AI and Machine Learning to Lead Digital Transformation in Banking

Four tech trends are going to reshape the banking industry

The past decade and the new lifestyle imposed by the pandemic have forced banks and credit unions to keep pace with emerging technological changes and fintech disruptors. What’s more, digital products and services once considered innovative are now expected by customers and taken for granted, especially if you have to deal with millennials and impatient GenZ.

The reality is that technologies considered “the future” just a few years ago, such as APIs and cloud computing, are now a must. The most advanced ones, such as artificial intelligence, continue to be a top technology trend, as the potential is largely untapped, and the recent development constantly reveals new applications and fields to explore.

Regardless of their size and geography, financial institutions have realized that technology has never been more critical in protecting and accelerating their core business. The growing competition from non-financial organizations, ever-increasing consumer expectations, and new digital strategies embraced by innovative financial organizations are shaping how financial services are delivered.

So, based on insights from leading fintech analysts, financial organizations need to focus on the leading technologies such as predictive artificial intelligence, Robo-assistants in branches, and helping consumers secure digital goods in the Metaverse. Therefore, banks and credit unions should consider the best strategy as they begin defining their 2023 technology plan.

Trend 1: AI and predictive analytics to deliver true personalization

Personalization is the best solution for financial marketers. To turn a problem into an opportunity, financial institutions must utilize the power of artificial intelligence, machine learning, and predictive analytics. In this way, they will be able to provide special offers tailored to individual customers, according to Capgemini in its Technovision 2022 report.

What people do in real-time, through analyzing accumulated data (e.g., search history), helps build a unified customer profile. This ensures that insights are extracted from every interaction, thus providing new opportunities for financial institutions to create the most attractive offers to their customers.

This is made possible by integrating real-time data capture, analytics solutions, and user experience offerings. For example, personalized credit offers can be combined with e-commerce companies by taking credit risk assessment and customer behavior into account. To achieve this, the requirement for a technology stack is relatively high - it is required to use cutting-edge applications that are adaptive, not static.

New applications no longer look like the old ones as they become a connected web of microservices. To enable innovation around transactional services, these applications should be built in cloud-native and microservices-based capabilities, simultaneously fulfilling the three prerequisites - flexibility, personalization of experiences, and easy real-time decision-making.

Trend 2: Self-learning autonomous systems

In its 2022 Banking Technology Trends report, Gartner predicts that autonomous, self-learning software is expected to play a leading role in customer-facing situations. Autonomous systems should be seen as the most effective solution that provides new opportunities for business transformation in financial services.

Autonomous systems are self-governing physical or software systems that learn from their environment and dynamically change their algorithms in real-time to optimize their behavior in complex ecosystems. An excellent example of a modern, low-level version of an autonomous system is wealth management Robo-advisors. In the future, these systems could even play a role in powering robotic assistants in physical branches. While AI in financial services is primarily software-based, it could be used to power hardware-based systems that assist customers in smart branches in the future.

Gartner’s report also states, “Now, autonomous systems are mostly software-based in banking. However, humanoid robots are emerging in smart branches. They are hardware-based autonomous systems that take care of customers and clients. They can be applied to autonomous debt management, personal financial assistants, and automated lending.”

Trend 3: Harnessing the power of banking ecosystems

The emergence of open banking and embedded finance has forced the concept of banks to become facilitators of ecosystems. However, changing technology becomes the catalyst for fundamental change in core banking services.

According to EY analysis, banks will play a more significant role in ecosystems in the coming years by offering their customers access to third-party products and services and facilitating embedded financing. Examples include helping the automotive industry to offer subscription services and allowing telecom customers to be charged for movie rentals and other content through their phone bills. In the same survey, respondents named the eight top benefits of a such ecosystem:

  • Increased efficiency/cost reduction – 55%
  • Extend penetration to new markets – 54%
  • The enlarging product portfolio – 47%
  • New product development – 47%
  • Attracting new customers – 45%
  • Lower risk and faster way to acquisitions – 42%
  • Nurturing innovations – 42%
  • Speeding up time to market – 41%

The analysts pointed out that many opportunities are identified through the lens of the ecosystem approach. For example, direct-to-consumer retail sales or end-to-end home buying services. Many of them can be delivered through apps. Companies in many sectors are still timid about innovation because they have doubts about whether they can serve their customers, especially when it comes to ensuring their financial peace of mind.

Obviously, this is a massive opportunity for financial institutions that can proactively lead, accept and support such non-traditional arrangements. To operate in an ecosystem environment, the prominent consultants advise banks to think about what customers want from them and what kind of partners can help them meet that need. Banks must then define their role in this ecosystem while transforming the business and operating model and ensure the technology infrastructure and leadership vision are in place to move forward.

“By identifying where and how an ecosystem can add value, defining your role, and transforming to deliver it – financial services companies have a road map that will enable them to make financing easy for their ecosystem partners and end customers. In this way, financial service providers become instrumental to delivering the value that ecosystems promise.”

Trend 4: The impact of Metaverse on digital assets, CX, and the workplace

Generally, the Metaverse is described as the future iteration of the Internet—composed of persistent, shared, 3D virtual spaces connected in a perceived virtual universe, as Forbes states. Despite the emphasis on “the future,” the Metaverse already exists in various ways, some of which are relevant to financial institutions. Among them are blockchain and non-traditional digital assets.

At this year’s TMT Conference, Morgan Stanley analysts said that creating virtual products in the Metaverse will lead to the proliferation of digital goods, and people will need secure storage. Banks can play a crucial role in facilitating transactions in digital realms and helping users hold digital assets, of which non-fungible tokens (NFTs) are a growing part. In this regard, the blockchain enables the monetization of the metaverse, and companies are eager to create, adopt, and multiple digital assets for purchase. Some tech giants are expanding their online platforms where people can work, communicate and play games, while well-known consumer companies create NFTs for sale.

In conclusion, even in such a brief overview, we must admit that the new reality in modern banking is a blend of advanced technologies and new relationships with third partners within an ecosystem. Technology must be embraced and utilized throughout the organization, regardless of the business unit, activity, or individual role.


Capgemini, TechnoVision 2022: Trends for CIOs and tech practitioners; Gartner: Top Strategic Technology Trends in Banking and Investment Services for 2022; EY: How can harnessing the power of ecosystems make finance effortless? ; Morgan Stanley: Technology, Media and Telecom (TMT) Conference 2022.

Transform your business