Top 8 Banking Trends for 2023

Financial software development, consulting, and transformation has swept across the banking industry. As our industry adapts to the new digital demands of consumers, key trends have begun to emerge.

The banking industry will be undergoing a technological transformation in the year 2023. Top trends in banking to expect include cloud migrations, the use of DevOps and omnichannel strategies, and greater use of AI. Each of these trends has transformative capabilities that are likely to shift the banking landscape.

Technological evolutions are reshaping how the world does business. For the financial industry, this means an even greater emphasis on FinTech and innovative banking technology. In this article, we outline what we believe to be the top 8 banking trends emerging in 2023.

Technological, Economical, and Social Factors Shaping the Banking Trends for 2023

No matter what the industry, new technologies can be highly disruptive.

Technology can be a double-edged sword. On the one hand, tech brings innovation and advancement to the financial industry. On the other hand, implementing digital solutions and overcoming the technological learning curve can be difficult.

For banking, the switch to digital services has been a drawn-out one. Banks have been slowly introducing new technologies to their business models over many years.

This is largely to do with the sensitive nature of finance. While a customer may adjust quickly to automatic checkout lines at the supermarket, accepting digital changes to banking processes takes more time.

There are three core issues to be mindful of when adopting innovative banking technologies:

Plus, we’ll cover how banks can properly prepare for and adapt to the digital age.

As technology continues to integrate into finance, new trends will emerge to help tackle these three core issues.

The Rise of FinTech

Technologies used within finance are so widespread, they effectively form their own mini-industry – FinTech.

FinTech is a term used to describe the union of finance and technology. Professionals in the FinTech realm design, develop, and implement innovative banking solutions.

An August 2020 survey uncovered the top 3 priorities of financial service organizations worldwide:

1. Improving digital experiences for clients
2. Enhancing data analytics capabilities
3. Reducing operational costs

Each of these priorities present problems that can be directly addressed through FinTech solutions.

A core principle of most FinTech companies is to help financial institutions provide more customer-centric services. FinTech often leverages the best organizational practices and the most innovative technologies to achieve greater results.

When it comes to trends facing the banking industry in 2023, FinTech will likely have solutions for each.

Banking Trends Emerging from 2020 and 2022

Leading up to March 2020, adoption of innovative banking solutions and technologies was slowly growing.

However, the first lockdown of the Covid-19 pandemic shook markets around the world. The year 2020 almost instantaneously became the year for technological advancements.

Though the pandemic is now slowing down significantly, many of the technological implementations performed will persist. Major trends that emerged in 2020, 2021 and 2022 in all industries, with no exception for banking, include:

• Remote work environments. Working from home became a widespread reality for many during the pandemic. For many businesses, remote work environments proved to be just as productive – if not more so – than traditional ones.
• Heightened financial awareness. The pandemic caused many people financial stress and worry. This has resulted in customers being more interested and involved in their personal finance. Interactive and responsive digital banking systems thus rose even further in popularity.
• Digital misinformation. Being stuck at home resulted in more people than ever becoming more familiar with the internet. As a result, misinformation could more easily spread digitally on a wide variety of topics. To address this, banks need to establish themselves as digital authorities and provide the proper educational resources.

Keeping the trends of 2020, 2021 and 2022 in mind is crucial for finding greater success in 2023. Banks can both learn from the mistakes of previous years and come up with innovative solutions for the upcoming year.

The Top 8 Banking Trends in 2023

FinTech has come to the forefront of the financial industry. This puts the attention on digital banking more than ever.

The following seven trends will be key players in the banking industry over the next year – and likely the next decade!

1. Cloud Migrations

Cloud migrations are likely to remain a serious priority for banks in 2023.

The years 2020, 2021 and 2022 pushed the banking industry squarely into the digital space. To adapt quickly, many financial institutions began speeding up their cloud solutions.

In a December 2020 Celent survey, 88% of respondents reported 3 key benefits experienced after migrating:

1. Increased agility
2. Lowered budgetary expenses
3. Movement away from capital expenditures

Cloud computing delivers all the computing services you need virtually. This includes everything from servers and databases to analytics and software.

Plus, many cloud platforms allow users to introduce their own code and applications. This enables banks to optimize their digital presence to meet their specific needs.

There are 3 key factors that make migrations to the cloud so appealing to banks’ innovative solutions. These include:

• Centralized Location. All financial information is securely stored in one central location. The cloud exists in a digital space rather than a physical one. This allows authorized personnel to gain access anytime from anywhere, which enables remote work environments and greater efficiency.
• Scalability. Using onsite equipment to protect sensitive financial information can be costly. This is especially true when business and demand scale up. With the cloud, your platform scales automatically and can handle heavy workloads.
• 24/7 Accessibility. Due to being in a central and virtual space, the cloud offers 24/7 access. For employees, this means more freedom in their work environments. For customers, this means accessing accounts and viewing financial information whenever desired.

Additionally, cloud migrations allow banks to lower operational costs and working from the cloud enables employees to work remotely. As a result, the costs to run an office space can be reduced significantly.

2. Staff Augmentation and Managed Services

Regardless of the period, the distribution of resources has always been and will be a trend in banking. In 2023, we expect to see the expansion of the influence of managed services and staff augmentation. This is primarily due to constantly improving systems: traditional banks work with time-tested technologies and prefer rigor to innovation. However, areas such as cybersecurity and customer service cannot remain without the innovation of the tech stack. In order to implement it qualitatively, invited resources are needed, experts in their field who are able to work with a variety of platforms and solutions.

