The banking sector is experiencing significant changes primarily driven by the growing integration of technology into consumers’ daily lives, evolving customer expectations, increasing interest in digital money and the volatility of cryptocurrencies. The potential annual value of AI and analytics for the global banking industry is expected to be as high as $1 trillion.

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What’s inside

1. Key takeaways
2. Key drivers shaping trends in banking
3. Business trends driving innovation
4. Technology trends aiding the business

Key takeaways

• Changing IT spend- IT spending in banks is shifting from Capex to more.
• Opex, with significant shifts to Cloud.
• Future of banks- Neobanks can play a crucial role in addressing and responding to all the key drivers.
• Rise of fintechs-The emergence of fintechs is shaping business trends and expanding the range of choices available to customers. Studies indicate that from now until 2028, the growth rate of fintech companies is expected to be three times that of the banking industry as a whole.
• Impact of emerging technologies- New technologies like GenAI, Blockchain, IoT are likely to cause banks to change the way they work and will influence the majority of the business.
• Cybersecurity resilience- Cybersecurity is evolving from being solely a technological concern to becoming an important consideration for new business strategies.
• Sustainability increases in priority-While Sustainable finance enables banks in financing sustainable projects for other businesses, banks must also prioritize making their own operations sustainable. Download Complete Research

Key drivers shaping trends in banking

• Customers want personalized, convenient, and seamless banking experiences. Over 60% of banking executives report rising customer experience expectations, with 45% struggling to keep up.
• Fintechs are revolutionizing banking with mobile apps, online lending, and personalized experiences using AI. By 2030, they will be constituting 25% of all banking valuations.
• To address environmental risks and foster responsible economy, banks are focusing on sustainability. Banks representing 41% of the global banking assets have joined Net-Zero Banking Alliance.

Business trends driving innovation

• A lot of the trends are reflecting the move to extended value chains or ecosystems thinking.
• Technology platforms support a lot of this, and banks and financial service providers are seeing the benefits of these.
• BaaS allows third parties to connect with a bank’s API infrastructure to build and integrate products.
• With automation, banks can now reduce their lending processing time from weeks to a couple of days.
• Neobanks can operate on a low-cost model, which can be instrumental in improving the accessibility of banking services.
• With Open Banking, banks can now open online accounts in just three minutes, 100 times faster than before.
• These banking trends impact various stakeholders, including customers, regulators and government bodies, employees, technology providers and fintechs.

Technology trends aiding the business

• Banks can leverage AI to gain deep insights into their customers and the financial ecosystem, identifying new fraud patterns and money laundering strategies using synthetic data.
• Banks are migrating their analytics platforms to the cloud for complex banking analytics. Data marts are being used to store and perform analytics on sensitive bank data.
• Recent developments in cybersecurity in banks, like Zero Trust Architectures and Adversarial ML, help train ML models to be more resilient to attacks and increase cloud adoption.
• Blockchain technology in banking promotes secure digital transactions, cost reduction, decentralization, and anonymous financial activities while ensuring accountability.
• IoT implementation helps to monitor each customer touchpoint in realtime when they bank, enabling banks to offer more relevant services and identify fraudulent activities faster.

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Credits
Lead Authors@lab45: Deepika Maurya, Chandan Jha
Contributing Authors@lab45: Sujay Shivram, Hussain S Nayak

GenAI is changing the banking industry through work automation, individualized customer experiences, and fraud detection. Operational cost savings from using GenAI chatbots in banking globally is 35 times more than not using GenAI. GenAI helps banks increase productivity, lower expenses, and enhance customer happiness.

