I’ve been following new technologies in the banking industry for many years, watching them disrupt long-established processes. Every new device linked to the internet represents another venue for customer interaction — and another potential headache for IT and security departments.
The pace won’t slow down, so it’s crucial to understand these new trends and integrate them when it best serves your business. At a recent commercial real estate (CRE) conference, I spoke about some of the most visible trends, and how they stand to alter the course of banking as we know it.
My innovation team at U.S. Bank identified the following areas as top innovation priorities:
Each of these areas varies in maturity, though all have the potential to shake up banking systems. Many already do, thanks to increased consumer adoption of smart devices for transactional management.
In my speech to the CRE audience, I focused on three specific areas:
These three alone give bankers immense potential with their customers — though only when implemented effectively within their current infrastructures.
Jim Marous, from The Financial Brand, said it best: open banking APIs offer potential “far beyond traditional banking, including all of the services a consumer may want in a digital world.”
Banks have used APIs for years, though primarily through private networks or with formal third-party partners. The open banking trend could force banks to align with third parties that aren’t formal partners — like financial technology startups. I’ve spoken about the complicated relationship between banks and these firms before. It could benefit banks to build a better relationship through open APIs — and provide more options for customers to do business.
In general, API development allows organizations to:
More specifically, banks and their customers can use APIs for everything from payment instructions, accounting system integration, to issuing rebate cards. Even the age-old system of check printing can receive a boost from open APIs.
I’ve made multiple references to distributed ledger technology in my recent presentations, and it remains one of the most disruptive methods for transactional and process management.
Distributed ledger can improve speed and visibility by removing intermediaries from the transactional process. Since there’s no central clearing house within a ledger, the network itself decides whether or not to approve transactions. How this happens varies by network type, a good topic for a future discussion.
They provide a universally accepted, unchangeable and cryptographically secured record of all transactions and events. The Blockchain and Bitcoin brought this technology to the forefront, but banks now use versions of it to keep record of more regulated transactions.
From a CRE perspective, distributed ledger could be used to simplify the contract process. Organizations can develop “smart contracts” that use distributed ledger for data verification and automatic enforcements:
Distributed ledger now stretches to multiple aspects of modern banking, including capital markets and trade financing. Banks and organizations will need to determine the best ways for their business and customers to adopt this emerging technology.
When my team thinks of artificial intelligence, it lives within a broader category of computer science innovations. AI by itself can encompass several aspects, including the following:
Banks have generally limited their AI activities within specific domains or business verticals. As data rapidly increases and computers perform more computational tasks than ever before, my team focuses on elevating these tools for more widespread use.
These three trends represent a small segment of the innovation space. Within them, new advancements are developed every day. Not every innovation will work for an organization, nor should organizations jump to adapt when something new arrives. But it’s crucial to understanding the potential of these new innovations, because the cycle of disruption never stops.
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Dominic Venturo serves as chief innovation officer for U.S. Bank., bringing more than 10 years of experience in emerging technology research and development. He holds a diverse background in financial marketing, product management and sales management.