2023 Tech Trends: Banks Will Focus on Automation and a Continued Push to the Cloud

Financial institutions offer a variety of digital services, including mobile banking apps, online trading, asset management applications and other investment resources. And according to a survey from American Banker, most financial institutions plan to boost their tech spending by 10 percent or more in 2023.

This year, legacy banks will aim to keep pace with newer competitors with a greater focus on the digital experience for customers. This is in part because of the threat posed by fintech companies rising to swallow legacy banks’ market share, but it’s also powered by partnerships between fintech firms and banks.

On the one hand, some fintech companies have a banking license, while digital players are challenging traditional banking businesses such as mortgage lending, says Jerry Silva, vice president for IDC Financial Insights.

However, the threat to traditional banks has “not been wholesale,” he says. “This belief of fintechs posing an existential threat against traditional financial services organizations is just simply not true.”

Here are three trends to look for in financial services in 2023.

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1. Banks Will Double Down on Artificial Intelligence

Artificial intelligence has been making an impact in financial services in ways that include powering recommendation engines and chatbots that aid customer service. AI also helps banks with fraud analysis and prevention.

“One of the main reasons to invest in AI and machine learning is for the analytics side of the house,” Silva says. In 2023, more companies may use AI to drive customer engagement, validate credit scoring and protect businesses against fraud.

According to the latest State of AI in Financial Services report from NVIDIA, 31 percent of financial services organizations say they are investing in fraud detection for transactions and payments, compared with 10 percent in 2021. Meanwhile, 28 percent are now investing in conversational AI, up from 8 percent in 2021.

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Banks use AI to track where workloads are running, whether it’s in the cloud or on-premises. AI also helps financial institutions automate IT ticket creation if a mobile banking app goes down, Silva says. This process of automated troubleshooting is called a self-healing infrastructure, and it requires AI, automation and “a ton of cultural change on the bank side,” he says.

Banks are moving toward more AI and self-healing infrastructure in 2023, and Silva says AI-enabled automation continues to mature.

More financial institutions will also perform continuous monitoring, which provides more proactive security checks than postmortem audits and helps with business continuity, according to Mo Ghazouly, a professor at Durham College and a member of the ISACA Emerging Trends Working Group.

“There are different systems right now and solutions providers that are serving organizations to automate the business continuity plan,” Ghazouly says. “So, if a disaster is announced, a system will give a call directly to the right people at financial institutions to start the steps that are mandated in case of a crisis.”

2. Banks Will Drive New Services with Low-Code, No-Code Solutions

A key trend to watch for in financial services is a low-code or no-code approach to application development, which makes software development simpler for nontech professionals.

For example, Silva says, suppose a business analyst at a bank wants to introduce a new application to do his job more efficiently. “This would actually allow that business analyst to create new products as opposed to sending it back to IT and saying, ‘I want to create this product. Can you write the code for me?’” Silva explains.

As smaller organizations such as community banks and credit unions struggle to find and retain adequate technical talent, they are turning to low-code and no-code development tools to push out new digital products. These solutions enable financial institutions to keep pace with changes in technology and meet the digital demands of their customers. Low-code and no-code tools reduce the workload of in-house software developers and let financial institutions reuse previous work, Ghazouly says.

“Low-code or no-code solutions are helping organizations move away from the normal development routine and processes followed for decades in software development to rely more on the reuse of developer modules and combine them to serve the objectives of the business,” he says.

As financial institutions look to save on costs in the new year, low-code and no-code tools could be an option for quicker product development. The concept also empowers banks to focus more resources on strategic challenges and risks, including product security, Ghazouly says.

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3. More Banks Will Become Cloud-First

Look for more banks to go cloud-first with new applications in 2023. Banks are working to migrate more of their workloads to the cloud, which presents no shortage of hurdles. According to the 2022 State of the Cloud report by Flexera, 58 percent of financial services organizations cited migrating cloud workloads as a challenge.

Still, in an IDC survey of 100 banks worldwide, 95 say they are already using cloud or plan to use cloud in the next 12 months. “This is not limited to productivity tools like Microsoft Office,” Silva says. “These are critical workloads.”

Workloads that are moving to the cloud include consumer, corporate and small-business deposits, payment processing and cybersecurity, Silva says. He notes that NASDAQ has migrated its trading platform to the cloud.

“We’re talking about extremely low latency trade requirements and ultrahigh availability of those platforms,” he says. “And it’s running on cloud.”

As financial institutions migrate workloads to the cloud, a hurdle they will continue to face in 2023 is navigating privacy regulations in various global regions, Ghazouly notes. Protecting information and establishing controls around both bank and client data will remain a challenge.

“I don’t expect as an industry that we are going to have this kind of flexibility to do that migration easily by the end of 2023,” Ghazouly says.