The Evolution of Banking Technology


For decades now, the banking sector has maintained its position at the forefront of modern technological advancement. Looking back at how the industry has rapidly developed over the centuries, it has generated many milestones and technological innovations, making it an integral element for banks to always be ready for a digital transformation to thrive.

When one wants to examine the history of modern banking’s technological evolution, the most notable beginning that can be pinpointed would be the introduction of credit cards. Undeniably, this was a huge milestone to be achieved by the financial industry back in 1950. First introduced by the Diners Club, a credit card was deemed the first notable payment solution that could be used at several different establishments. This invention radically altered the way people perceive finances, as they no longer have the need to carry wads of cash for every purchase.

A decade later, ATMs were developed. The idea originated in the 1960s to help depositors gain access to their funds regardless of banking hours and branches’ locations. The use of computers has also revolutionised the first digital banking revolution. Also introduced to the sector in the 1960s, computers aid banks in centralising their trading by replacing the machine accounting operations used in individual branches. The purpose of this was to create a centralised repository of accounts that would streamline banking processes and give financial institutions (FIs) the leverage to focus more on customer service. This then launched the trend of banks investing heavily in computer technology to automate manual processing. By the 1970s, electronic payment systems for both domestic and international transactions were already developed. This brought about the emergence of online banking.

With online banking introduced, several benefits could be seen as transaction costs dropped much lower, and service integration could be done more smoothly. As online banking gained stronger momentum, so did automation across the financial landscape. With the computerization of key functions across departments, FIs were able to connect disparate branches, automate back-office operations, and efficiently facilitate information sharing without disrupting any regular banking processes.

The digital revolution has also allowed banks to develop interbank connectivity. As the industry shifted towards more customer-oriented services, core banking applications were then developed. This created the possibility of an integration between enterprise software and in-house applications, while at the same time automating multiple delivery channels at once.


The New Era of Banking

Within the last decade, the financial industry has experienced many more innovative breakthroughs that have transformed its entire landscape. The usage of AI and process automation had given banks the opportunity to increase value by experiencing end-to-end automation, a higher customer lifetime, and lowered operation costs. With AI adoptions, come several other new technologies that banks can embrace, such as Robotic Process Automation (RPA), Machine Learning (ML), Deep Learning (DL), Neural Network, Computer Vision, and Natural Language Processing (NLP).

Another commendable technological advancement within the financial sector will be cloud banking, which is a deployment and delivery model that assists banks in managing core banking systems and applications in the cloud while leveraging on-demand access to increased computing power. With cloud banking, banks can have access to scalable, cost-efficient computing resources. The cloud also gives banks the potential to synchronize their organizations, break down operational silos, and gain advanced analytics to generate integrated insights.

eKYC (Electronic Know Your Customer) is another significant element in the financial sector, as it helps banks reduce financial crimes and money laundering through accurate facial identification and biometric authentication. This technology essentially assisted banks in realising their customer acquisition processes in remote locations, as it required no physical administration. Not only is it entirely online, but it also helps to reduce costs and eliminate the traditional bureaucracy involved in registering new customers. This technology also minimises the risks of identity falsification and phishing, therefore ensuring zero margins of error in the customer identification stage.

Furthermore, the banking industry has witnessed some of the most disruptive technologies made by both banking and non-banking entities, such as big tech and fintech. As the financial sector is preparing for the next digital revolution, banks face even more challenging competition with the emergence of competitors from within and outside of the field (fintech and start-ups included). This has ultimately changed the financial landscape, in which tech-savvy banking customers have gained more control over their financial transactions, therefore shifting customer behaviour trends. This alerts banks to place more efforts and focus on improving their operational and analytical customer relationship management (CRM) systems that can boost their customer experience (CX).

Such diverse competition and further emphasis on customer-centric systems also call attention towards Application Programming Interfaces (APIs) adoption by banks, as the organizations can utilise it to link their product offerings, services, customers, and value providers in one place. Not only do APIs enable banks to integrate their new modules into the existing systems to provide real-time services, but they also encourage open technology and open platforms for banks, which enable cross-business collaborations that can create value-based market offerings. Undoubtedly, the future of banking will continue to leverage APIs, data analytics, the cloud, and its associated innovations to allow FIs and banks alike to further cater to consumers’ needs.

Realizing the importance of API adoption, the percentage of banks and FIs investing in this technology increased from 35% to 47% in 2021 in just two years. By 2022, the number of open banking users in the UK alone will reach up to 6 million, which further indicates just how integral API is to the banking industry.

With INFOPRO, banks can unlock their technological capabilities to their highest capacity, reaching new heights and embracing digital innovations without a hitch. As our product and service suites offer more than a personalized digital solution, rest assured that we have the right expertise, combined with over three decades of experience, to help your financial organization stay relevant and thrive in the upcoming years, despite the constant technological shifts.

Contact us now for a free consultation or visit our website to find out more.

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