, who could introduce them to relevant services and products. If a bank’s digital offering is truly humanized and customer-centric, they can gain the same experience online – starting with interactions with chatbots and escalating to human staff if necessary.»

Oliveira stresses, «This use case for digital services is one of many where humanizing services is key. Digital will be a mega-trend in both the short and long term, with all financial institutions leveraging tech to drive growth. The institutions that combine the right technology with the best banking to deliver humanized, customer-centric services will be in a good position to succeed in a year of uncertainty and change.»