The world of finance is, on the verge of a change, driven by the digital revolution in banking. It's more than moving from bank branches to online services; it's about completely reimagining how we bank in today's digital world. Leading this transformation is the field of banking software development, where technology and finance come together to offer efficient and personalized services. 

This shift is powered by technologies like intelligence, blockchain and cloud computing each playing a crucial role in reshaping banking in the 21st century. The outcome is a banking environment that not only caters better to individual customer needs but also adapts well to the evolving global economy. As digital banking progresses it aims to eliminate barriers make financial services more inclusive and promote knowledge and autonomy. It is not just change; it's a revival in the banking sector marking an era where digital empowerment is within reach, for everyone transforming how we manage our finances fundamentally.

The rise of banking

The rise of banking began with the introduction of the Internet. Its rapid expansion has been driven by recent advancements, in technology and changes in what consumers expect. Today customers want banking services that are not just digital but user-friendly, immediate and seamlessly integrated into their daily lives. In response, banks are using cutting-edge technology to create banking software that goes beyond methods. This push for innovation is not about keeping up with tech trends but about reshaping the nature of banking in the digital era.

Consequently, we are seeing the emergence of platforms that not only enable transactions but provide tools for financial management, investment guidance and personalized predictive analytics based on each user's financial habits. This transformation reflects a shift in the banking sector from focusing on transactions to becoming a holistic financial partner for clients well being. It's a journey that demands not only technological advancements but also a cultural change within institutions to prioritize user satisfaction, data security and ongoing innovation. The future of banking lies in building ecosystems that are both adaptable and user-centric while ensuring security—a sign of a chapter in financial empowerment, for consumers globally.

Cutting-edge technologies, like intelligence (AI) blockchain and cloud computing, have become elements in modern banking software development. AI is transforming the banking landscape by offering insights into customer needs and enabling tailored guidance. It drives chatbots for customer support. Utilizes advanced algorithms for detecting fraud effectively. In parallel blockchain technology is reshaping trust through its secure transaction capabilities expanding beyond cryptocurrencies. On the other hand cloud computing delivers the flexibility needed for banks to scale services as required, improving efficiency and reducing costs.

Customer role

Central to the evolution of banking is a dedication to prioritizing customer satisfaction. This shift towards customer-centricity is evident in the push for personalization. Through analytics and machine learning, banks can now provide bespoke solutions instead of relying on a one size fits model. Additionally, the seamless omnichannel experience ensures that customers can engage with their bank seamlessly across platforms. Whether, through applications, websites or voice assistants. Without any disruption. This comprehensive approach goes beyond convenience; it demonstrates an understanding of modern consumers' lifestyles and preferences.

By integrating services into everyday digital interactions banks are not just offering a service but enhancing the customer's life with valuable financial advice and solutions that are timely and relevant. This shift, in approach, is reshaping how customers view banking setting standards for customer service and interaction in the age. This leads to a banking experience that's more connected, intuitive and essential to life paving the way for a future where banking is not only necessary but seamlessly integrated into everyday living.

However, this journey comes with its challenges. The digital banking landscape faces cybersecurity threats with institutions constantly targeted by cybercriminals. This underscores the need for security measures to protect customer data and ensure transactions. Additionally, banks must navigate frameworks to comply with laws aimed at safeguarding consumer rights and promoting financial stability.

Wrap up

Despite these obstacles, the advantages of banking are clear. It holds the promise of making financial services more accessible to people from all backgrounds enabling access, to banking services. It also fosters a financial sector where banks innovate continually to meet customer demands and preferences.

The evolution of banking is transforming the industry propelled by progress, in banking software technology. As financial institutions venture into this territory they face the challenge of striking a balance, between innovation, security and regulatory adherence. The overarching aim is to establish a banking environment that's digital and also safe tailored to individual needs and seamlessly woven into daily routines. By achieving this goal the financial sector can anticipate surpassing the demands of customers in today's era.

Have you ever thought about how much technology has transformed our lives? Think about it - from smartphones that can do practically anything to those handy little gadgets that control our homes with just a voice command. It's pretty wild, isn't it?

And one industry that's been at the forefront of this technological revolution is banking. Banks aren't just those bland old buildings you visit to deposit your paycheck anymore. Oh no, they've jumped headfirst into the tech revolution.

No more waiting in line for ages to deposit a check or transfer money. Now, with just a few taps on your smartphone, you can do all that and more. And that's just the beginning.

In this article, we’ll talk about how banks are re-embracing all this fancy new technology and using it to revolutionize how we manage our money.

Why Banks Should Adapt to Technological Advancements

• Enhanced Customer Experience: Technological advancements allow banks to offer their customers more convenient and personalized services, improving overall satisfaction.
• Increased Efficiency: Automation and digitalization streamline banking processes, reducing operational costs, dealing with banking problems and solutions, and improving efficiency.
• Competitive Advantage: Banks that embrace technology stay ahead of the curve, attracting tech-savvy customers and staying competitive.
• Improved Security: Advanced cybersecurity measures protect sensitive customer data and transactions, safeguarding against cyber threats and fraud.
• Access to New Markets: Technology enables banks to reach new customer segments and expand their market reach through digital channels and innovative products/services.

9 Ways Banks Are Adapting to the Tech Revolution

By embracing innovative solutions and leveraging technological advancements, banks use advanced technology to revolutionize how financial services are delivered to customers. Here are eight key strategies banks are using to stay ahead of the tech revolution and meet the evolving needs of their customers:

1. Embracing Mobile Banking

With the widespread adoption of smartphones, banks are investing heavily in mobile banking apps to offer customers a convenient and accessible way to manage their finances.

These apps allow users to perform various banking transactions, including checking account balances, transferring funds, paying bills, depositing checks remotely, and even applying for loans or credit cards, all from the palm of their hand.

By embracing mobile banking, banks are empowering customers with greater control over their finances and providing a seamless digital banking experience that meets the demands of today's tech-savvy consumers.

2. Enhancing Online Banking Platforms

In tandem with the rise of mobile banking, banks are also enhancing their online banking platforms to offer customers a comprehensive and seamless digital banking experience.

These platforms are being upgraded with advanced features and functionalities, such as real-time account monitoring, bill payments, fund transfers, and budgeting tools.

By providing customers with easy access to their accounts and empowering them to manage their finances conveniently from any internet-connected device, banks are meeting the evolving needs of digital consumers and staying competitive in the ever-changing financial landscape.

3. Implementing Contactless Payments

With the increasing preference for cashless transactions, banks are implementing contactless payment methods to offer customers fast, secure, and convenient payment options.

Contactless payments utilize near-field communication (NFC) technology, allowing customers to simply tap their cards or mobile devices on a contactless-enabled terminal to complete transactions.

This technology reduces the need for physical contact during transactions and speeds up the payment process, making it ideal for busy consumers on the go.

4. Leveraging Artificial Intelligence (AI)

AI-powered chatbots, for example, are being deployed to provide 24/7 customer support, answer queries, and assist with account inquiries.

These chatbots use natural language processing (NLP) and machine learning algorithms to understand and respond to real-time customer queries, improving response times and customer satisfaction.

Furthermore, AI in banks is being utilized for fraud detection and prevention, where advanced algorithms analyze transaction patterns and detect anomalies indicative of fraudulent activity.

5. Introducing Biometric Authentication

Biometric authentication utilizes unique physical characteristics such as fingerprints, facial features, or voice patterns to verify the identity of users.

By implementing biometric authentication, banks can offer customers a more secure and convenient way to access their accounts. Instead of relying on traditional passwords or PINs, customers can simply use their biometric data to authenticate their identity, reducing the risk of unauthorized access due to stolen or compromised credentials.

6. Enhancing the In-Branch Experience

Beyond mobile apps and online platforms, banks are increasingly utilizing digital signage solutions for banks. These strategically placed digital displays throughout the branch offer several benefits:

Informative Content: Real-time wait times, product information, and promotions can be displayed, keeping customers updated and informed.

Financial Literacy: Educational content can be showcased to raise awareness about financial products and services, empowering customers to make informed decisions.

Personalized Experience: Targeted messages and offers can be delivered based on customer demographics or preferences, creating a more relevant and engaging experience.

Brand Awareness: Banks can leverage digital signage to reinforce their brand image and messaging, fostering stronger customer relationships.

7. Exploring Blockchain Technology

Blockchain, a decentralized and immutable ledger system, offers several potential benefits for banks, such as increased transparency, reduced transaction costs, and improved efficiency.

One critical application of blockchain technology in banking is in cross-border payments. Traditional international money transfers often involve multiple intermediaries and can take several days to settle.

However, blockchain-based solutions offer the potential for near-instantaneous cross-border transactions, as transactions can be recorded and verified in real-time on the blockchain network.

8. Personalized Financial Services

Banks are increasingly focusing on offering personalized financial services to meet their customers' unique needs and preferences.

One way banks are offering personalized financial services is through targeted promotions and offers. By analyzing customer spending patterns and preferences, banks can identify relevant products and services and offer personalized promotions to customers, increasing engagement and satisfaction.

9. Enhancing Cybersecurity Measures

As digital banking becomes more prevalent, banks prioritise cybersecurity measures to protect customer data and transactions from cyber threats and attacks.

Banks are implementing multi-factor authentication (MFA) methods to strengthen account security. To access their accounts, MFA requires users to provide multiple verification forms, such as passwords, biometric data, or one-time passcodes. This adds an extra layer of security beyond traditional password-based authentication, reducing the risk of unauthorized access.

Conclusion

The tech revolution has brought about significant changes in the banking industry, prompting banks to adapt and innovate to meet customers' evolving needs in the digital age.

As technology advances, banks must remain agile and proactive in adopting new technologies to stay competitive and continue providing exceptional customer service. Through these adaptations, banks are shaping the future of banking and contributing to a more efficient, secure, and customer-centric financial ecosystem.

The finance world is changing big time, driven by a wave of innovative technologies collectively known as Fintech. But what exactly is it? In a few words, it is a dynamic domain where IT companies like Relevant Software are developing tools and solutions that are transforming the way we manage our money. 

Why is this transformation so critical? Traditional financial services, while established, are often riddled with inefficiencies, limited accessibility, and a lack of personalization. This translates to a frustrating and time-consuming experience for customers, who increasingly demand agility, convenience, and a tailored approach to their finances. 

So, how can Fintech address these challenges? Let's look at the details.

Digital Banking

Fintech innovations are breaking down barriers to financial inclusion. Millions of people worldwide still lack access to basic financial services. Fintech is bridging this gap with mobile-based solutions that don't require traditional bank accounts. This allows individuals to save, send, and receive money securely, promoting financial independence and inclusion. 

Payment Innovations

Remember when making a payment meant writing a check or waiting days for a bank transfer to clear? Those days are long gone. Now, peer-to-peer payment apps, contactless payments, and instant payment systems are the norms, radically reducing transaction times and increasing user convenience. 

Automation and AI

Fintech introduces automation solutions powered by Artificial Intelligence (AI) that streamline tedious manual tasks. Mortgage approvals, for instance, can be significantly expedited with AI-driven document processing and risk assessment, saving both time and resources for lenders and borrowers. Similarly, AI-driven chatbots can handle customer inquiries 24/7, providing a level of service that was unimaginable just a few years ago. 

Low Code Platforms

Low code platforms are shining as a new trend in fintech innovation. By using visual tools instead of writing code, creating fintech apps becomes much easier, helping close the skills gap. Fintech newcomers can harness the power of low-code platforms to quickly bring to life innovative ideas that stay in step with market trends

Blockchain and Cryptocurrency

It's impossible to talk about Fintech without mentioning blockchain. Through this technology, one can perform transactions securely and with transparency, without reliance on a centralized authority. Additionally, blockchain is used to prevent fraud, streamline cross-border payments, and improve supply chain transparency.

