Banking Industry Trends of 2022
The banking industry has always been at the forefront of innovation, and the past few years have been no exception. In 2022, we have seen a number of significant innovations that are transforming the way banks operate and serve their customers.
One of the biggest trends in the banking industry has been the increased use of artificial intelligence (AI) and machine learning. Banks are using these technologies to improve fraud detection, assess and manage risk, and provide personalized recommendations to customers. They are also being used to automate certain tasks and processes within the bank, such as data entry and analysis, to improve efficiency and reduce errors.
Another major trend has been the development of mobile banking super-apps and online account management tools. These tools allow customers to access their accounts and perform banking transactions anytime, anywhere, using their smartphone or computer. Many banks have also introduced biometric authentication methods, such as fingerprint scanning and facial recognition, to enhance the security of these digital services.
Besides traditional banking services, we have also seen an increase in the development of new financial products and services that meet the changing needs of customers. This includes the rise of Robo-advisors, which use algorithms to provide personalized investment recommendations, and the development of new payment methods, such as mobile payment platforms and cryptocurrency.
Yes, blockchain technology will gain a larger foothold in the banking industry as well. Banks will start using it for cross-border payments.
Sustainable finance has also emerged as a major focus for many banks in 2022. In response to increasing demand from customers and investors, banks are developing financial products and services that support environmental, social, and governance (ESG) goals. This includes green bonds, which fund projects that have a positive impact on the environment and impact investing, which aims to generate both financial returns and positive social or environmental impacts.
Another trend in the banking industry has been the use of data analytics and customer insights to improve the customer experience. By analyzing data on customer behaviour and preferences, banks are able to offer more personalized and targeted services, such as personalized recommendations for financial products and services. The AI-based conversation chatbots have been the focus of customer delight. It uses the cognitive ability to understand and respond to customers instantly based on a vast knowledge of the financial industry. Mind you; it’s not just chatbots, it is artificial intelligent chatbots that will make waves in the coming days through hyper-personalization and automation.
Generative AI is one which is not talked about much today because of limited adoption, but soon it will become a trend in the banking industry, with the coming year starting its early adoption in the banking industry.
Besides these trends, we have also seen several other innovations in the banking industry in 2022. For example, many banks have implemented virtual reality (VR) and augmented reality (AR) technologies to enhance customer training and education. Some banks have also introduced chatbots and virtual assistants that can help customers with common inquiries, freeing up human customer service representatives to handle more complex issues.
The race towards “metaverse bank” has started, and banks want to provide virtual branch experience to new younger audiences who are more experienced in NFTs. With few banks already having launched metaverse banks in this year, next year is going to see widespread adoption of the metaverse ecosystem.
Overall, the banking industry has seen several significant innovations in 2022, with a focus on the use of technology, the development of new financial products and services, and the promotion of sustainable finance. These trends are helping banks to improve efficiency, reduce costs, and enhance the customer experience, and they are likely to continue driving innovation in the industry in the years ahead.
With CBDC launched, we need to see how many banks remain relevant in the coming years.
Not to forget that all financial institutions will become a technology company in the coming years !!!!
Programmable Money !!!
Unleashing the power of Programmable Money: A Revolution in Our Wallets?
In today’s digital age, the concept of money is evolving rapidly. A year ago, the RBI (Central Bank of India) did something that few other central banks had done before — launch a Central Bank Digital Currency (CBDC). Think of this simply as an online version of our physical currency. It’s a digital banknote. With a CBDC, the RBI can simply ask people to open digital wallets and issue new digital notes to them directly called e-rupee.
Having run this pilot project for a year, RBI is deliberating it now to take it to the next level. Yes, as you rightly guessed from the title, RBI is deliberating to launch it as programmable e-rupee.
Unpacking the concept:
Programmable money, is reshaping the way we think about and use currency. Unlike traditional forms of money, programmable money is not just a medium of exchange but also a tool that can execute actions based on predefined conditions, thanks to smart contracts. This is often achieved through smart contracts, self-executing agreements stored on a blockchain. These contracts automatically enforce and execute the terms of the agreement with no intermediaries.
Imagine a world where government provides subsidy to buy a ration and beneficiary can only use this money to buy food ration as an example and nothing else. Voila, the purpose is served. Yes, that is exactly central bank is thinking of programming your money in your e-wallet so that you cannot spend the money on anything else apart from buying grocery or food stuff. The government can also set an expiry date for the money similar to loyalty reward points.
While some may argue that this may cause limited fungibility of money but that is only for the brief period until that e-money is spent on targeted sector/purpose for the first time.
Yes, this may cause the government to track your move and data privacy nightmare may become an issue. However, this may ensure that government money is used exactly for the purpose it has been distributed.
There are other use cases also which may ensure frictionless transactions ultimately benefiting humans. Some of the scenarios can be like it automatically deducts rent on your payday, or a donation to your favourite charity triggers after you complete a workout. This is the potential of programmable money, a digital currency embedded with code that defines its use. While still in its early stages, it holds the promise to revolutionize the way we interact with money.
Programmable money differs from traditional digital currencies, like Bitcoin, in its ability to carry instructions. These contracts specify conditions under which the money can be used, opening up a pandora’s box of possibilities.
Potential Applications:
The applications of programmable money are vast and still evolving, but here are some exciting examples:
- Automated Financial Management: Imagine setting up rules to automatically invest a portion of your pay check, send funds for recurring bills, or even allocate savings based on pre-defined goals. This can save time, minimize manual errors, and boost financial discipline.
- Targeted Aid and Micropayments: Governments and NGOs could create programmable tokens to distribute aid efficiently, ensuring it reaches the intended beneficiaries and is used for specific purposes like education or healthcare. Similarly, micro-payments for content, like online articles or music streams, could be automated based on consumption.
- Supply Chain Efficiency: In complex supply chains, programmable money could track goods along their journey, trigger payments upon delivery, and ensure compliance with specific conditions. This could improve transparency, reduce fraud, and streamline processes.
- Programmable Insurance: Smart contracts could automate claims payouts based on pre-defined triggers, like reaching a specific health metric or experiencing a weather event. This could streamline the insurance process and improve access to coverage.
- Tokenized Securities: Programmable money could facilitate the creation of new financial instruments like tokenized stocks or bonds. These could offer fractional ownership, frictionless trading, and programmable dividend distribution.
Challenges and Concerns:
While the potential is immense, several challenges need to be addressed before widespread adoption of programmable money:
- Technical Complexity: Building and maintaining secure and scalable platforms for programmable money can be complex and expensive.
- Regulatory Issues: Existing regulations might not be equipped to handle the unique aspects of programmable money, requiring legal frameworks to adapt.
- Privacy and Security: Programmable money could raise privacy concerns, as transactions might be tied to specific conditions. Robust security measures will be crucial to prevent fraud and manipulation.
- Accessibility and Equity: Not everyone has access to the technology and skills required to interact with programmable money, potentially exacerbating existing inequalities.
The Road Ahead:
Programmable money is still in its nascent stages, but the potential to transform financial systems and everyday life is undeniable. As technical hurdles are overcome, regulations evolve, and awareness grows, we might see this technology seamlessly integrated into our financial lives. The key will be to ensure its development focuses on inclusion, security, and responsible innovation, paving the way for a more efficient, transparent, and equitable financial future.