At one time, the biggest challenges facing banks included wavering faith in the stock market, economic depression and opportunistic criminals. In the modern era, however, the banking sector faces more sophisticated challenges to stability – challenges which require innovative thinking to overcome.

Back in January, in their discussion of the year ahead, PwC outlined a number of issues which the financial sector would need to contend with in 2017. Although traditional difficulties, such as regulation and risk management made an appearance, the list also confirmed the effect of Brexit and the increased presence of challenges considered ‘of the time’.

Threats from Cyberspace

“As a society, our confidence in using digital technology to shop, pay our bills and connect with others has grown faster than our knowledge of how to do so safely. This has created a ‘digital safety gap’ which is being exploited by criminals.” Ashok Vaswani, CEO of Barclays UK via Computer Weekly

News of cyberattacks and hackings have dominated the news for the best part of the last five years, with huge firms coming under pressure to increase security following the theft of personal data belonging to millions of customers.

But it’s not just hacking that banks must be aware of. Reports of digital fraud are continuing to rise, with the latest figures showing 5.6 million fraud and cyber offences committed last year, at a cost of £11billion.

A lack of education when it comes to financial security online is partially to blame. During research for their upcoming £10million digital safety campaign, Barclays discovered that only 17% of UK residents could identify basic digital threats – such as phishing scams – and nearly a fifth of digital fraud victims took no action to further increase their security once they had been affected.

Barclays’ campaign aims to tackle the main threats to digital safety by providing tools, information and tips on keeping safe online, all the while calling on businesses and the police to step up action against fraud. What’s more, Barclays will allow customers to have greater control over where and when their debit cards are used, as well as including online quizzes and a multi-channel advertising campaign.

Big Data

“Managing data is a core competency for us, and we found we have loads and loads of really important and really fascinating business opportunities that rest on the use of data.” David Knott, Chief Architect, HSBC via Computer Weekly

Elsewhere in cyberspace, Big Data continues to receive much attention. Whilst not a threat to banking, Big Data continues to be woefully underused by established financial institutions. