The new technologies are redefining the conventional methodology of banks. The era of the IT infrastructure is increasingly vulnerable to remaining. In the past since strategic decisions are made based on innovation in the technological field. Here Ali Saadat Meli tags how companies must constantly modify and adapt their models to be at the forefront of this new economy.
What are the new applications and technologies?
Banking institutions have shown sustainable growth in managing their financial products. Thanks to the development of the Internet, Cell Phones, Artificial Intelligence, Chatbots, Big Data, Blockchain, etc.
Novelties such as online banking have allowed them to optimize previously carried out customer service in branches. Customer communication and customer requests, distribution of information and acquisition of financial products and services. However, Ali Meli stumbles on having optimal equipment for better performance in the flow of information. Ready for the development of telecommunications, robust to avoid any attack, agile to transmit data information. And working every day of the year entails a significant challenge.
The banking sector is immersed in the process of technological transformation. Although numerous technological changes have occurred, the current innovation process will likely significantly impact banking activity. The development of new technologies that allow massive data analysis (big data), artificial intelligence (AI). Decentralized record technology (blockchain) and cloud computing begin to configure a “new banking technology. Its implementation, approval and use can alter the offer with more digital banks. And the arrival of new technology providers capable of offering financial services. And the demand for banking services with more digitized customers.
What‘s digitization and how does it help?
The change in the supply and demand of financial services results from the leadership in technological spending carried out by banking entities. This transformation process is characterized by being subjected to continuous acceleration and by its global nature. Ali Saadat Meli suggests that this process of change in the banking industry is accelerating. As future growth rates in technology spending will exceed current ones.
Ali Meli uses a broad sample of banks from North America, Europe and Asia-Pacific. It is observed that banks allocate between 7.99% and 16% of their budget to technology, with the average being 11%. There is also a positive trend worldwide, such that banks increased hi-tech access compared to the previous year. Likewise, technical investment and its growth rate feed each other, as positive correlations are observed. So, those banks that invest the most in technology also increase them the most.
Banks that are leaders in adopting technologies present a higher return per asset (ROA). And net worth (ROE) than banks called less technical. This is based on average. Likewise, banks with a higher degree of adoption of new banking expertise can generate more income to their level of assets.
A significant part of this spending, around 26%, is allocated to the most innovative expertise. The sector identifies four fields as the most disruptive: big data, artificial intelligence, blockchain and cloud computing. Their combined use is known as the “new banking technology.” Its potential in the offer of financial services is very extensive. Although the analysis of its current banking applications determines that all of them are oriented towards three main objectives. Strengthening the competitive position of the entity before the arrival of new competitors, improving the experience of the user to expand the ability to attract new customers. And retain current ones and ultimately save on costs to improve operational efficiency.
What is the possible impact of approving “new banking technology”?
Ali Saadat Meli distinguishes between two groups of banking entities –those that make intensive use of these technologies (leader banks in the new banking technology) and those that make limited use of them (developing banks in the use of new banking technology. There are differences between entities based on the degree to which they have adopted it. On average, banks that are front-runners in adopting technologies present a higher return per asset (ROA) and net worth (ROE) than banks called less technical.
Why are the banking sector embracing new technologies?
Today, banking stands out worldwide for the adoption of new technologies. Ali Meli evaluates the degree of embracing of new technologies in banks. It can be deduced that 94% of these banks refer to using at least one of the technologies mentioned earlier. The highest adoption percentage corresponds to using big data, followed by artificial intelligence and blockchain. This effort in the sector is taking place individually, where each entity decides and executes its technological budget by its priorities, and through global projects, in which a group of banking entities participate.