RegTech

The fintech sector moves fast, often outpacing regulatory frameworks. This can lead to a gray area where innovations flourish without adequate oversight, potentially leading to risks for consumers and the financial system at large. Therefore, collaboration between fintech companies, traditional financial institutions, and regulatory bodies is crucial to ensure that innovations benefit everyone without compromising security or fairness. 

InsurTech

Insurance is another area ripe for disruption. InsurTech companies are utilizing tech to make insurance options more economical, widely available, and tailored to specific preferences.. Think pay-as-you-drive car insurance, or parametric insurance that pays out based on specific events, like a natural disaster.

Open Source & SaaS

For fintech startups, being quick and adaptable is key. That's where open source and SaaS (Software as a Service) come in. They allow companies to use and improve software without the hassle of managing it. This means more time focused on customers and less on tech headaches. 

Embedded Finance

This means users can access financial services through non-financial platforms. Think buying insurance from your favorite online store or getting a loan from your ride-sharing app. It's making finance a seamless part of everyday life. 

It's easy to get caught up in the excitement of all these innovations, but it's also essential to approach them with a critical eye. Regulatory hurdles, security concerns, and the digital divide (the gap between those with access to digital technologies and those without) are just a few of the issues that need addressing. Moreover, as the financial sector increasingly relies on technology, the risk of cyberattacks constantly grows, necessitating robust cybersecurity measures. But the potential benefits—increased accessibility, efficiency, and personalization of financial services—are too significant to ignore. 

And what about the traditional banks? Some may argue that fintech is spelling doom for conventional banking institutions, but that's not entirely accurate. Sure, fintech is disrupting the status quo, but it's also pushing banks to innovate and adapt, leading to collaborations that combine the best of both worlds. Traditional banks are leveraging fintech to enhance their digital offerings, making banking more accessible, efficient, and customer-friendly. 

Therefore, what can we expect for financial services moving forward with the rise of Fintech? It's a question many in the industry are pondering. While the trajectory seems clear—more automation, increased personalization, and further democratizing financial services—the pace and nature of these changes remain fluid. 

What's certain is that those who can adapt to and leverage these innovations will find themselves at the forefront of a new era in finance. The journey is complex, but the destination—a more inclusive, efficient, and secure financial ecosystem—is undoubtedly worth the effort.

In addition, online shopping and online financial services have opened up a new world of possibilities, bringing greater convenience and new opportunities. While this has ultimately been great for consumers, it’s also made things easier for cybercriminals.

In recent years, cybercrime has become a serious problem all over the world as more people than ever connect online. By stealing personal data, cybercriminals can commit fraud, access accounts and steal your money.

The cost of global cybercrime is predicted to reach $8 trillion in 2023 and is on pace to surpass $10 trillion by 2025. The UK and US are two of the most affected countries, but anyone is at risk. Thankfully, there are ways you can protect your data and keep your money safe while using online services.  

Keeping Your Passwords Safe

When you use online services such as banking or shopping, it’s important to set a strong password and keep it safe. ExpressVPN’s study shows that banking account passwords are most commonly forgotten, and this is often because they need to be strong.

A strong password is difficult to crack with software, and it normally needs to be at least twelve characters long. You can also improve the strength of a password by adding upper and lowercase letters as well as symbols and numbers.

Once you’ve made your password, it’s important to keep it safe and ensure you don’t forget. One of the best ways to do this is to use a password manager. Some browsers will also let you save your passwords, though you should be careful doing this if you’re using a shared computer.

While it may make it easier to remember, you should never use the same password for multiple accounts. If one account is compromised due to a data breach, you could then lose access to several accounts. Change your passwords regularly and ensure they’re all unique.

Adding Extra Security

You can increase your account security by also adding two-factor authentication. This means that you’ll need to enter the correct password and then approve your sign-in by confirming it with a code sent to your phone or email. With two-factor authentication, your account is still safe even if your password is compromised.

Additionally, many banking apps and websites now offer biometric security features. These will take a scan of your face, eye, or fingerprint and use it as a key. Each time you make a transfer or log in, you’ll need to present this key. This way, only you can ever access your account, making it next to impossible for cybercriminals to gain access to your money.

Being Aware of Scams

While you can spend a lot of time adding security to your online accounts, scams are the most common form of cybercrime. No matter how good your security is, a cybercriminal will be able to get what they want if they’re capable of tricking you.

There are lots of different online scams, but most of them involve phishing. This is where an email or message is sent from a seemingly trustworthy source to gain money or information. A cybercriminal will often send fake emails that look like they’re from a bank or other organisation, requesting that you log in or provide information.

While these scams can look convincing, you can avoid them by never giving out personal information online. You should also avoid clicking links sent in an email unless you’re sure of the sender. Be sure to check the email address and compare it to any official emails you’re received.

Diverse Ways of Accessing Data

Only some bank customers want to access their bank accounts in the same way. According to this infographic, everyone needs several essential pieces of technology in their tech survival kit. That includes flash drives, external drives, and SD card readers. These accessories can all be useful at various times, such as for keeping important information on or for emergencies. That brings us to the point that online banking isn’t something that should only be available when you’re in an urban zone with excellent network coverage. A digital bank also needs to be available when needed, no matter where the customer is. They need to offer the chance to access data offline securely and various ways of storing important information.

It should also be remembered that digital banks are for everyone, not just for technical experts. The data has to be presented in a way that anyone can understand. That explains the trend for simple banking apps that have a minimalist design. Still, augmented reality (AR) and virtual reality (VR) could perhaps be used in the future to give even more accessible and more intuitive ways of carrying out transactions, as we can see in these examples of AR technology in action. 

Use of Data and Customer History to Personalise the Banking Experience

We’re now so used to getting a personalized experience online that perhaps we barely notice it now. Still, if we think about it, many industries use our data and past interactions to customize the experience. That allows your streaming service to be pretty accurate with their suggestions about what might interest you and how online shopping sites can suggest the best products for our needs.

