By Iwona Sikora, Executive Vice President Europe and South Africa, Iron Mountain
In an era characterized by rapid technological advancements and an ever-changing regulatory landscape, the need for banking institutions to remain both competitive and compliant has never been more critical. This is largely due to current economic difficulties and rising operational costs, which have created new pressures on banks.
In response to these challenges, the sector has seen exponential growth in recent years in two areas: “life-centric banking”, built around the implementation of customer needs, and niche digital banks responding to specific demographics. More than anything, adapting and innovating in this era of transformation is crucial for banks to overcome challenges and remain profitable. So what is fueling this new era of transformation?
Harnessing the power of artificial intelligence
Banks are increasingly harnessing the power of artificial intelligence (AI) to combat fraud, meet evolving customer demands and face competition from smaller, more nimble fintech competitors. By 2025, the banking sector should spend an additional $31 billion on the integration of artificial intelligence (AI) into existing systems. This alone shows us how essential AI technologies are becoming in the banking world.
For example, the adoption of advanced AI algorithms, large language models and client ML models – delivered through intelligent document processing solutions – will be crucial to helping banks better unlock “dark data” and to promote unstructured data. They can uncover previously unrecognized data points, expose errors, improve fraud detection, improve customer service, and personalize offers to meet specific customer needs.
Banks are integrating AI-based document processing solutions into their fraud detection systems. By leveraging large language models and advanced machine learning models, the bank’s system automatically analyzes transaction data, identifies suspicious patterns and detects potential fraud in real time. This improves the bank’s ability to protect itself against fraudulent activity, thereby ensuring the security of the bank and its customers.
Elsewhere, AI-powered chatbots and virtual assistants are subject to rigorous testing to ensure fairness and mitigate bias. These intelligent chatbots provide personalized and unbiased customer support, enabling the bank to provide exceptional service to all customers while future-proofing their AI strategies.
But to successfully leverage any of these innovations, banks must develop a comprehensive, enterprise-wide data strategy. Here, more and more banks are adopting it – this refers to a decentralized data architecture that organizes data by specific business area. Rather than being stored centrally and owned by a single team, data ownership is distributed across multiple teams, each responsible for data in their own domain. This makes data more accessible and valuable in an organization.
Capturing the elusive Generation Z
Overall, consumer demands are evolving, as are banks’ priorities based on consumer demographics.
To this end, banks are acting quickly. A number of traditional banks have started to integrate fintech services such as Banking as a Service (BaaS), which involves financial institutions opening up their platforms to third-party providers, allowing them to offer banking services to their customers . While Buy Now, Pay Later platforms and similar solutions have continued to gain popularity among Gen Z consumers.
Embedded fintech is more than just a trend; it represents an era of integration and innovation. But while this approach brings many advantages, it also presents significant risks, particularly in terms of data security and consumer protection. The transition to such platforms therefore requires a transparent and compliant transition.
Create a data-driven strategy
Creating a data strategy involves finding use cases, addressing legacy constraints, and investing in capabilities to meet current and future needs. For example, intelligent document processing and content services platforms can help banks extract valuable insights from vast customer and financial data. Additionally, automating and streamlining processes can reduce manual entries, speed up processing, and provide a comprehensive view of operational information through intuitive dashboards.
Partnership and integration are also the key to success. Leveraging data is crucial for long-term competitiveness and requires agility and collaboration with third parties, providing customers with tailored financial solutions. Working with specialists – whether a cloud or fintech provider, or a trusted technology partner – can help leverage the benefits of transformation even more effectively, driving greater ROI. quickly and help banks seamlessly achieve the desired business results.
Banking regulatory thresholds continue to change frequently – they can be complex to manage and even more difficult to implement. However, to succeed in this evolving landscape, banks will need to be prepared to adapt to new technologies and innovate their processes and offerings.
Pursuing a digital transformation should not be just an option, but a business imperative. And above all, banks must be ready to adopt innovative data practices to empower customers on their financial journey, now and in the future.
Ultimately, the need for stability and resilience in the current economic climate need not be at odds with investment in innovation. Stability and collaboration with trusted organizations will be guiding principles for all banks around the world.
Data Mesh Explained: Although the concept of data mesh is introduced, it is assumed that readers are familiar with it. A brief, one-line explanation might make it more accessible to the general public.
In the section on Generation Z, the statement “Once upon a time the older generation drove trends and habits…” could be interpreted in different ways. Consider clarifying which older generation is being referred to or rephrase something like “Historically, older generations set trends and habits…”
