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Commercial Banking

Current Trends and Issues

Many new ideas and developments are affecting how the banking industry does business and interacts with its customers. For example, more banks are embracing the practice of banking-as-a-service (BaaS), which is the provision of banking products and services through third-party non-banking distributors to expand one’s customer base, grow revenue, and meet other goals. “BaaS is helping traditional banks to create new revenue models,” according to Retail Banking: Top Trends 2022, from Capgemini, a technology consulting firm. “Such models enable incumbents to monetize their banking stack (data, capabilities, and infrastructure) via revenue sharing agreements, one-time setup charges, subscription fees, or a combination of these. The result? A steady stream fed by diverse sources.” Another trend is the increasing use of Web sites, social media, and mobile applications by banks to interact with customers and allow them to complete financial transactions without the need to visit a “brick and mortar” bank. Some banks are even creating artificial intelligence (AI)-driven virtual financial assistants (e.g., Bank of America’s Erica) to allow customers to check their account balances, make payments, and transfer money. Erica has helped more than 32 million Bank of America customers with their financial needs since 2018. AI is also being utilized in the front office (authentication and biometrics), the middle office (anti-fraud and risk, anti-money laundering, complex compliance workflows), and the back office (credit underwriting, smart contracts). “Although the banking industry is in the early stages of developing robust AI solutions, real potential exists in how AI may transform customer experience,” according to Capgemini. “Going forward, AI will also be leveraged for product development, by applying both qualitative and quantitative data to create financial products.” Other trends worth watching are: changing customer expectations, the increasing focus on data security, the growing use of data analytics, the rise of distributed ledger technology, and increasing competition from fintechs and other non-financial services firms.

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