Artificial intelligence (AI) is making it easier to do this, and there’s no reason it can’t be used so that digital banking gives us the convenience that other industries have achieved. There are also banking platforms that use AI to automatically calculate how much a customer should be able to save each month or to decide how to move their funds across different accounts.

A truly digital bank can remind us when we reach a date when we usually pay a bill, or it can tell us how we can best use our money, taking into account what AI has calculated about us over time. It’s no wonder that 80% of banking are already aware of the possibilities offered by AI, as explained in this article on the subject.

These different areas will help digital banking become more valuable than it already is, allowing us to carry out our financial transactions in a way that suits every type of lifestyle and personality.

There are different ways to transfer money to US destinations from abroad. Some of those ways equally apply to making domestic transfers, but the most popular method is through digital banks. These banks offer a convenient and easy way to transfer money, whether you're sending it to another person or institution.

One of the best digital banks for domestic transfers in the US is Chase Bank. Chase offers several ways to send money, including online transfers, mobile transfers, and even in-person transfers. You can also set up recurring transfers so that you don't have to repeat the transfer process every time you need to send money.

Another great option for domestic transfers is Wells Fargo. Wells Fargo offers a variety of different transfer options, including wire transfers, ACH transfers, and even checks. You can also set up automatic payments so that you don't have to worry about manually transferring funds each time you need to make a payment.

If you're looking for a digital bank that offers great rates on domestic transfers, Ally Bank is a good option to consider. Ally Bank offers some of the best rates on both online and mobile transfers, making it a great choice for those who need to send money frequently.

What are digital banks and why are they becoming popular?

In the past decade, we’ve seen a major shift in how people bank. More and more people are ditching traditional banks in favour of digital ones. But what exactly are digital banks? And what’s causing this shift?

Digital banks are online-only financial institutions. They don’t have any physical branches, which allows them to offer lower fees and higher interest rates than traditional banks. They also tend to have better customer service and more innovative features.

There are a few reasons why digital banks are becoming more popular. First, they’re more convenient than traditional banks. You can do everything from your phone or computer without having to go to a physical branch. Digital banks often have lower fees than traditional banks. For example, many digital banks don’t charge monthly maintenance fees or foreign transaction fees. They also tend to have higher interest rates on savings accounts and loans.

If you’re looking for a new bank, you may want to consider a digital one because they offer a lot of advantages over traditional banks, and they’re only going to become more popular in the coming years.

What to look for when choosing a digital bank for domestic transfers in the US

When looking for a digital bank for domestic transfers in the United States, you should consider several factors. The first is whether or not the bank offers FDIC insurance. This will protect your money in case of any problems with the bank. You should also look at the fees that the bank charges for transfers. Some banks will charge a flat fee, while others will charge a percentage of the total amount being transferred. You should also look at the exchange rate that the bank offers if that applies to your need. Some banks will give you a better exchange rate than others, so you can save money on your transfer if you choose a bank with a good exchange rate. 

Then, you should look at the customer service that the bank offers. You want to be sure that you can easily get in touch with someone if you have any questions or problems with your transfer.

How to make sure your domestic transfer is safe and secure

First, make sure you choose a reputable bank to handle your transfer. The level of security may not be the same for all banks, so it's important to find a bank that follows the best security practices for its digital transactions. Be sure not to give out your personal and financial information to anyone. This also includes your passwords. 

If you suspect anything or need any clarification, don't hesitate to ask questions. By taking these precautions, you can help ensure your domestic transfer goes smoothly without any problems.

Accelerated by the pandemic and empowered by the latest technological advancements, it has quickly entered people’s lives and aligned with the demands of businesses. 

Statista predicts that the number of US citizens using digital banks will hit 216.8 million. Among the reasons why consumers turn to online banking are the ease of use, security, and extensive banking capabilities available within their favorite solutions. 

The concept of digital banking admits easy and swift money management, performing fund transfers and online transactions, payments automation, and more. Modern banking solutions provide the ability to operate with digital currencies, introduce asset management, and provide comprehensive lending options.

The reasons for developing digital banking platforms are many. Let’s figure out what the process of financial mobile app development is like and how to start an online bank.

A quick overview of the digital banking market

The market for FinTech services is growing exponentially, and it’s projected that by the end of 2022, more than 65 percent of the US population will be banking online. 

The target audience for digital banks

Taking into account their lifestyles and aspirations, Millenials and Gen Z representatives are considered to be the most active mobile banking users. At the same time, the share of online banking users aged 50+ has also grown in recent years.

While Millennials turn to online banking to make the most of online transactions, peer-to-peer transfers, and cashback, the representatives of older generations may benefit from obtaining information about bank products, receiving mobile payments, and tracking their balances online.

So, deciding on the audience to target with your banking product, you better take into account the needs of different age groups.

Popular online banking solutions

Some banks make digitalization a part of their transformation strategy and FinTech businesses provide digital banking without having any brick-and-mortar branches behind. The latter is often called neobanks or digital-only banks. To operate legally, they partner with bank license issuers and distribute virtual and physical cards just like traditional banks do.

Among the most popular banking solutions that provide digital services are:

• Chime is the US most popular neobank that allows its customers to open deposit and debit cards, view their credit history, easily withdraw cash, automate savings, and more.
• Wise is not purely a mobile bank, but a system offering electronic money accounts. It offers international and domestic money transfers, provides debit cards, and provides options to operate with different types of currencies.
• N26 is a German digital bank that evolved from a startup and is now functioning in more than 50 countries. For users, its capabilities include direct deposits, international fund transfers, and personal finance management.
• Monzo is a popular neobank from the UK. Their services include p2p transfers, splitting the bills, easy budget tracking, digital loans, and many more.

Each success story has a tedious formation process and hours of work behind it. Now, let’s figure out how to develop a digital bank.

How can you develop a digital bank?

