The 7 digital technology trends that will shape banking and financial services in 2023

1. Digital onboarding will become end-to-end in 2023

New customer acquisition is the No. 1 business challenge and investment priority for banks heading into 2023. That’s according to a recent BAI Banking Outlook survey. The challenge is compounded by there being fewer established customers who are open to switching. 

One way that banks can make it easier for customers to switch is to offer them a seamless, pure digital onboarding experience. That means ditching the old hybrid approach of enticing customers with a digital offer but then forcing them to complete the application process with a physical trip to a branch. Customers are increasingly digitally savvy – they know that ‘wet’ signatures on printed forms and in-person screenings are no longer necessary for secure identification.

People don’t want the inconvenience of unnecessary branch visits when they know that modern banks have the technology and data to confirm who they are remotely. Challenger banks and financial services leaders will accelerate the use of pure digital onboarding. Those who fail to adapt will lose market share. 

2. Digital identity – biometrics and digital signatures will reshape financial services

Digital identification is not only for onboarding. Customers have grown accustomed to using digital signatures for many other online approval processes. They now demand nothing less from financial services providers. However, they also expect to have choice, particularly when contemplating complex offers. 

That means they want the option of pure digital self-service, banker-assisted hybrid service and full personal service. And they want to move seamlessly between them, as and when they need to. That’s particularly the case when they are looking for individual, specific advice.

At the same time, they increasingly want their digital services to deliver more human-like engagement. The technological challenge now is to make such services far more interactive and immersive. The aim is to make customers still feel valued as individuals, but without the hassle of having to visit a branch. 

3. Lifestyle Services could be a game changer

According to BAI, 70% of millennials say they would switch banks for a better digital app. These digital natives are pointing the way to the future, where they use just a few Super Apps for most of their digital interactions in most areas of life. That makes it imperative for banks to become their customers’ Primary Financial Institution (PFI) in this hyper-connected ecosystem. 

The pandemic has accelerated the pace of digital adoption in all walks of life. People don’t just buy goods and services online, they work and network remotely online, they monitor their homes and families online. They can even have medical checkups online with customer-centric health services. 

To compete and stay relevant in this digital everywhere environment, smart financial institutions are focusing on supporting and engaging with their customers in their everyday lives. That is why we are seeing the rise of customer-centric services focused on lifestyle specific topics such as Car, Home, and Health. There is also a growing trend to reward loyalty with lifestyle benefits, from dry cleaning and plumbing to event planning and concierge services. 

4. Customers will use their bank’s mobile apps less often

While customers will continue demanding better apps, there is also the growing trend for embedded finance that might mean apps eventually go the way of branches. In fact, Gartner forecasts that embedded payments will grow to $141 billion by 2025. Embedded finance lets customers use banking services when and where they need them most, which is invariably in a non-bank environment.

By embedding their services in such environments, particularly online commerce sites, banks can more easily follow and support customers throughout their life journeys. They can streamline the customer experience by eliminating friction in the buying process. That means making it easier and more secure for customers to get loans or insurance or to make investments with pure digital services. 

Embedding financial services in customers’ day-to-day lives can increase engagement, improve retention rates, and reduce acquisition costs. The other big benefit of embedded finance for banks is that it can unlock new revenue streams from otherwise unbanked customer segments. 

For example, a credit card brand with over 1,000,000 customers in Germany, chose VeriPark’s VeriTouch and VeriChannel for their omni-channel CRM capability. This enabled them to partner with Amazon.de and provide purchase financing, so that customers can now choose to pay for their purchases in installments directly and easily during the checkout process. As a result, the credit card provider is now acquiring 20,000 to 40,000 new customers every month from this partnership.

5. Wearables will transform financial services in 2023 and beyond

Smart watches are currently the most popular wearable but there are many new devices coming to market. In fact, according to Gartner, the global wearable device market could reach $109 billion in 2024. These devices all tend to have one thing in common: the ease with which they can be managed through lightweight applets that fully integrate with the main operating systems for mobile apps.

This complementarity will drive the development of wearable services, including financial services, in 2023 and beyond. The most obvious of these is in payments (whether through your Smart watch or other embedded wallet) but the aim will be to enable customers to manage their lives more easily. For instance, your exercise monitor might link with your health insurance provider, or your driving monitor with your car insurance provider, to help them offer more competitive, personalized premiums. 

6. Entitlements and lifestyle benefits will go beyond traditional financial services

Entitlements are a way of thanking your customers for using your product. You might say, “your first year’s home insurance is on us because you took out our mortgage" or "you bought a car from us, so we’ll cover the registration fee". It’s possible to create lots of marketing campaigns around entitlements and offer them bundled with products or individually. 

People often now expect such entitlements or privileges when they use digital services for the first time or frequently. Since digital technology helps reduce customer acquisition costs, it can pay to return some of savings to customers in the form of perceived ‘added value’ benefits. As well as encouraging customers to use lower cost digital services, it can create customer ‘stickiness’ or loyalty. 

This is where it helps to have detailed and insightful CRM analytics. Understanding customers’ wants and needs can enable you to identify the “next best action” for each individual. Such analysis can even enable you to offer them specific, personalized benefits before they are aware that they need them. 

7. Digital wallets and embedded payments are displacing card payments

FIS Global has forecast that digital wallets will account for more than half of all e-commerce payments worldwide by 2024. Meanwhile Gartner predicts that nearly 60% of the world’s population will use mobile wallets by 2025 and that the use of bank cards will fall 50% by 2030. 

However you define ‘digital wallet’, whether it's ‘tap and pay’ with card, phone, smart watch, or some other wearable, they are increasingly prevalent in people’s lives. That’s because people value the ease and simplicity that embedded finance and other identity-based services can bring to their busy lifestyles. Banks that build, or are built on, the latest digital systems that enable such embedded financial technology will be at an advantage in the rapidly developing global digital ecosystem.