Economists point out that, in order to maintain liquidity after the coronavirus crisis, banks will have to make changes in key areas. The digitization process and technological development are to accelerate, especially in the use of microservice architecture, artificial intelligence and machine learning. The approach to asset management, investment management and credit policy is to be changed. Banks are also to increase competitiveness against more and more innovative fintechs, challenger and neo-banks.

Although the first wave of uncertainty related to the coronavirus epidemic seems to be behind us, and other areas of the economy are starting the defrosting process, it seems that, for many industries, this is not the end of changes, but their beginning. One such sector is undoubtedly banking, which was affected by lower interest rates, credit holidays and all other economic consequences of the epidemic. Today, in the face of economists’ forecasts indicating a possible decline in Polish GDP by as much as 1%, banks are facing the challenge of making considerable changes.

In order to maintain financial liquidity, the banking sector will have to make modifications in key areas of its operations. First of all, in the approach to asset management, investments or customer offers. It will also require intensive technological development of the financial industry, which will start using the architecture of machine learning microservices and the achievements of artificial intelligence. There will be space for traditional banking to draw inspiration in the area of ​​innovation from technologically advanced fintechs. In other words, the pandemic will accelerate the process of changes towards which banking has been moving since the PSD2 directive entered into force – says Michał Mazur, senior business development manager from INCAT.

Flexibility and security are becoming a necessity

As the INCAT expert explains, although banks have been following the path of digitization for some time, the experiences of recent months will most likely significantly accelerate this process. With the outbreak of the pandemic, organizations faced many challenges, such as the need to move customer service to the network, organize remote work for branch employees, or deal with the increased burden on electronic and mobile banking. For many banks, these new experiences mean the necessity to further modify specific areas of operation in order to cope with long-term financial problems. While the time to invest in technology does not seem the best from this perspective, it looks like banks will be forced to develop technologically in a relatively short time in order to maintain their competitiveness and customers.

Moreover, due to the recent growing activity of mobile and desktop banking, which is already used by over 14 million Poles, it will be important to implement even more advanced security measures that will protect customers and banks themselves from threats posed by online communication. Therefore, the automation of processes will proceed, which may bring long-term savings to banks, especially in a situation where, after the experience of a pandemic, even more doubts will arise from the legitimacy of maintaining so many stationary bank branches and positions where responsibilities can be relatively easily transferred to a machine. Moreover, as Michał Mazur points out, due to the rapidly growing expectations of customers and the need to constantly expand the offer, banks will supplement the infrastructure of monolithic systems, which are typical for the financial industry, with solutions based on the architecture of microservices, i.e. many independent modules that implement specific functionality in the system. Only this approach will enable the appropriate level of dynamics of the development of innovative functionalities.

This will be necessary because, in order to remain competitive, the key will be to react quickly to what customers expect, and this is difficult to achieve in monolithic systems, where, to put it very simply, changing one functionality necessitates adjusting the entire system. Microservices, which are characterized by high scalability and flexibility, address this problem and seem to be one of the right directions of development. The experience of the pandemic has shown that in extreme situations, time, technological awareness and the ability to adapt to circumstances are decisive. In my opinion, it is these factors, supported by advanced technology, that will determine which institutions will survive and maintain the status of competitive players on the market – – explains the expert.

This belief is shared by the authors of the report “The impact of artificial intelligence in the banking sector & how AI is being used in 2020” (Business Insider), who point to one more aspect, namely savings. According to their data, the total potential savings for banks resulting from the implementation of AI applications is estimated at $ 447 billion by 2023, of which $ 416 billion is for the front and middle office. It is no wonder then that as many as 75% of banks indicate plans related to the implementation of the AI ​​layer in their development strategy. These strategies, according to the aforementioned report, are based primarily on a holistic approach, including AI in the area of ​​data administration, human resource management, or, going much further, in creating business lines of financial institutions.

Capgemini also points to the growing importance of flexibility in the banking industry in its World Retail Banking Report. According to experts, modern banking will soon be based on the standard of quick implementation, taking business risk, as well as simplifying and automating internal processes. Basing these changes on the technology of microservices seems to be the right direction of development

Change driven not only by a pandemic

Let us emphasize that changes in the banks’ approach to innovation began even before the outbreak of the pandemic. The key year is 2019 and the implementation of the EU Directive PSD2 (Payment Services Directive 2), the purpose of which is to safely implement the idea of ​​regulated open banking. The directive made it possible to use the so-called open banking, in other words – the category of payment services provided by third party providers. The directive allowed such entities to access user accounts in various banks, make payments on behalf of an external supplier or verify the amount on the account before the service is provided.

Moreover, open banking has increased the competition between banks. By allowing a full analysis of the new customer in the context of the available data, the PSD2 directive, on the one hand, facilitated personalization of the offer, but on the other hand, made it difficult to maintain customer loyalty. Therefore, the growing transparency of banks and greater competitiveness generated not only product development, but also, and perhaps above all, technological development.

– The use of artificial intelligence or machine learning in banking will bring significant time and cost savings, and will also have an impact on cybersecurity, especially in the context of fraud or fraud prevention. For banks, it will also be an opportunity to more effectively predict operational risk, thanks to an even more detailed analysis of the huge amount of various data flowing from many channels  – sums up Michał Mazur.