Banking software development requires a deep knowledge of the market. This includes understanding the legal part, complying with the industry requirements, and bringing to the table hands-on technical knowledge.

Getting started with digital banking, make sure you’ve figured out the things to do first and have in place all the assets to get you covered.

Among the challenges you may face on this way are:

• Building product architecture requires involving a Business Analyst and a Solution Architect. Together with the stakeholders, they are to decide which of the architecture types (monolith, microservices, or layered) better aligns with the technical requirements and business goals.
• Choosing the right technology stack you need to mind the time to market, a long-term development strategy, and the risks to mitigate.
• Ensuring all-around security is a must for applications that deal with sensitive data. This means every Fintech solution is subject to introducing enhanced security measures like introducing secure authentication, developing dedicated encryption and data storage systems, and following KYC (Know Your Customer) principles.
• Achieving regulatory compliance means developing and following a set of principles related to risk mitigation, data reliability, and user data processing.

Clearly understanding your business goals, following the security best practices, and partnering with a reliable financial software development services provider are the key principles for creating a successful digital solution.

Must-have features of digital banking apps

Deciding on the features to add when you start a digital bank, it’s essential to understand the needs of your audience. Think of the ways to realize your ideas and evaluate the resources you can count on to implement the desired functionality.

Consider starting with the product MVP and then gradually rolling out additional features. This approach will help you meet the time and budget constraints and evaluate your success on the go. 

Most mobile banking solutions are equipped with the following must-have features:

• Login and authorization
• Account management
• Transaction management
• Fund transfer
• Digital payments including P2P
• Notifications
• Support

With this basic functionality, your application can soon evolve into one of the custom banking solutions providing its users with:

• Expense tracking functionality
• Cashback system
• Digital loan capabilities
• Insurance options
• Tips on investment management
• Integration with digital wallet services and more.

How to monetize your digital banking app

So, how do you make money from developing a digital bank? 

As a rule, FinTech solution providers get some profit from:

1. money on cards, which is getting some share from customer deposits;
2. transactions, meaning that a part of the interchange fee is split between the card network (Visa, Master Card) and the bank card issuer.

You may also consider offering a part of your banking functionality as a premium tier, adding some insurance options, increasing your product LTV by introducing BankID, and targeting your customers with PPC advertising.

Providing your customers with real value and adjusting your solution as their needs change with the product change is a winning strategy you should take with you when developing a digital bank.

Workflow digitalization allows banks to reduce operating costs, focus on developing client-oriented solutions, and thus enhance client experiences. Meanwhile, clients can enjoy the speed and simplicity of online financial services such as mobile apps, digital wallets, contactless payment, 24/7 access, etc. That said, the transformation has also been attributed to many new forms of digital bank fraud. 

Nowadays, most bank frauds happen online. According to the Financial Crime Report for the second quarter of 2022, online attack rates increased by 233% overall. Fighting against ever-changing online bank fraud has been more challenging than ever. For banks to remain competitive, seamless digital experiences aren't enough. They also need to implement an effective bank fraud detection and prevention strategy. Otherwise, huge losses await, including both direct and indirect costs.

What Is Digital Bank Fraud?

Digital bank fraud is an online illegal act to steal money or assets from banks and other similar financial organisations. It can be committed by either a single individual or a high-tech crime group. 

What Are Some Common Types Of Digital Banking Fraud?

There are various types of online banking fraud. However, the three types mentioned below are the ones most frequently encountered.

• New Account Fraud can happen during an onboarding process to verify client identity. It is risky for banks or financial groups as this process takes place online. There is no face-to-face interaction between their staff and clients. Chances are identity thieves can use fake or stolen IDs to fool the process and open a new account. Later, they will commit financial crimes. For example, apply for credit cards or loans in a fake or stolen name.
• Account Takeover Attack is another form of identity theft. It happens when a fraudster somehow can log into a legitimate account. Then, begin taking control of it by changing its user name or password. As a result, the victim can no longer access his own account. The fraudster can transfer money to another bank account or make other fraudulent transactions. 
• Fund Transfer Fraud is also known as wire transfer fraud. This type might not be the most popular digital bank fraud. Yet, it is the most destructive for banks and financial groups. In almost all cases, it's nearly impossible to recover the stolen fund. Fraudsters will set up a fake account and use various techniques to launder money. When a bank or an organisation becomes aware of suspicious activities, the money might already be gone. And the fake bank account might already be closed.

Are Digital Users 100% Safe Now?

Of course, bank users cannot be 100% secure. Fraud in the banking sector can be exploited from both sides. Imagine this situation: A client clicked on a malicious link in a fraudulent message he received. Then, his account information was stolen. The question is: Who is responsible for the bank fraud in this case?

Online campaign of Monzo to warn their clients about a phishing scam

That’s why it’s the responsibility of both banks and clients to increase the security level.  Clients should raise their awareness of online security risks themselves. Meanwhile, banks and financial groups should provide ongoing education for their clients. In addition, they need to invest in advanced technologies for fraud detection and prevention.

Along with the industrialisation of digital bank fraud, the revolution of advanced technologies has spread to prevent these illegal acts. Technology-based strategies are considered the most effective ones to fight against internet bank fraud. Today, a wide range of technologies is available in the marketplace to help banks and financial groups identify fraudsters’ attempts and prevent them.

Transaction monitoring software, for instance, can detect and flag suspicious activities, then block them as well as monitor the safety of SSL/TLS certificates required to prevent data loss while issuing payments. Machine learning algorithms and robust risk scoring can identify fraudsters' attempts to enter fake information. A real-time data enrichment tool can help supplement client KYC data with additional information gathered from open-source databases, social networks, and other sources. 

Final Words

Digital bank fraud is an unexpected event for both banks or financial groups and their clients. Both sides are badly suffering from this event. However, the most aggrieved party is usually the former. When it happens, banks and financial groups incur two types of costs:

• Direct costs: compensation for damage to clients, non-compliance fines, etc.
• Indirect costs: broken reputations, time spent handling the situation, customer loyalty, etc.