What's inside

1. Key Takeaways
2. Reimagining banking through GenAI
3. GenAI transforming banking landscape
4. Challenges in GenAI implementation and their solutions

Key takeaways

Among industries globally, GenAI could add about $ 3.5 trillion annually in productivity on average, out of which the banking sector would be nearly 8 per cent. Banks are starting with applications in software development, chatbots and media content generation. GenAI has vast potential to execute business and technology processes autonomously. The operational cost savings from using GenAI chatbots in banking reached $7.3 billion globally. It is 35 times the operational savings without using GenAI. The integration of GenAI with virtual assistants has significantly enhanced customer support and experience. GenAI enables banks to automate crucial processes such as customer onboarding, fraud detection, and risk management. As a result, employees can concentrate on more intricate tasks, such as delivering exceptional customer support. The banking sector can significantly benefit from this, leading to an overall increase in efficiency. Download Complete Research

Reimagining banking through GenAI

Empowering customers through GenAI

• GenAI enables banks to provide customized products, personalized financial advice enhancing the banking experience for customers.
• GenAI automates and streamlines banking processes, reducing wait times and enhancing customer convenience.
• GenAI helps banks strengthen security measures, protecting customers from fraud, unauthorized access, and identity theft.
• AI-powered chatbots and virtual assistants provide round-the-clock customer support, offering prompt and reliable assistance.
• Through efficient processes, enhanced security, and seamless support, GenAI enhances overall customer satisfaction with the banking experience.

GenAI transforming banking landscape

Corporate banking, retail banking and software engineering are the most value-creating functions with each providing a value of about $ 50 billion. The rest of the functions include wealth management, asset management, risk, IT and finance and HR. Download Complete Research

The diagram below shows the impact of GenAI on banks' functional architecture

Future trends in GenAI

GenAI is in nascent stage, but it has the potential for vast changes in banking. The following use cases are expected to prevail in future:

• Financial forecasting: As GenAI will be able to integrate and analyze data from various sources in future, it will be able to identify data patterns and run simulations based on real-world context and hypothetical scenarios. It can help banks to make effective financial forecasts.
• Generate financial advice for customers: Training GenAI on customers’ financial goals, risk-taking ability, income, expenditure. It can be used for budgeting recommendations. Also, it can help in smarter investment and wealth management and trading advice.
• Minimize manual paperwork: Manually analyzing financial documents is costly and time-consuming. GenAI can be used to summarize large documents and significantly cut operational costs.
• Regulatory code change advisor: GenAI will be used to make developers aware about underlying regulatory changes that will require them to change code. It can assist in automating the changes and providing documentation.
• Manage risks and credit worthiness: GenAI will be used to create a more accurate picture of borrowers after analyzing vast amount of data from multiple sources.

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Credits
Author@lab45: Poonam Pawar, Hussain S Nayak

The aviation industry is expanding rapidly, making it imperative to adopt sustainable practices. Airports worldwide are taking significant measures to reduce their carbon footprint, conserve natural resources and encourage social responsibility but still more needs to be done.

What's inside

1. Establishing the need for sustainability
2. Several areas of impact: not just carbon emissions
3. Top areas to focus
4. New initiatives to optimize footprint

The need for sustainable airports

The aviation industry contributes to global carbon emissions, with airports accounting for about 2-3% of that contribution. While this is not very significant and airports are committing to Net-zero, they impact the environment in many other ways. Airports consume significant amounts of energy and water and generate waste equivalent to small cities and contribute significantly to noise pollution leading to health disorders in the neighbourhood. Airports also promote economic growth through trade, tourism, job opportunities, support for local businesses, and regional development and hence a sustainable balance is the need of the hour.

Areas to focus for maximum impact

Airports around the world are recognizing the importance of sustainability and are implementing various eco-friendly initiatives to reduce their ecological footprint. Four key areas of focus have emerged: energy, waste, water, and noise. Some leading airports have already implemented sustainable initiatives, such as using recycled materials for construction and mandating the use of reusable tableware in food and beverage establishments. Emerging ideas include hydrogen fuel cells and bio fuels (for energy), AI and IOT Sensors for optimal water usage, hydrothermal liquefaction and AI/ML to detect recyclables for waste and AR safety programs and Noise insulation techniques for Noise impact reduction. Others need to assess their current state and take steps that best suit their situation. Download Complete Research

Credits
Author@lab45: Deepika Maurya