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.”