Obviously, the most terrible consequence for banks and financial groups is the fragile relationship with their clients. In the Great Payments Disruption report, 67% of respondents suffering fraud switched their bank as a result.

The winner in the battle for client loyalty will be the ones that effectively implement bank fraud detection and prevention strategies and provide ongoing education for their clients. 

Richard Shearer, CEO of Tintra, discusses digital banking’s increased prevalence in the emerging world. 

In the West, Digital banking is now entirely uncontroversial to make payments, transfer money, and communicate with banks entirely through mobile apps and websites. The rise of online-only challenger banks is a testament to the staying power of this trend, as newcomers to the banking scene recognise that physical branches are becoming increasingly unnecessary – an eccentric reminder of an analogue world. And, of course, it goes without saying that the conveniences of digital banking have been thrown into an ever-more flattering light during the course of a pandemic which has demanded a minimum of physical interaction in settings like banks, alongside a reluctance to handle cash.

Though these developments in Western countries are, as I have mentioned, well-established, it may be surprising to learn that emerging economies have also witnessed an enthusiastic embrace of digital banking. This is a broad statement, of course, and one that does need qualifying. Pre-pandemic research from McKinsey suggested that for some emerging Asian countries, digital banking penetration had grown by 300 per cent, but the median was a far more modest 52 per cent.

Even with such caveats in mind, there are clearly developing countries whose digital banking adoption has caught up with that of developed markets – in fact, a 2021 survey from McKinsey found that emerging Asia-Pacific markets saw fintech app and e-wallet penetration reach 54 per cent in 2021, whereas developed Asia-Pacific regions only saw penetration of 43 per cent.

Statistics aside, this relationship between emerging markets and digital banking may – at first glance – appear counter-intuitive. After all, the public imagination tends not to associate such locations with technological advances – and this is reflected in one United Nations report, which notes that tech advances and their associated benefits “remain geographically concentrated, primarily in developed countries.”

On closer inspection, however, there are some clear reasons for digital banking’s increased prevalence in the emerging world.

Modern practices for young populations

On a practical level, emerging markets simply contain young populations. In fact, according to PwC, almost 90 per cent of people under 30 reside in emerging markets. This means, in PwC’s words, that “population trends favour the growth of online transactions.”

Clearly, then, the demographic dominance of digital natives has a part to play in the adoption of digital banking across emerging markets – but this is only one in a string of motivating factors. After all, it’s worth noting that a large proportion of emerging markets are getting wealthier: we’re seeing the emergence of a far bigger middle class in places like India, for example. In fact, according to 2019 estimates from World Data Lab, around 600 million Indians were on the cusp of joining the middle classes at that time.

Similar projections have been made by McKinsey in the context of China, with the firm noting that the Chinese middle class will soon reach something in the region of 550 million. All of this additional wealth comes hand-in-hand with greater demand for convenient banking services, whether that be in the form of savings accounts or the desire to link mobile apps to bank accounts – thus setting the stage for digital banking.

However, these are not the only factors that encourage a shift towards digital banking in emerging economies. It would be facile to suggest that this movement is entirely natural or inevitable when, in fact, many emerging market governments actively encourage any moves which boost financial inclusion – ensuring that individuals and businesses can access financial products and services like bank accounts.

As PwC have recently noted, in fact, “governments’ desire to boost financial inclusion and reduce the use of cash is fuelling rapid growth in electronic payment” – meaning that newer technologies and innovations “make it more economically viable for banks to reach the ‘unbanked’ or ‘underbanked’ populations.” 

Far-reaching benefits

This discussion of the active pursuit of financial inclusion brings us on to another set of reasons for the rise of digital banking: its many economic benefits. It is, perhaps, unsurprising to learn that various emerging market governments have a strong economic motive to encourage financial inclusion through digital banking.

Turning briefly to a final set of statistics, it is worth noting that, according to research from HSBC, digital finance is capable of increasing the GDP of all emerging economies by 6 per cent by 2025. In practical terms, this kind of growth could take the form of 95 million new jobs, while markets could see a flow of as much as $2 trillion in new credit. No wonder, then, that digital banking is so highly prized by emerging economies. But, again, there is more to this phenomenon than the slightly dry terrain of GDP growth.

Digital banking doesn’t just create new credit: it spurs on new levels of innovation.

As emerging markets feel the effects of financial inclusion, we’re seeing what some have described as a ‘leapfrog’ process. Some consumers rocket from no bank account whatsoever to the cutting edge of banking services – and, perhaps crucially, this forward momentum has led to further innovations in online banking and similar payments processes.

PwC’s recent report on payments transformations points, for example, to payments made through social media, advances in NFC technology, use of blockchain, and mobile money. As such, emerging markets’ embrace of digital banking isn’t just a fast track towards parity with the banking systems of the developed world – it can be a catalyst for the adoption of revolutionary banking and payments technology.

Rethinking our terminology

Reflecting on developments like this is a great way to remind ourselves that, in fact, the term ‘emerging’ isn’t necessarily the most applicable or appropriate way of describing these markets. After all, these new waves of financial inclusion and technological advance clearly show that many of the countries branded as ‘emerging’ have, in fact, emerged, and now find themselves in a position to capitalise on – and potentially pioneer – the future of digital banking services.

While these new digital banks do not boast the same kind of experience as their traditional rivals, this is a big part of their success. What they lack in heritage, they also lack in being tied into the established banking system. While banks that have been around for decades have made great strides to adapt to a digital market, they have no choice but to depend on technologies that have been around for just as long for some of their processes. Challenger banks are not tied down in the same way and benefit from being built around technology that is difficult, if not impossible, for the more established names to deploy.

1. Cloud Computing

Virtually everyone has heard of cloud computing, even if only in terms of storing their photos in the cloud. It shouldn't come as a surprise that banks rely on vast amounts of data storage and that the security of this data is of paramount importance. For a website, deciding to switch to cloud computing is relatively simple. It involves a simple data transfer and perhaps a few days of downtime at most. However, for a bank, moving data is not as straightforward. Banks that have been around for many years may have vast amounts of data collected before cloud storage was even a concept. Those established names cannot afford downtime either – even outages lasting just a few hours make national news in some countries.

