Top 5 Issues Banks Can Solve with the Help of Technology

The transformative impact of FinTech solutions on the banking sector has long been proven and documented.

A recent survey from SAP indicates that 57% of banking executives cite digital transformation as their key objective for the next three to five years.

With the assistance of new technologies, the respondents aim to protect their IT infrastructures and data from cyberattacks, enhance customer experience (CX), enter new markets, improve process and risk management, and increase profit margins.

Another study from McKinsey, however, claims that only 30% of banks that underwent digital transformation managed to meet these goals.

Several factors hinder digital transformation projects in the banking sector. These include the lack of structured and easily interpretable data for better-informed decision making, siloed departments and job functions, and customer concerns surrounding the use of personal data in banking.

A team of innovation analysts from Symfa, a software engineering company that develops leading-edge technology solutions for the financial services industry, has identified the top five operational, organizational, and technological challenges banks are facing.

Read on to find out how banks could successfully navigate these issues by undergoing a digital overhaul.

Top 5 Burning Problems in the Banking Sector & How Technology Helps Address Them

1. Breaking silos between departments and systems. Data is the fuel of the digital economy. However, your financial organization can hardly use it to power up your products and services if your operational data is scattered across departments and isolated technology systems. The fact that the median age of banking applications fluctuates around 14 years only complicates the matter. Banks can gain a comprehensive insight into their processes and operations by replacing legacy technology systems with modern cloud-based solutions and connecting disparate applications using APIs and other types of middleware. The paradigm-shifting impact can be amplified by implementing traditional business intelligence (BI) and self-service BI solutions — including those powered by generative artificial intelligence (Gen AI).

2. Minimizing cybersecurity risks. The increasing digitalization of the financial sector inevitably puts banks on cybercriminals’ radar. In 2022, high-profile hacker attacks targeting the industry led to 254 million records being leaked on the Internet. This year, the number of ransomware attacks on banking organizations has grown by 34% compared to 2021. Given that the average cost of a data breach in financial services exceeds $5.9 million, no bank, large or small, can take cybersecurity lightly. By incorporating AI-powered anomaly detection systems into their tech stack, banks can successfully mitigate an array of cybersecurity risks, from fraudulent transactions to suspicious network activity. This, in turn, can help financial services organizations win customer trust (more on that later).

3. Automating tedious tasks and processes. According to Accenture’s A New Era of Generative AI for Everyone report, banking has the biggest potential for automation across all industries. The analysts reckon 54% of all operations in the sector can be fully automated, while 12% of the remaining tasks possess high automation potential. This report, although focussing on Gen AI applications, sheds light on what technology is capable of — provided it is applied to the right tasks and implemented correctly. From customer support operations and transaction processing to payroll and market trend analysis, digital banking solutions can facilitate or automate miscellaneous processes, saving your employees up to 40% of work hours for higher-value assignments.

4. Addressing talent shortages. Banks used to be a top career choice for graduates. Today, the financial services industry is getting ready for the largest-ever talent crunch in its history, anticipating a shortage of 10.7 million skilled workers. Some of the key factors prompting banking employees to resign include tough competition from emerging FinTech startups, stringent data privacy regulations coming into effect across the globe, and an abundance of monotonous yet time-consuming tasks. Financial organizations are taking several steps to attract top talent and retain the existing workforce. Besides increasing wages and compensation packages, they’re turning to technology to automate mundane tasks, bring transparency into the hiring process, and improve employee onboarding. To that end, several types of IT solutions can be used, including robotic (RPA) and intelligent process automation (IPA) tools, Gen AI-powered assistants, resume screening applications with natural language processing (NLP) capabilities, and AI-infused learning management systems (LMSs).

5. Meeting customer expectations. While 78% of clients expect their banks to deliver highly personalized services, only 44% of retail banks are actually capable of offering such services. These numbers stand in sharp contrast with bank executives’ aspirations regarding customer experience: 93% of business leaders now treat five-star CX as their core differentiator and competitive advantage! McKinsey identifies several experience-improvement opportunities where FinTech technologies can be applied, leading to higher satisfaction rates among your clients. These include assistance with opening new bank accounts, making payments and deposits, tapping into spending analytics, and timely resolving issues. With Gen AI-powered chatbots, customer sentiment analysis algorithms, and advanced data analytics tools, financial organizations can win customer trust by helping their clients navigate their financial downturns.

To sail through the digital transformation phase, however, financial organizations need to overcome several obstacles.

First and foremost, banks need to address technical debt. The process involves refactoring and replacing legacy systems, getting rid of unused applications, and implementing an effective strategy for managing structured and unstructured data. To that end, financial organizations might need to extend their in-house IT teams or enlist the help of digital transformation consultants.

Next, it is vital to address the resistance to change among your workforce. This can be done through proper onboarding and education aimed at demonstrating the benefits of adopting novel technology.

Finally, banks need a goal-tied digital transformation strategy. A rule of thumb is to implement technology-assisted workflows iteratively, gradually scaling systems across use cases and departments while collecting user feedback and making improvements.