Technology Innovations Driving Change in Transaction Banking

Technology Innovations Driving Change in Transaction Banking

The global banking industry is expected to spend up to $519 billion on IT in 2018, according to recent research by Gartner. This will continue growing as financial institutions embrace technological innovations to drive growth and improve customer services. One of the areas where technological innovations are expected to impact the industry is in transaction banking. With more banks working closely with tech companies to ensure seamless innovation management, there’s no doubt that rapid growth in tech investments means that banks have to quickly adapt to new changes that are set to disrupt transaction services. Here is a look at the technological innovations driving change in transaction banking:

Machine Learning and Advanced Analytics

Financial transactions, including business-to-business (B2B), business-to-consumer (B2C) and consumer-to-business (C2B), generate more transaction data than any other area of banking. With recent advancements in advanced analytics and machine learning in banking, financial institutions are going beyond traditional statistical approaches. Adopting the latest analytical innovations is helping them get a more precise description and prediction of transaction banking data, thus optimizing market performance.

Based on a survey of senior transaction banking executives across the US, advanced analytics and machine learning are expected to help financial institutions identify new commercial opportunities through more accurate transaction analytics. This will make it easier for both individual customers and businesses to enjoy better financial services and easier access to funds from lenders in the market. An improvement in transaction analytics is expected to result in a 15-20% potential increase in customer base for both traditional banks and online lenders.    

Blockchain Technology

A lot has been said about the potential of blockchain technology and its application in transaction banking to streamline operations. After several years of experimentation, industry experts are confident that distributed technology could be the key to transforming both internal and external transaction banking processes. In fact, banks just completed their first live transaction via a blockchain platform. This marks a huge step forward in facilitating live transactions taking place on the blockchain.

With the right applications, blockchain technology is expected to significantly increase transaction banking transparency, mitigate risks and help financial institutions manage their capital more efficiently. Engaging with new technological innovations is one of the best ways banks and small lenders can anticipate the future needs of the ever-sophisticated client base.

Fintech Challengers

The number of fintechs focused on commercial and corporate banking has increased by around 15% over the last year. This rapid growth has attracted the interest of banking executives responsible for a diverse range of transaction banking product areas like payments and current accounts. While fintech innovation in transaction banking is expected to continue to accelerate, most applications offered by fintechs in the market today are still in the early development stages. Banks can either partner with fintech companies or combine forces with other financial institutions to benefit from fintech networks. Nevertheless, banks must stay up-to-date with the emerging innovations and their potential applications.

In Conclusion

To counter a shrinking customer base due to the fast adoption of mobile banking solutions, traditional banks have to implement a number of retention techniques that focus on inactive customers while also using the power of technology innovations like advanced analytics, machine learning, blockchain technology and fintech solutions to increase their market share. Adopting these new changes will ensure that banks drive more growth in transaction banking.


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