2020 is the year of accelerated digital transformation in the world. The main impulse was COVID-19 pandemic and the several-month lockdown, which caused a greater than ever demand for e-verification of customer identity, remote contracting and fully electronic customer service.

Step 1: Artificial Intelligence

According to Business Insider research, in 2020, 75% of large financial institutions are implementing solutions based on Artificial Intelligence (AI) and their benefits are yet to be seen in the upcoming year. Artificial Intelligence helps financial institutions to collect detailed customer information, which is then used to personalise products and services as closely as possible to the customer's needs or for purposes related to minimising credit risk.

Therefore, AI is also used on a large scale when assessing the creditworthiness. Increasingly, banks and other credit institutions verifying customers, take into account very inconspicuous factors such as the timing of filling in the "date of birth" field or the frequency of charging a mobile phones.

The extended time needed to fill in the "date of birth" field may indicate that the applicant does not know "his" date of birth and must rewrite it from some document, perhaps he is not who he claims to be on the web. On the other hand, a constantly discharged phone may indicate the user's irresponsibility and forgetfulness that in the future could result in the late repayment of liabilities by this person.

AI Benefits

Step 2: E-verification of identity and remote contracting

The lockdown accelerated implementation of solutions enabling remote customer identity verification on the market. Both banks, insurance companies and investment companies discovered the need to introduce electronic identification of clients (e.g. with a selfie), without the need for personal contact between the client and an employee of their institution.

Moreover, it is becoming more and more popular to conclude contracts remotely using a qualified electronic signature, which can now be obtained in Poland, e.g. via KIR, within a few minutes without leaving your home.

A qualified electronic signature is equivalent to a handwritten signature, so the contract is closed in the way that is unquestionably binding. Therefore can be used even for large-value transactions such as housing loans.

The Australian Banking Association, delighted with the effectiveness of remote emergency processes used in Australia during the lockdown, appealed to the Australian government to become permanent solutions of identiy and documents e-verification for remote contracts to facilitate transactions, minimise costs and reduce problems of "personal" signatures and paper documents.

Step 3: Open banking and invisible payments

The cooperation of Banks with FinTechs, with relatively light legal regulations applicable to these entities, will enable the rapid evolution of payment methods and the creation of completely new products and services.

Consumers expect purchases online and in traditional stores will be quick and convenient. Payment methods also need to follow this path. Customers are reluctant to fill in any payment instructions or click on subsequent windows. They expect the line between purchasing a product or using a service or payment will disappear. Thus, payment processes should be automated and take place completely in the background, i.e. become invisible.

An example of this type of initiative is NS, the public transport system in the Netherlands, which uses technology for "invisible tickets". Let's imagine that ... You are getting on the train. You know where you got on, which train, which place you took and where you got off. The fee is charged automatically. Isn’t it convenient?

Another example. BBVA Bank is testing the system of consumer facial recognition in the network of internal cafeterias. The process of paying for orders takes place without using credit card. You can walk into the restaurant, order a meal, eat and leave without even asking for a bill. Your account will be charged for it anyway.

Step 4: Voice assistants, voice and chat bots, and video consultations with virtual advisers

Bank of America voice assistant allows consumers to voice account management, Barclays gives voice to Siri, who guides the customer through the transfer process and Capital One, using Alexa (Amazon), allows free access to all functionalities of the mobile application. Our native PKO BP has also introduced a voice assistant to the IKO application.

Voice, chat bots or video consultations with a virtual advisor are also becoming more and more popular.

These services are intended to be an alternative for people who prefer to talk rather than write and so far have to contact the call center or use the bank's stationary branches to order instructions or obtain information.

Step 5: The age of invisible banking?

Financial services are closely integrated into our daily life.

Artificial intelligence, that is, advanced analysis of our habits, decisions, conduct, voice assistants, voice and chat bots, invisible payments and numerous FinTechs popping up like mushrooms, gradually preparing us for the world of "invisible banking".

It seems like customers will have less direct interactions with banks and their employees, but will  meet more often their needs through universal (fintech?) applications that allow them to simultaneously manage their finances deposited in various banks and select products and services from the catalog offers across different banks.

Banks may soon become "invisible rock" for clients who ensure their funds security and guarantee them fair credit conditions, protecting against usury and dishonest practices emerging from quasi-loan or quasi-financial institutions.

So is digital transformation the key to the future of the banking industry?

Only the increased use of technology seems to be the way forward for financial institutions. To be most effective, banks and financial institutions should redefine themselves as agile technology companies.

This will be a particular challenge for technologically neglected or small institutions, often struggling with the problem of outdated infrastructure and archaic core systems software, which significantly limit the possibility of integrating these solutions with modern services. Migration of the "old" systems to the new solutions would be very time-consuming and costly. Therefore, it is worth looking for solutions that will create a new services with no limitations of ineffective core systems, by implementing independent supplementary modules and even covering the functionality of the basic system.

Such solutions are offered by Advantica - Cloud Core Banking System - by Softax.

Advantica is a modular system that, depending on the needs of the institution, can provide comprehensive functionality in the field of remote identity verification and remote contracting, maintaining deposit accounts, servicing loans and assessing creditworthiness, domestic and foreign settlements, mobile payments, currency exchange or payment cards (debit, credit, charge, pre-paid).

The implementation of selected Adavantica modules tailored to the needs of particular  financial institution will allow the core system to remain unchanged while providing customers with access to modern products and services, including for instance immediate payments available 24x7, which are often available by banks only at certain times due to  limitations of back-end systems.

Advantica is a great proposition for small financial institutions that need a certain solution, but concurently do not want to invest in the expensive system or commence a long-term project of implementing Temenos, Alnova or Profile solution.