In addition, reduced cost is another reason why staff augmentation and managed services will become a banking trend in 2023. In recalculation, it is much more profitable for banks to hire third-party specialists to solve point problems than to keep employees with specialized experience on their staff. This is especially the case when it comes to implementing one big cloud migration.

3. DevOps

Embracing trending financial technologies can be difficult for traditional banks. This is due to digital tools requiring regular and time-consuming software development.

A DevOps strategy comes from both philosophical and technical practices. DevOps prioritizes speed of delivery without sacrificing quality. This method requires continuous development and testing.

DevOps offers a myriad of benefits for banks, including:

• Continuous deliveries. A key objective of DevOps is to provide continuous software deliveries. This also includes continuous development and updating.
• Automation. DevOps enables the automation of many technical aspects and maintenance tasks. This helps to boost overall productivity levels.
• Increased collaboration. DevOps utilizes professionals in many departments, encouraging collaborative behavior.
• Time for innovation. DevOps helps free up more of your team’s time. This free time allows your team to spend more time being innovative. As a result, your team will have more time to commit to major projects and innovative banking technologies.

The industry only continues to move towards total digitization. Having a strong DevOps team will be key to developing successful software in the future.

4. Artificial Intelligence and Machine Learning

Artificial intelligence, or AI, is a very useful technology for the banking industry.

Popular use cases for AI/ML in banking include:

• Customer identification and authorization. AI helps to automate authorization tasks. These can include entering passcodes or using biometric security measures.
• Front office banking. AI helps create responsive and conversational interfaces. This often comes in the form of chatbots and can serve as an important touchpoint for customers. Chatbots regularly help customers navigate a site and acquire services or products.
• Fraud and risk management. AI offers analytical and predictive capabilities along with automation. These work together to prevent fraud and assess risk more efficiently.

A recent eMarketer report found that 56 percent of financial companies implemented AI for risk management. This makes risk management the most common use for AI as the latest trend in the banking industry.

Other real-life applications of AI include:

• Generation of new revenue potential
• Customer service
• Client acquisition.

5. Omnichannel Strategy

As banks increase their digital presence, they must keep accessibility as a priority.

Omnichannel involves offering the same services and products through all business channels. This can include online, in-person, or over-the-phone business.

An omnichannel approach helps provide customers with a personalized experience. This not only strengthens customer loyalty, but also helps to provide extra value.

The importance of intuitive mobile accessibility is more crucial than ever. Customers expect access to most services from the convenience of their smartphones. This means that now is the time for innovative banking solutions to include developing digital platforms that allow for mobile service.

Banks struggling to unify their departments and provide a strong digital voice will have difficulty finding success amongst younger generations. Luckily, the rise of omnichannel strategies will provide great assistance in this unification.

6. Open Banking

The concept of open banking is relatively young; it only came about in 2015. Its focus is the creation of open APIs and how global financial institutions can use them to build more transparent structures and create ultra-personalized offers for customers. All this happens with client consent, whose data is used for analysis and processing.

The trade-off for these benefits is that banks must share customer data with third-party developers, so cybersecurity is a main concern.

When this is appropriately addressed, there are major gains associated with open banking, including:

1. Marketplaces. Like individual creators or large online clothing stores, banks can now design their marketplaces with end-to-end solutions. Banking customers can choose the services they want to connect with – from pension services to savings accounts. This increases customer focus and allows banks to target their customers with the right solutions at the right time.
2. Affiliate systems. Since banks are included in a single regulatory system and share data about their customers, this allows them to offer their customers a completely new feature: viewing their account data from different banks in one application.
3. Digitization. Due to the high-quality software  that is required for the implementation of OpenAPI, banks who integrate it will improve their tech stack, bringing it up to date and increasing their competitive advantage against fintech startups.

7. Blockchain and NFT

Blockchain and NFT systems have spread all over the world, and financial institutions at all levels are interested in offering and working with digital assets.

From offering coins as part of democratized wealth management to leveraging distributed ledgers as infrastructure, the benefits of blockchain and NFTs are taking financial institutions by storm.

8. RPA

RPA (Robotic Process Automation) is a process in which robots imitate human actions. The robot is able to follow links, copy and redirect data, verify it, perform mathematical calculations, and work with servers non-stop.

RPA can:

1. Reduce the risk of human error.
   Working with large amounts of data and customer databases isn’t easy, and manual processes can often lead to errors. An AI application, working according to a clearly defined scheme, can process requests accurately and perform a comprehensive set of actions without waiting for a complex work process to take place.
2. Save resources.
   Even a large body staff can only work so many hours per day. RPA systems, however, are able to work non-stop 24/7 to help your staff to handle tasks efficiently.
3. Accelerate processes.
   Robots and AI applications are capable of processing far more data in a short period than their human counterparts. Many manual processes that do not need human resources can be optimized using RPA.

RPA is particularly popular in:

• Loan application processing
• Client onboarding
• Fraud detection

How Can Banks Adapt to Digital Trends in 2023?

Knowing about upcoming banking trends is one thing. Taking the right actions to prepare your financial institution for the future is another.

When looking to the future of banking, financial professionals must consider how they will adapt to new digital needs of customers.

To begin a digital transformation, financial institutions must take inventory of what digital strategies they already have in place. From there, they can begin to seek out the talent they need to achieve their goals.

Here are 3 key factors for adapting to digital banking trends in 2023:

Final Thoughts

Throughout 2023 and the coming years, technology will continue to be a disruptive presence in the financial industry.

As banks develop a deeper understanding of innovative technologies, it is imperative to pay close attention to digital trends.

The eight major banking trends of 2023 are:

The future of banking is tech. Embracing upcoming trends is essential for financial institutions to find success in 2023.