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Moving Into the Future: Technological Trends in BankingAs with almost every industry, banking benefits from the latest technologies.Many financial institutions have already implemented mobile banking apps andAI-controlled chatbots. However, the future of banking lies with a series ofemerging technologies designed to increase efficiency and customer experience.Here’s a look at some of the technological trends that may change the shape ofbanking.## Blockchain TechnologyBlockchain may bring one of the largest overhauls to the modern bankingsystem. While blockchain technology is mostly associated with Bitcoin, thepotential uses of the technology extend far beyond cryptocurrencies. Close to75 percent of banks are in the early stages of adopting blockchain technology.An online ledger that is essentially managed by a network of computers, usingblockchain means that every computer on a blockchain network stores a copy ofthat ledger, creating a transparent record. Previous transactions cannot bealtered without altering every copy of the ledger, which also increases thesecurity of blockchain compared to other data management systems. Most ledgersare managed by a peer-to-peer (P2P) network. However, banks may developprivate ledgers for internal use. While this eliminates the transparency of anopen ledger, it still provides major security benefits. Adopting blockchaingives banks a secure solution for instant money transfers as well, whichbenefits both consumers and banks. Consumers benefit from lower fees andshorter waiting periods, while banks benefit from increased efficiency, fewererrors, increased security, and lower overhead.## Peer-to-Peer PaymentsAbout 40 percent of financial institutions have proposed investment in peer-to-peer (P2P) payment systems in 2020. While PayPal is the most recognizableconsumer P2P payment app, over 80 percent of the largest banks use Zelle as aP2P payment provider. A P2P payment system is simply a way for customers tocomplete electronic money transfers to other accounts. Integrating P2P paymentallows banks to give customers flexible solutions, as well as remaincompetitive in an increasingly online world. P2P payments, meanwhile, can alsobenefit from blockchain technology. In an open banking system, a distributedledger can ensure the security of each P2P transaction. All transactions arepermanently added to the ledger, reducing the risk of fraud and providinggreater transparency.## Digital Account OpeningAlmost a third of banks plan on implementing new or replacement software tohandle digital account opening (DAO). DAO allows customers to open accountswithout physically visiting a bank – a boon not only to consumers in anincreasingly digital age, but also to more and more remote workers who may bemoving abroad or traveling. Due to the online environment, DAO comes withadditional security and regulatory concerns, however. Banks need to cautiouslyverify the identity of a customer when opening an account. They must alsoevaluate the risk of each applicant and obtain funds electronically in realtime. These potential concerns have slowed the adoption of DAO solutions,however, many banks are now investing in DAO software to avoid missing out onthis growing segment of the banking market. With younger generations of adultspreferring online interactions for goods and services, a recent study foundthat 75 percent of millennials prefer opening a bank account online. As dozensof new online banks open each month to cater to millennials, traditionalfinancial institutions are implementing DAO options to keep up with thedemand.## Machine LearningArtificial intelligence (AI) is currently used in a variety of implementationsfrom chatbots to personalization features in web-based services. However, theuse of these technologies is dwindling, as the real future of AI is theability to analyze big data through machine learning. Allowing powerfulcomputers to analyze large volumes of data provides many practical uses in thebanking industry. Large financial institutions may employ machine learning toautomate processes or devise new strategies, while machine learning may alsochange the future of fraud detection. AI technology can analyze and detectsuspicious activity more efficiently compared to existing systems, andreducing fraud, along with the time spent dealing with fraud prevention,offers significant value in the banking industry. In addition to internalprocesses, AI and machine learning may improve the customer experience aswell, with chatbots and personalization just the beginning. For banks,implementing this technology now makes it easier to remain on the cutting edgeof AI as it develops into the future.## Cloud ComputingBlockchain technology and machine learning systems require substantialinformation technology resources. Instead of increasing their on-site ITinfrastructures, many financial institutions are moving to the cloud. Close to50 percent of banks already use cloud computing, and many intend to enhancetheir existing solutions. Adopting cloud technology offers many advantages inthe banking industry, including improved cybersecurity, reduced ITinfrastructure costs, faster technology implementation, and access to morepowerful technologies. Using cloud-based servers to manage data andapplications is becoming more secure compared to on-site systems as well. Manycyberattacks are directed at poorly managed IT networks, with smaller banksbeing the biggest targets, as they tend to lack the sophisticated securityfeatures used at major financial institutions. Transitioning to cloud-basedservices reduces IT costs, meanwhile, by saving banks money on hardware,staffing, and future technologies. Implementing updates and new tech is oftenfaster and cheaper when dealing with cloud computing, which provides directaccess to the latest developments.## Application Programming Interfaces (APIs)Application programming interfaces (APIs) are not new. The IT industry hasused APIs for over two decades to simplify software implementation for thirdparties. However, the banking industry is just now starting to invest heavilyin the creation of their own APIs. Working as an interface that establishescommunication between two sets of software, organizations typically use APIsto give third-party developers access to assets such as data or other specificservices. Google, for example, offers APIs for most of its web-based services,allowing independent developers to implement Google Maps or Gmail in theirapplications. In the banking industry, an API provides a simpler interface forintegration with vendor software or custom applications. Banks can also maketheir APIs available to organizations to develop tools that fit theirindustries, providing a secure communication between the bank’s data orresources and third-party software, and giving clients greater freedom todevelop custom solutions.Some technologies receive a lot of attention without delivering long-termresults. While large financial institutions are investing billions in thesetrends, some smaller banks may choose to hold off until they can reviewconcrete statistics. But with major banks investing heavily in AI, cloudcomputing, and APIs, many financial institutions around the world are alreadyrolling out many of these technologies, and they will continue to develop inthe years to come.