Dissecting banking technology trends in 2020
Andrea Melville, managing director of commercialisation and propositions, global transaction banking at Lloyds Bank sets out her predictions for key trends and developments throughout this year.
Customer expectations of technology continue to evolve – and for those in the financial services sector that means action has become an imperative.
We’ve seen customers demand the ability to access all of their banking services through a channel of their choice. They want to have more personalised information on their financial affairs – whether that’s insight into their cashflow and performance, or extra insights into their core banking services.
Shifting expectations will continue to drive technological trends this year as providers apply new advances to address their clients’ pain points, as well as their own. Here are five broad areas of banking technology where we expect to see a focus in the months to come.
APIs making connections
Application programme interfaces (APIs) have been around for a long time, but the acceleration of their usage within banking, and within banking propositions, will continue to be a focus. Banks will continue to invest in API technology, whether to help increase the speed of underlying processes or to connect with customer systems such as accountancy packages or enterprise resource planning software.
Last year we launched an API enabled proposition that allows clients to send an instant payment to the bank from within their workflow, removing extra steps from their processes and enhancing their own customer’s experience.
We have been co-creating these propositions with clients, to ensure we are solving the right problems and creating services which are fast, easy and friction free.
Advanced Analytics, Machine Learning and AI
In 2020 we expect the growing trend of maximising the use of data to continue. Advanced analytics has long been a cornerstone of decision making, and this will continue with more expansion into machine learning and artificial intelligence (AI). This could mean helping to deliver greater personalisation, or supporting more automated customer journeys.
Lloyds Bank’s recent collaboration with fintech Xelix is a great example of how technologies like AI and machine learning are adding value to banking propositions. One part of our partnership centred around leveraging machine learning to spot errors in open invoice data, reducing potential errors and fraud, ultimately helping us better meet our customers’ requirements by enhancing our insights-driven offerings.
Collaboration between fintechs and financial institutions (FIs) is set to continue increasing in 2020 – with clear benefits for everyone involved.
Together, fintechs and FIs can help to find solutions to cross-industry challenges, or leverage their unique strengths to support each other’s ambitions. The agility of fintechs means they are well-positioned to accelerate the pace of technological development and testing, while big banks, through their client bases, can provide fintechs with the opportunity to significantly scale their products.
The adoption of the cloud
We spoke to more than 100 senior decision makers for the latest Lloyds Bank Financial Institutions Sentiment Survey (FISS) last year and 60% of our respondents said cloud adoption would be an investment priority in the coming months.
Many cloud strategies have been in development over the past few years, and 2020 will continue to see the cloud be a major enabler in propositions – helping to support partnerships with fintechs, the handling of large quantities of data or the development of the API economy.
In the small medium-sized enterprise (SME) banking space, the use of cloud-based solutions such as accountancy packages could be a driver for firms to adopt other new or emerging technology-enabled propositions, such as machine learning, AI or APIs.
Distributed Ledger Technology
Distributed ledger technology (DLT) is the name given to digital transaction systems such as blockchain. Although many projects are still in their infancy, 2020 will likely see a number of organisations that Lloyds Bank are involved with progress from the design stages through to testing and even small-scale utilisation – ultimately aiming to launch larger, fully developed, solutions in the years ahead.
Last year, we joined Komgo, which is a DLT solution for trade finance in the commodities sector, as well as becoming a founding member of Fnality International, the company developing Utility Settlement Coin (USC) – a settlement asset that will help to simplify the current clearing and settlement process, and enable faster and more secure payments between different banks and their customers.
DLT has the ability to transform processes, systems and ways of working, but our research suggests that while investment in DLT is set to increase, relatively few businesses are expecting to invest in the immediate future. Mainstream DLT value propositions still needs time to develop, but there are some exciting opportunities and this is a great time for banks and businesses to learn about the technology.
Change to come
This year will be one of continued disruption and evolution in banking technology as providers continue to innovate in response to customer demand. At Lloyds Bank, we’re committed to exploring the potential of new and emerging technologies, and have been investing £3 billion between 2018 and 2021 to transform and digitalise our business more broadly.
It’s impossible to know exactly what else this year will hold, but it’s certain that – over the months to come – we’ll continue to work by the side of businesses to explore how technology can help them prosper.
By Andrea Melville, managing director of commercialisation and propositions, global transaction banking at Lloyds Bank