The advantage that challenger banks have is that cloud computing existed as a robust, secure concept before they did. They had the opportunity to start collecting data in the cloud immediately, with no need to ever look back. In practice, this makes their data storage just as secure as any other bank but far more flexible and sustainable. These incredible connectivity levels also ensure few restrictions on new features and ideas, as cloud data can plug into just about anything.

2. Blockchain

Many people associate blockchain with cryptocurrencies, and while this is undoubtedly the most prominent connection to date, there are far wider use cases. Blockchain technology also underpins the trend for non-fungible tokens (NFTs) and also powers some of the latest functionality in challenger banks. 

While some people value cryptocurrencies primarily due to their lack of relationship with the traditional banking system, some challenger banks use the concept extensively. At some of the biggest digital banks, this involves providing wallet storage for existing and emerging cryptocurrencies. Others go further and use blockchain technology at the core of their offering, favouring blockchain-based currencies over their fiat counterparts and providing traditional banking services without a dollar in sight.  

3. Open Banking

Open banking protocols vary in popularity depending on where in the world a bank is based. It remains an emerging technology in the US, although support is increasing all the time. It is already so established in the UK that many of the biggest banks now utilise the technology to some degree.

In an industry where rivals can quickly become enemies, the concept of sharing data and financial information was virtually taboo for a long time. However, the sheer number of digital banks that have entered the market meant they learnt the importance of working closely early on.  

Many of these new digital banks were built with open banking in mind. Even those that do not explicitly utilise it themselves are happy to share that information with financial services beyond banks. An increase in solutions to view balances, outgoings, and payment schedules on apps that are not banks in their own right, makes banking easier for consumers. The concept of shared data without any negative impact on security will remain a cornerstone of digital banks and one that their established counterparts will need to catch up with.

4. Microservices

An individual does not need to go too far back in time to remember when a transfer from an account with one bank to another could take several days. This remained the case even as the internet and e-commerce became mainstream. The delay reflects the outdated processing systems in place at established banks and the limitations on implementing change.

In some cases, those traditional banks are still working to catch up to this day. Digital banks benefit, once again, from launching at a time when the framework to operate a bank was far more advanced. Microservices are a fairly advanced concept even compared to current IT services, let alone banking infrastructure. However, they also represent an invaluable tool for digital banks to be faster and more reactive to the needs of their customers.

In the past, changes to established banking protocol could take months or even years. In one case, a digital bank founder left a senior role with an established brand to start a digital alternative because it was easier to create a new bank than fix the old one. However, these days, updates and new features can go live instantly with absolutely no downtime thanks to microservices.

Some say that established banks are a relic of the past. Between digital banks and cryptocurrencies, their role has diminished over time. That remains to be seen, and some are doing better than others in adapting to new opportunities. However, the rapid increase in popularity of challenger banks indicates a sentiment among the general public for faster speeds, more features, and greater flexibility. It would take many years for the big names to disappear if that were to be the case, but it is clear that their upstart rivals have vast technological advantages, and it is up to them to capitalise.

Their success is down to many things – luck, vision, hard work, but too often ignored - because of good hires. Thanks to effective recruitment, they have been able to bring their vision to life, bringing transparency, access and customer experience to the banking industry. The results speak for themselves – they have a million customers using their debit cards.

The quality of their employees has been a huge contributing factor in their success. Monzo have put customer satisfaction at the heart of their company and made it their mission to shine a light on the ineptitude of legacy banks. Hind Ali, Operation Support Analyst at Monzo, believes that customer experience is fundamental to the business. She explains that the business has built their reputation on providing a level of real-time customer service and insight that the established banks don’t offer. “Undermining this would have far-reaching implications”, she says. “We have to continue to deliver the most transparent and usable app, and to do that we need the best Customer Operations team. We don’t just need bodies; we need personable people with the right problem-solving skills to provide the customer service we expect.”

One of the byproducts of achievement is demand, and in the Autumn of 2018, Monzo felt the full force of their success. They found themselves in need of 60 new full-time employees and set the ambitious target of having them all hired by Christmas – a huge task for a company so young. Hind tells us that the start-up was running at full capacity, holding two to three assessments each week which they were sometimes struggling to fill. “So, we needed to find other ways of sourcing great candidates”, she adds.

Start-ups such as Monzo are in existence to disrupt the industries, and their recruitment process should be no different.

Start-ups such as Monzo are in existence to disrupt the industries, and their recruitment process should be no different. Technology is central to their evolution, and video-based hiring was the answer to their concerns.
It provided an opportunity to improve the quality of candidates, whilst simultaneously simplifying the process. This not only saved time and therefore money, but also had the added benefit of meaning people could be onboarded in the recruitment team with minimal training.
Hind explains that “what’s great about Tempo is that they give us control of the process. We could choose to put less emphasis on previous experience and instead focus on the candidate’s soft skills. We really needed to assess skills like empathy from the start. There’s usually no emotion or personality in a CV. It can be very difficult to get an idea of someone’s soft skills by looking at a list of jobs they’ve done. With Tempo, we see a 30-second video introduction from the candidate, and we could ask applicants questions in real-time. This meant we could see how they reacted to challenging situations, before inviting them to an assessment day.”

Through optimising their recruitment process through technology, Monzo managed to hire 200 people, as opposed to the initial (albeit ambitious) target of 60. Efficiency and peace of mind are what Monzo now associate the recruitment process with, phrases that typically don’t spring to mind when organisations are hiring.

“Tempo has been an incredibly useful tool for our recruitment process. Rather than hiring the 60 people we set out to, we’ve been able to hire 200! They were the best choice for getting in quality candidates, quickly. The main differences have been in two areas – efficiency and peace of mind. Some of our assessment days had a 50% success rate. As anyone in the recruitment industry will confirm, that’s a fantastic return.”

