The Digital Revolution In Banking

The Digital Revolution In Banking

The digital transformation in the financial sector is creating a major revolution for the banking industry. Technological progress is enabling banks to expand their services and to meet the new expectations of their customers. Today’s customers are increasingly looking for simplicity, accessibility, flexibility, speed and optimal banking costs.   

How is digital technology being used in this sector and what important innovations lie ahead of us? Discover the latest, rising trends in digital banking in our article.   

This is an overview of the new digital trends in Switzerland and the rest of the world in 2021: 

Switzerland remains the leading country for innovation  

Geneva’s banking industry favors technological innovation and is adapting to “Y” and “Z” generations, allowing them to stay relevant and on trend. Indeed, in 2020, Switzerland ranks among the most competitive and innovative countries in the world according to the World Economic Forum and the IMD. It is investing in digital technology and successfully coping with the global, technological shift. In its survey on “Digitization and Fintech in Swiss Banks 2019”, published in August 2019, the Swiss National Bank (SNB) notes that banks see digitization primarily as an opportunity, especially in reducing their costs and increasing the quality of their services. For this reason, FINMA has recognized the growing importance of technology and created a “License Light” that enables customer identification online or via video. Swiss banks have thus been able to explore new digital possibilities, while preserving the key strengths of “Swiss Banking” which include financial competence and reliability.  

Switzerland is a financial center that aspires to become an international hub for sustainable finance; a pioneer in the field of financial flows and sustainable financial services. More and more banks are taking part in international initiatives on transparency with regard to the risks inherent in ESG (environmental, social and governance) factors. They are expanding their services to include ESG factors such as Green Bonds, sustainability and social bond offerings.  

During the global pandemic, five key trends in the Swiss banking sector have been identified, including:  

  1. Digitization is being used more often within banks: electronic signatures, state-recognized e-ID, etc. 
  2. Customers expect more digital financial services, including personalized and digital follow-ups
  3. Alternative payment methods are becoming common place, including mobile and contactless payments, bank transfers an e-purses 
  4. “Smart working” has become more popular and flexible work forms are being encouraged. 
  5. Investment in security and digital infrastructure is increasing 

  

The Swiss Bankers Association is focusing on the following key aspects to ensure Switzerland’s competitiveness as a financial center in the world: 

  • A revision of current obstacles in the market preventing digital business models
     
  • The Blockchain: it reduces customer identification costs. Customer data can be accessed more quickly, resulting in a more efficient authentication process. For customers, it reinforces their rights: they are the sole owners of their digital identity and have a code to access their personal data and certificates. Asset tokenization also opens up new opportunities as it consists of converting the rights to an asset into a digital “token” that has the advantage of transparency, efficiency and security. 

 

  • An electronic identity: this consists of setting up a government-recognized login that allows users to identify themselves on the Internet in a clear, secure and user-friendly manner. The e-ID is extremely useful for administrative matters, making transactions more efficient in business and customer relations, and increasing the security of identification on the Internet.
     
  • Outsourcing and cloud computing services: the migration of banking IT systems to a cloud will increase productivity and incur lower costs. Cloud computing is a model for enabling convenient, on- demand network access to a shared pool of configurable computing resources (for example, networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service-provider interaction.
     
  • Cybersecurity: this is one of the greatest concerns in digital technology. So, the creation of a cyber defense campus and a security competence center is essential for many banks that wish to go digital; the implementation of a crisis mechanism within the banking sector is also essential. Cybersecurity training needs to be taken into consideration and done by specialists.
     
  • Open banking: this involves the mutual exchange of data. It is a value-adding factor for all stakeholders, customers, third-party providers and banks.
     
  • The use and evaluation of Big Data using RegTech. RegTech uses information technology to enhance regulatory processes. RegTech would improve compliance at a significantly lower cost.
     

In 2020, UBS announced that it will start a new initiative to raise funds for Fintech start-ups. The aim is to promote start-ups in the financial sector and drive their own digitization. A year ago, UBS opened its “Digital Factory” innovation laboratory in Zurich. A place where companies, developers and clients are invited to work together in an agile manner. It is a way for the bank to develop IT solutions more quickly, but also to reinvent itself internally.  

Another company that is taking the digital revolution in its stride is Credit Suisse Asset Management that has decided to participate in the creation of a new framework, the i.AM Innovation Lab. This innovation lab aims to remain at the forefront of the sector and to design tools to accompany and shape change. It uses IA-assisted asset management consulting and offers a first glimpse into the digital world of asset management to many investors. Technological advances are driving the financial sector forward, which is becoming more personalized. 

 

  • The easy way to pay online, fast 

Instant Transfer is a new and free payment method that allows you to send money to another account in less than 10 seconds, at any time of the day and on any day of the year. This method is a new alternative for online payments. Floa, the leader in web and mobile payment solutions, has already started to deploy Instant Transfer offers using Open Banking. This technology allows banks to share their data with other industry players, including Fintech.  

This new offer from Floa, developed in partnership with Bridge (a technology developed by Bankin‘) allows you to initiate, directly with your bank, an easy and instant transfer  

By 2022, it will probably become common place to pay in physical stores vaia instant transfer.   

  • Paperless pocket money for your children 

Boursorama Bank has just launched a new type of bank account for children, called Kodar. This offer allows parents to provide their children with digital pocket money paid. Thus, children can then pay with a contactless card, which is an important asset especially during this global pandemic. It also helps parents teach their kids to be responsible with cash and digital money. However, these accounts are only accessible for children aged 12 and over.  

