The financial sector is one of the most structured branches of the economy. In the case of financial entities, they must meet a number of strict legal regulations and standards of conduct. At stake are finances, which are a critical element of the functioning of today’s society. It is also important to remember the other role of the financial sector. It is very often an additional element of verifying the identity of users on the network, e.g. when logging in to public administration services. Despite the complex structure of financial entities, for years they have been one of the most computerized organizations on the market, and the banking sector in Poland is very fast in implementing new technological solutions. We are pioneers, as confirmed by biometric ATMs or the BLIK payment system – the flagship product of the Polish financial sector. You will not find such solutions in other countries.
Digital transformation in banking refers to the integration of modern technologies in order to streamline operations and improve customer experience. This includes the implementation of solutions such as mobile banking, artificial intelligence, machine learning and analysis of large data sets. The aim is to increase efficiency, security and adapt services to dynamically changing market needs.
Introduction to digital transformation in banking
Entities from the financial sector such as banks, investment funds and insurance companies are increasingly reaching for modern tools to meet customer expectations and compete in an increasingly digital financial market. In today’s world, simplicity, speed and 24/7/365 availability directly from our smartphone count. These cannot be provided without digital transformation.
Key technologies driving digital transformation
In the process of digital transformation, banks use a variety of technologies that revolutionize the way financial services are provided. The most important of them include:
- Mobile banking: It allows customers to access banking services via smartphone applications, which increases convenience and accessibility. Users can make transfers, manage accounts and use credit offers without having to visit bank branches. Currently, banking applications also offer monitoring of behavioral behaviors, based on which they automatically propose often repetitive activities. This solution also increases the level of security – it allows to detect unusual user behavior and stop, for example, a transfer of a large sum of cash through additional verification.
- Artificial Intelligence (AI) and Machine Learning (ML): Used to analyze customer data, personalize offers and detect fraud. AI algorithms help banks better understand customer needs and adapt offers to their preferences. Thanks to AI, users can use preferential solutions and services tailored to their needs. Thanks to AI algorithms and machine learning, the days of unsuccessful offers and promotions are gone forever, and each user can receive different proposals based on their behavior, preferences, and wealth.
- Blockchain technology: Ensures safe and transparent transactions, reducing costs and time of their execution. Blockchain-based solutions can revolutionize transaction accounting processes and ensure greater transparency of financial operations. Security must be hidden under the layer of modern mobile applications. In the banking sector, blockchain is responsible for this, guaranteeing the immutability of data and recording every change in databases.
- Big Data: Analysis of large data sets allows for a better understanding of customer needs and optimization of processes. Banks use predictive analytics to assess credit risk and predict market trends.
Benefits of digital transformation for banks and customers
Implementation of modern technologies in the banking sector brings a number of benefits for both financial institutions and their customers:
- Increased operational efficiency: Process automation reduces costs and minimizes the risk of errors. Thanks to digital transformation, some processes take place in the background without the need to engage employees who can focus on critical processes. This increases, for example, the speed of credit application analysis.
- Better customer experience: Personalized services and easy access to financial products increase customer satisfaction. Banking applications have also become an integrator of unique offers, which often prevail when choosing the services of a given financial institution.
- Greater security: Modern technologies provide a higher level of data and transaction protection, e.g. through biometric authentication or data tokenization. Biometric login, verification of transfers by phone have long become the standard, replacing classic tokens or SMS messages.
- Faster innovation: Technological flexibility allows for quick response to market changes and customer needs. Implementation of a new service or product does not require the creation of offline materials and multi-day preparations. Thanks to digital transformation, the financial sector can influence the market situation in near real time.
- Equality in access to financial services: Digital technologies enable access to banking services regardless of location or financial status.
Challenges related to implementing digital solutions in banking
Despite the numerous benefits, the process of digital transformation is associated with certain challenges:
- Integration with existing systems: Combining new technologies with traditional banking systems can be expensive and time-consuming. Financial institutions still have to serve customers who value traditional service at a bank branch.
- Change management: Employees have to adapt to new tools and processes, which requires appropriate training and support. Carrying them out is difficult due to the need to meet a number of legal standards and audits.
- Compliance with regulations: New technologies must meet applicable regulations and security standards, such as GDPR or PSD2. In the banking sector, securing solutions is critical for the operation of the entire market.
- Cybersecurity: Along with digitization, the risk of cyberattacks increases, which requires investments in advanced protection systems, such as multi-level authentication or advanced threat detection algorithms. The financial sector faces cybersecurity challenges from both the institution and end users.
The Future of Banking in the Digital Age
Digital transformation is not a one-time project, but a continuous process of adaptation to new technologies and changing customer expectations. It cannot be carried out once. It is a continuous process that must be embedded in the nature and manner of operation of the organization. In the future, we can expect further development of solutions such as:
- Open Banking: Cooperation between banks and external financial service providers in order to offer innovative products. Unified platforms will allow for the management of finances, investments, insurance and other products related to the financial market from a single application.
- Augmented Reality (AR) and Virtual Reality (VR): Thanks to VR and AR, banking service users will be able to visualize purchases without leaving home, e.g. release subsequent loan tranches, visualizing on an ongoing basis what the funds will be used for.
- Internet of Things (IoT): Integration of devices with Internet access will allow for better personalization of financial services.
To remain competitive, banks must continually invest in technological development and adapt their strategies to the dynamically changing market environment.
