At the moment, the UK banking industry is going through a lot of regulatory and technological changes. Evie Rusman speaks to senior digital strategist at Temenos Kam Chana about future technology trends and how the major banks can adapt to this new era.
Ever since cloud technology has emerged, the world’s biggest banking groups have been competing with the rising number of young digital challenger banks. Not only has this tech increased speed and efficiency but it has also meant more traditional banks have struggled to keep up with consumer needs.
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As a result, these institutions must hop on board with this new era and use this readily available software to not only innovate but become more efficient operationally.
Kam Chana tells RBI that the whole environment around banking has changed significantly causing a number of challenges for fintechs and banks alike.
She says: “I think one of the biggest challenges today is the fact that the industry has changed. So what we’ve picked up in the industry is the difference between banks and banking. And competitively the industry is moving towards an ecosystem of organisations, be they banks or non-banks, or organisations that have nothing to do with banking but offer banking capability.”
The increase in non-banks, such as Revolut, adopting financial services has caused a huge culture shift within the Industry. Chana highlights how banks and non-banks are now competing for the same customers.
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By GlobalData“Technology is always changing,” says Chana. “What I see in terms of trending over the next two to five years is a fundamental change in the approach by banks to move forward and how the culture and the reorganisation of banks around that culture ultimately use technology to deliver solutions.
“Many banks have started to realise that the problem is they don’t have enough tech. But another issue is that they don’t know how to use this new technology either. A lot of organisations like HSBC and Lloyds are reorganising their structures around use cases.
“Banks are becoming more human-centric and focused on what human problems can be solved, and then how to organise themselves around it. I would say that is one of the biggest trends at the moment, and is what is driving open banking.”
Technological trends to watch out for
When it comes to forecasting technological trends over the next 12 months, most industry experts will say AI is the thing to watch out for. Chana contradicts this by outlining that explainable artificial intelligence (XAI) is the real trend on the horizon.
“At Temenos, we have now invested in XAI closing a trend of transparency and control,” she says. “Regulators want transparency and users want to control. We are looking at how we can use XAI to not only provide insight and analysis but open up the doors, so that everyone can see how they got to that solution, and ultimately give people the ability to control their lives again.
“This is really exciting. I think over the next two to three years XAI is really going to become normalised because we will start to realise that it’s not about data grabbing anymore. It’s about utilising the right data to create the right insights, and then creating meaningful user experiences.”
Chana also predicts that another big trend will be de-siloing the banks and harmonising the customer experience. She explains how customers are no longer seen as a current account holder or a business banking holder, or a credit card holder but as someone with multiple interests.
“These different interests may conflict the other or not sit well with a particular part of one’s bank but ultimately need to be served as a holistic identity,” Chana says. “So dishonouring the bank and creating connected human meaningful customer experiences is what I see as the big trend over the next two to five years, because it’s going to take a long time for the banks to really get it.”
Scratching the surface
Chana explains that currently banks are not doing enough when it comes to AI and machine learning, and really enhancing the customer experience.
She says: “There are a lot of organisations that are just talking about AI and how many of us will start to lose our jobs. We haven’t even scratched the surface of anything really useful with it yet. A lot of AI is still just a set of rules.
“There are organisations outside of banking who are doing really clever things with AI such as Spotify where it does actually feel like the technology is being used to understand me as a human. I do believe there is a huge opportunity for banks to step up and become the ‘Spotify of banking’ where customers are understood as individuals.
“There aren’t many banks that do orchestration very well. They will orchestrate their own accounts but do not orchestrate everything you need in your life. There is so much white space for banking at the moment to grow beyond today’s current model.”
Should the banks worry?
As always, with anything new there is usually a worry traditional practice may be forgotten. Is this the case for the major banks?
Chana says: “The banks only have something to worry about if they sit back and watch or if they do not respond. At the moment, I think banks can still respond and remain relevant. But if they sit back and assume they are untouchable they will die out pretty quickly.
“Like any competitive market, you can’t just stand still. It doesn’t matter how big you are. The way I see it, the big banks still have an opportunity to remain competitive. They can deliver features products and services that are relevant, and maintain their market share, if not grow it, using the technology in the right way.
In addition to this Chana highlights how trust is a big factor when it comes to relevancy. She explains how the more traditional banks can use this to their advantage.
“At the end of the day, as customers we still trust the banks,” Chana adds. “That does give the big banks a major advantage. Whereas, if you came across a new bank, it may have some great features but do I trust them?”
