BUS235 OPERATIONS MANAGEMENT

DISCUSSION

The global trend in financial technology is completely shaking up the retail banking sector

from the inside out, so coping with new technologies and trends has become a major concern

for retail banks. Digitization, customer-centric service, and more represent important

priorities for retail banking. All these new technologies and trends provide a light on the

challenges that the banking sector must embrace to keep pace with the growing competition,

address security and privacy concerns, and meet growing consumer expectations, as well as

sharing, openness, and transparency.

Now it's good news for customers looking to take advantage of new and personalized

services and for banks looking to realize greater operational efficiencies. The banking

environment will be completely changed according to regulatory requirements and industry

standards.

Open Banking or BaaS (Baking-as-a-service)

Consumers live in a digital world, so their banking experience will also want to be digital.

Let's take an example from Uber, Airbnb or Netflix that proves this. In the retail banking

business, we will witness a big trend that will accelerate in 2020. The move to open banking

encompasses, in a broad sense, the need for banks and credit departments to respond to rising

expectations and demands. Deliver an engaging end-user experience to consumers. Basically,

the open banking system allows banks to work with fintech, startups, service providers and

solution software vendors to provide services across a wide range of value chains. Several
factors are driving this change, including banks and fintech rapidly embracing open APIs to

cooperate on a large scale, gradually regulating this open approach in Europe and the UK and

wide acceptance in North America. Banks will shift their approach from simply building a

financial institution to curating consumer-focused financial management services. Baas, or

banking as a service, will transform the competitive environment of conducting business and

economic activity and operations.

Hence, the retail banks would move towards the entirely new era of digitization containing

roboinvesting, customer lending automation, clearing and settlement of cash and security

transactions.

Always-On, ‘Invisible’ Banking

As we are witnessing, the entire business world is moving into the post-digital era. But the

question is, are banks ready to accommodate invisible banks? Traditional brick and mortar

banks have made their way for fintech invisible banks. Customers no longer want to waste

time around banking services. All they want is a service that can integrate into their lives and

provide a seamless banking experience, convenience, faster and more fun. What is really

"invisible"?

In retail banking, we will soon see a big trend that will accelerate in the near future and a shift

towards full digitization, i.e. invisible banking. Where banks belong to an ecosystem that is

barely visible to consumer expectations. Invisible Banking is possible through AI

development, and not only hands-free, but also customized interactions. Invisible banks are

transparent with simple terms. It supports trust and enhances the customer's lifestyle by

providing financial insights while providing value-added services to customers.

The emergence of fintech challengers has disrupted the traditional banking system, putting

pressure on them and many financial institutions to change digitally and shifting the whole

focus of consumer expectations. Traditional banking combined with invisible banks has

provided many benefits to consumers in the following areas:

 Onboarding, onboarding allows banks to easily board customers. What used to take

days before can be done on the same day. This is also due to the next-generation KYS

process and the immediate issuance of virtual cards.

 Interactions, many fintech banks such as Monzo have recently realized the importance

of customer interactions to build long-term relationships, create online communities

around services, and actively engage in interacting with customers an average of 5 or

more times a day. .

 Fintech banks can now respond to consumer activity in real time through notifications

using social media and in-app communication capabilities. This allows them not only

to advise them, but also to act as an invisible financial advisor to improve their

financial well-being.

However, in a way, the invisible banking concept is not new for some businesses like direct

deposits in an example of invisible transactions. But now the scope is greater and speed has

become much closer to immediate.

Intelligent Assistants and Voice Banking

After witnessing the rapid adoption of voice assistants among consumers, it has proven

essential for all banks and financial institutions to seriously integrate this technology into

their services to provide the best consumer experience.

Some statistics helped build the case like:

 The number of voice recognition devices like Amazon Echo or Echo dot has been

increased by more than 70% in the U.S as stated by the research conducted by Smart

Audio Report from NPR and Edison Research.

 BOA has its personal smart voice assistant named Erica being used by millions of

users since it made its first debut.

 According to a research conducted by Capgemini stating that more than 1/3rd of the

retail banking customers are preferring voice recognition assistance over in-person

visits.

Here's an example of what Virtual Assistance is willing to integrate. These statistics give you

a real picture of how voice assistants have provided customers with new ways to simplify

complex problems. In addition, the need to use the mobile version of the application is

reduced thanks to the ability to ask questions more interactively. The implementation of voice

assistants in banks has also increased the availability of technology for the elderly or

disabled. It has proven to be safe and supportive when it comes to clients' banking

transactions. Now they can check their bank balance or transaction history and other bank-

related activities simply by issuing orders.

Voice authentication technology has helped bank customers simply request service. For

example, you can now complain about lost ATM cards, make payments, and more.
Banks regularly review a variety of voice identification technologies for each consumer to

ensure that customers' identities are automatically identified when they request customer

service.

All of this clearly shows that the potential of an AI-enabled voice assistant or digital assistant

has not yet been developed in the banking space.

AI-Driven Personalization Still on the Do List

In a fast-growing world, empathizing with customers and understanding their needs has

become important, and a personalization approach can be very beneficial not only for

customers, but also for suppliers. Artificial intelligence capabilities that have emerged

recently will help retail banks take action in real time. In short, AI has reduced bankers'

efforts to ensure the stability and growth of banks in the 21st century. Now they have put in

their digital workforce to handle the needs of their customers. AI has the potential to

transform banking transactions by expanding customer data. AI makes it easy to observe,

analyse, and interpret the behaviour of banking customers, automatically deliver the end-user

experience (taking into account privacy), and provide a rich experience that will generate

customer loyalty in the post-digital era. AI increased customer satisfaction and credibility by

reducing fraud. AI consists of intelligent sensors that detect money laundering prevention,

fraud detection, and credit-related risks. All of these large-scale AI capabilities forced retail

bankers to apply them directly to their services. That's why it has become important for banks

and credit unions to take steps to please their customers. However, one of AI's main

challenges is finding a balance between proactive insights and security and privacy. Some

studies show that consumers are more likely to share personal information and information
with banks when they are provided with highly personalized services. According to a global

survey conducted by Capgemini, about 44% of bank consumers feel that way about sharing

personal information with banks.

In some cases, implementing AI into a banking system may be early in terms of

personalization, but there are many who feel the right time to leverage the potential of the

required technology and build expertise.

Enhanced Employee Skills for Digital-First Banking

New and emerging technologies have affected not only the banks or customers they serve,

but the workforce of these banks as well. In short, after witnessing the advancement of

technology, banks must either try to improve the technical knowledge of their existing

employees or replace their workforce with those who are familiar with the latest technology

trends.

Research conducted by Accenture suggests that retail banking employees are technically

more upgraded than institutions, so they have to wait until their employees get used to the

21st century tech trends. Putting a banking institution at risk of closure or depreciation.

This is why all these modern demands have forced banks and financial institutions to invest

in improving their knowledge of their existing workforce. Therefore, the combination of

employee skills and the latest technology trends will not only support the emergence of AI

ML, but will also accelerate the growth of banks and credit unions.
Conclusion

The emergence of all new technologies and trends will have a profound impact on the retail

banking sector. AI will change the way customers interact with banks and how retail banks

conduct business. Investing in AI is essential because it helps reduce the recurrence of the

retail banking industry and helps set banking companies ahead of their competitors. It is also

important to prepare retail banks for these changes by providing career and training

opportunities to existing employees. This will help develop the skills and knowledge needed

to transition to a role that leverages AI.

So, banks have to do it ahead of time before keeping pace with the latest upgrades and

technologies.