“We’re now able to immediately see which candidates are engaging and would fit our culture before we invite them to assessment days. As a result, we’ve been able to host larger and more successful assessment days. That’s saved our team of four a huge amount of time and effort, which we can spend on hiring for technical roles or improving onboarding and internal processes”, added Ali.

Amidst a large swathe of planned job cuts at Lloyds, at the beginning of November the bank announced that there was a silver lining - a £3 billion investment programme that will see the country’s biggest high-street lender radically transform its digital strategy. While 6,000 existing roles are being cut from a broad range of areas, 8,000 are being created to focus on areas of digital expansion, including in the group transformation unit. And, the CEO of Tectrade Alex Fagioli points out, it’s about time for Lloyds, as it begins to play catch up with an industry that has quietly been revolutionised by high-street banks and start-ups that have gone all-in on digital banking.

Digital banking provides a great deal of benefits to administrators and alike. Customers are given a more flexible way of banking, accessing their accounts and transferring their money without relying on bank hours. Managers have an unprecedented insight into the activity of branches and can offer services to their customers which they had previously been incapable of. However, the challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.

In April, a routine systems upgrade at TSB went awry and left 1.9 million customers locked out of their accounts for up to a month. Similarly on Friday 1 June, 5.2 million transactions using Visa failed across Europe as a result of one single faulty switch in one of Visa’s data centres. This isn’t just a continental issue; Atlanta-based Sun Trust – a bank with 1,400 bank branches and 2,160 – experienced a significant outage to its online and mobile banking platforms in September due to a botched upgrade. In all of these cases, the outages weren’t the result of cyberattack or weather-related problems. Instead, these outages came as a result of seemingly insignificant technical factors that had been overlooked – and Lloyds would be wise to heed these cautionary tales.

The challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.

In the first two instances, cause of the outages are very clear– and they were entirely preventable. TSB rushed into an upgrade by hastily initiating the update across its entire system. For a technical reason that we will likely never know, the update tanked the entire bank and left it at a standstill while it tried to pick up the pieces. Even when it managed to get everything back in place, TSB is now permanently scarred by the event, with its reputation still reeling. The prevention for this would have been a gradual rollout, as opposed to a sweeping installation. If the upgrade was initially piloted with non-essential systems, then the bugs would likely have been spotted early, with little fuss and no media spotlight.

Likewise, the Visa incident came as a result of a single faulty switch and that betrays a lack of understanding of its own systems. It is shocking how few companies have carried out any form of disaster recovery testing on their infrastructure. Administrators are incapable of having a full understanding of the systems they are responsible for without testing them in a controlled and simulated environment. With a controlled disaster test, that faulty switch would have been highlighted and those 5.2 million transactions would have been completed. It’s similar to a car – the reason that MOTs are essential is so that any issues can be highlighted well ahead of them having a serious effect on the vehicle’s performance. Banks must carry out a cyber MOT in order to keep their systems in check and to give IT teams a full working knowledge of any potential issues.

But this is all in the case of preventable issues, and in the modern day accepted wisdom is not if, it’s when outages will happen.

Thus far we’ve only addressed routine operations, but cyberattack is of course an omnipresent threat. Ransomware has spent the past couple of years as the ‘big bad’ in cybercrime, and it is an even bigger threat to the financial sector. Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.  If a bank were to be hit by a ransomware attack, all online systems for banking and insurance transactions will need to be taken offline, rendering that organisation unable to operate. According to a report from Osterman Research, there is a 50% chance of employees in this industry suffering productivity loss, a 30% chance that the financial and insurance services will shut down temporarily, and a 20% chance of revenue loss and adverse effect on customer perception. In cases of ransomware, data recovery can be very difficult as there is a large amount of customer information stored in a variety of disparate systems. As such, many organisations may feel they have no choice but to pay the fee demanded of them to regain access to the data.

Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.

Equally as unpreventable are environmental factors. Areas like the Southern States of the USA are frequently dominated by hurricanes and tropical storms which can cause large disruptions to everything from schools to banks. Many of these buildings have to be built with this in mind, and network operations should be created with the same mindset. In the UK, by contrast, we don’t have to deal with such extreme weather conditions, but environmental considerations must be made with the potential for freak accidents. A burst pipe in a shared building or road workers drilling through electrical or network cabling, for example, could see a bank offline for an indeterminate period of time outside of its control. One example of this in action was with National Australia Bank, which suffered a power outage that downed ATMs, Eftpos and online banking across the country for five hours in May.

In all of these situations where outages can occur, banks must make sure they have the capacity to get their systems back online and fast. The best way to do this is by adopting a zero-day approach to architecture. Zero-day architecture won’t prevent an outage, but it will mitigate the effects. It allows organisations to minimise downtime and recover from backups without having to worry about lost data.

A zero-day recovery architecture is a service that enables administrators to quickly bring work code or data into operation in the event of any outages, without having to worry about whether the workload is still compromised. An evolution of the 3-2-1 backup rule (three copies of your data stored on two different media and one backup kept offsite), zero-day recovery enables an IT department to partner with the cyber team and create a set of policies which define the architecture for what they want to do with data backups being stored offsite, normally in the cloud. This policy assigns an appropriate storage cost and therefore recovery time to each workload according to its strategic value to the business. It could, for example, mean that a particular workload needs to be brought back into the system within 20 minutes while another workload can wait a couple of days.

Without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes.

As it begins its massive investment in digital transformation, Lloyds could very easily sink its budget into exciting features that promise to improve the lives of customers and employees. However, without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes. You can promise all the features in the world, but without a solid foundation the bank will essentially be a house of cards, ready to collapse at the slightest sign of danger. All banks, regardless of size, must prioritise the minimisation of downtime by having common sense policies in patch management, full knowledge of a system gained through disaster testing and a recovery strategy in place that enables it to get back online at speed.

https://www.tectrade.com