Banking has advanced so much across the EU in recent years that even customers themselves do not always keep up with the innovations.
FREMONT, CA: The breakthrough occurred in the past couple of years when COVID-19 took the world off-guard and compelled it to accelerate the pace of banking reform. Banks have therefore become more active in the digital domain than ever before. For both financial service providers and users, digital services have become a requirement. Many customers used to be hesitant to use digitised services due to security concerns and fears of cyber-attacks, but that has changed after they began utilising them. It was evident how much security work had previously been done and how critical investments in areas like anti-money laundering (AML) are in general. Indeed, it is the focus on things like cybersecurity and anti-money laundering that has revolutionised banking in recent years and will undoubtedly contribute considerably to future improvements. Financial institutions commit at least ten per cent of their IT investments to cybersecurity each year, and the cybersecurity market in Europe could reach USD 55 billion by 2026. Simultaneously, there is a rising focus on anti-money laundering and AML experts. The global market for AML software was worth $879 million in 2017 and could be worth more than USD 2 billion by 2025.
Artificial Intelligence (AI) is another of the most essential, if not the most significant, aspects of banking that has changed and continues to change. AI is now a significant component of everyday life and is employed in a variety of fields. The impact of AI in banking should be divided into two categories: the extent to which it has altered and will continue to change consumers' daily lives, and the extent to which it has influenced and will continue to influence financial organisations. AI and its algorithms excel at analysing data, creating useful insights, and considerably speeding up the process of assessing credit risks, loan issuing, and other similar issues. As a result, the financial institution and the customer could save a considerable amount of time. The employee is not subjected to the same dull, repetitive situations regularly, and the customer does not have to wait long for a decision and can obtain service at any time of day. And, most crucially, this is just one of the many intricacies in describing AI's benefits.
Another key step toward changing banking and its characteristics were taken in 2018. The EU's second Payment Services Directive (PSD2) went into effect in January 2018, allowing financial service providers and third parties access to payment service customers' data. In essence, a directive has evolved that requires a bank to send information about a customer's account, as well as access to it to commence a payment service, to another service provider (third party), with the customer's approval. The consumer has benefited from this step as it's now easier to buy goods and services wherever they are: access to account and payment services is now available not only through the bank's environment, such as online banking or a mobile app but also through a variety of other electronic solutions.
Banking as a Service (BaaS) is another key breakthrough that has revolutionized banking by expanding the number of options and making life easier. This is the ability for non-banking corporate products to deliver digital banking services to their clients even if they lack the necessary financial services licence. When licenced financial service providers connect their digital banking services, this opportunity arises. In the future, BaaS will surely bring more improvements and benefits. According to worldwide research firm Verified Market Research, the global market value of BaaS will be USD 356.26 billion in 2020. It might increase by five to six times by 2028. It's worth mentioning that Europe accounted for roughly one-third of the BaaS market in 2021, as per the reports.