Similarly, there is a digital banking solution that has been developed by the company Money Walkie, in partnership with Mastercard and Treezor, that is just as creative: it is a contactless wallet. It has the appearance of a small animal and allows children to digitally pay small sums of money, for example, when purchasing sweets, ice cream, etc.   

These tools aim to make children financially responsible from an early age 

  • 2020: the year of contactless payment  

Covid-19 has accelerated the democratization of contactless payment via mobile phones. This method of payment has the dual benefit of not entailing any additional costs for the customer and also of not risking any contact with the virus. Consumers are steadily becoming more inclined to pay with their smartphone. For example, Stéphane Vallois, Orange Bank’s Deputy CEO highlighted that, Mobile payment represents 20% of Orange Bank’s card payments, versus less than 1% for the market as a whole. The digital market is becoming more significant in the banking sector, shifting consumers perceptions and habits. Apple Pay, Google Pay, Samsung Pay and Paylib are becoming more and more popular. There are advantages to this payment method, for example, unlike contactless, there is no cap on smartphone payments. The only limit is the credit card limit,” highlights Maxime Chipoy, the manager of Meilleurebanque.com. Contactless payment is a really attractive solution, but unfortunately not accessible to all because not all banks offer mobile payment solutions yet 

  • Automatic savings 

Automatic savings is intended to help young people to put a little money aside to finance their projects, especially as it the younger generations that generally find it hardest to save. 

For this, Yeeld, a savings application launched in 2019, allows you to put money aside in a fun way, by setting yourself an annual challenge: you save 1 euro on the 1st week, 2 euros on the 2nd… and so on until 52 euros on the 52nd week.   

There is also Plum, an AI assistant that follows the same principle and has a few additional options such as “rainy dayssavings for example, which allows you to decide how much money you want to put aside each time the weather is dismal 

Cashbee is another revolution in financial technology. This application analyzes your accounts and tells you how much money you can save or invest, depending on your objective 

  • Teen banking: a growing trend   

Today, banks encourage children to become financially independent so that they can learn to manage their pocket money on their own.    

In traditional banks, it is generally as of the age of 12 and onwards that counsellors start suggesting that parents create a specific withdrawal card and account for their child. These are special accounts that only allow you to use the money that is available balance on the account.  

Online banks including Pixpay, Kard and Xaalys for example offer an option for parents to give their children a pre-paid card, which can be practical and even educational. The reason for this is because banks wish to develop budget and financial education for young people. Indeed, banks have even developed functionalities that teach you how to manage a budget via online quizzes and games, as well as virtual piggy banks to save and jackpot funds to prepare for a birthday, for example. 

Pixpay offers the Pix&love program, in partnership with 10 emblematic brands for Generation Z such as McDonald’s, Undiz, Back Market, etc. This allows children to receive a few euros in cashback if they buy from these partner brands. It is also presented as an educational tool that allows children to anticipate a purchase and have fun.   

  • Online banking

Hello Bank, BforBank, ING Direct and Boursorama are all banks that are expaning their digital banking services. What is more, the pandemic led to a considerable increase in new online banking registrations. This change in payment habits is an important factor in the digitalization of the banking sector. Neo banks for example, which are 100% mobile banks, are also booming because they allow the management of all accounts directly from the smartphone.  

  • Bitcoin exceeds $30,000 for the first time in its history.   

Bitcoin, the first decentralized crypto currency, reached a value of $30,000 on January 2, 2021. Launched in January 2009, this purely digital currency, with no leader or government to steer it, has become extremely popular during the crisis. PayPal contributed to its growing sucess as well by launching crypto currency payments.   

  • The DO Card: an eco-friendly bank card  

In partnership with Mastercard, the Swedish startup Doconomy has launched the world’s first bank card capable of calculating the carbon footprint of purchases. This start-up offers two banking solutions:   

  • The White Card  

This card, coupled with a mobile application, sends you a notification on your phone detailing the carbon footprint of your expenses. You can follow your progress in real time. The application allows you to offset your CO2 emissions by investing in environmental projects that are certified by the UN.  

  • The Black Card  

This card allows you to set your own carbon-footprint cap that you may not exceed. If the carbon footprint of your purchases is higher than the target you have set, your purchase will be automatically blocked.   

  • How is data being used in finance 

Artificial intelligence, machine learning and other digital innovations are being integrated into different areas of the banking sector. What is important to keep in mind is that these innovations are based on data.  

For banks, this data translates into the use of credit cards and other banking services that contain valuable information about users, For example, spending habits, monthly income, savings, withdrawals, etc. This data represents a gold mine of information for banks 

The CommBank in Australia offers small and medium-sized businesses access to the data collected from their customers, to better target and promote their products but also to detect atypical behavior and prevent fraud.   

Another important asset of Big Data in finance is that it enables banks to offer their customers a unique and personalized experience in real time. For example, Citigroup, through the creation of its data lake (raw data), the company has a 360° view of their customers, with the possibility of cross-referencing this data to offer services that are adapted to them in real time.  

The banking sector has seen its ecosystem metamorphose over the last few years with digital technology. To capitalize on the digital landscape, banks need to build on their current strengths and strategic advantage. Ideally, banks should leverage digital technology to improve and ensure that they provide an excellent customer experience