6 Tech Trends Recasting the Financial Sector

The banking industry is going through a rapid evolution and technology is at the heart of it.

From how we pay for things to how banks manage their systems and customers, new and improved fintech solutions are changing the way banking operates at its core.

Let's have a closer look at the current technology trends in banking industry and tools shaping the future of banking.

Moving Away from Old Banking Systems Towards Cloud Based Core Banking

Most of the banks still operate on COBOL systems built back in the 1960's. Even though these systems provide reliability and stability to banking systems, they are extremely expensive to operate, costing banks up to 80% of their IT budgets.

They aren't built to support real time transactions, mobile banking or emerging fintech integration, with reports revealing a staggering 75% of banks struggling to implement new tech due to their legacy infrastructures.

To stay competitive and to offer the latest banking tech trends and solutions for their customers, banks are investing billions to switch to new cloud-based core banking infrastructure.

These cloud-based banking systems promise to cut costs drastically while enabling banks to integrate and implement new financial solutions for their customers and enhance operational speeds and cyber security.

A study conducted by Accenture recently found that transitioning to the cloud can potentially reduce IT expenses by up to 40%. Leading fintech providers like Thought Machine and Temenos, along with tech consultancies such as Enablis, are guiding banks through the transition to these modern infrastructures, enabling features like AI fraud detection, open banking and more personalised customer experience.

Contactless Payments

Contactless payment is another one of the leading banking technology trends that has become a new norm in recent times.

Previously, we had to swipe our cards and enter a PIN to make a payment. Contactless payment solutions now allow us to make the transaction by simply tapping your card or phone on the reader.

Other contactless trends in banking industry also allow you to make payments by scanning QR codes or digital wallets.

Even though the contactless payments began in the 1990s with Radio Frequency Identification (RFID) technology, the trend really took off during the pandemic, as it allowed customers to pay without touching anything except for their phones.

Digital wallets like Apple Pay, Google Pay and PayPal are making transactions even smoother by enabling customers to send and receive money to and from anywhere in the whole world.

Banks are adapting by integrating these latest trends and technologies in banking into their services, making it easier than ever to make secure, fast payments.

Instant Payments Are Reducing Delays

Traditionally, bank transfers took 2 to 5 business days due to the transactions being handled by the outdated batch processing systems. Now, RTP or Real Time Payment networks are completely changing the industry, enabling transactions 24/7 without any days off.

The FedNow service launched by the Federal Reserve in 2023 allows banks to settle in milliseconds. Meanwhile in the EU and the UK, SEPA or Instant Credit Transfer processes £100,000 within 10 seconds.

These banking industry technology trends eliminate delays and reduce cash flow and cross border transactions issues while, of course, providing consumers with immediate access to funds.

This shift is crucial in a world where digital transactions are surging, with global real-time payment volumes projected to reach $511.7 billion by 2027.

Biometric Security - Your Body is Your Password

81% of cyber security breaches are caused by stolen or weak passwords. This makes stronger, more reliable payment methods essential.

Also, with cybercrimes expected to cost the world a staggering 10.5 trillion dollars by the end of 2025, traditional passwords are just no longer enough to protect your bank accounts.

Solution? Biometric security - fingerprint scans, facial recognition and voice authentication to some extent.

Most of the major banks have already implemented biometric login options into their online banking solutions, allowing customers to log in to their account simply with a fingerprint scan or facial recognition. That's why the stats are projecting the biometric authentication market to reach 99 billion dollars by 2027.

Blockchain is More Than Just Cryptocurrency

Most of the population knows Blockchain as only a tech powering cryptocurrencies like Bitcoin. In reality, it's much more than that.

Banks, for instance, leverage this to enhance security, reduce fraud and accelerate international payments, all thanks to the decentralised, borderless nature of blockchain network.

Blockchain is already handling 23.5 trillion dollars in cross border transactions annually and the numbers are expected to grow exponentially in coming years.

By eliminating intermediaries, blockchain can cut transfer times from days to mere seconds and reduce costs by up to 40%, according to the World Economic Forum.

Then there are smart contracts and self-executing agreements that also utilise the blockchain tech and are rapidly transforming banking operations. These technologies can automate loan processing, improve regulatory compliance and minimise, making life easier for bank staff.

AI-Powered Customer Service

Chatbots and virtual assistants are becoming the first point of contact for many customers trying to reach out to their banks. It's not yet perfect; there are lags, and these bots are operating within strict limitations and that's why only 38% of global banks are using chatbots to guide their customers.

But it's just the start.

With the recent developments in AI tech and customers getting a bit more comfortable and accepting of these bots, the percentage of banks using chatbots for customer services is expected to reach 95% by 2025.

What’s Next for Banking?

The future of banking isn’t just about technology - it’s about making banking more accessible, secure and efficient. As banks continue to innovate and adopt the current banking industry trends, they must balance technological advancements with security, regulation and customer trust.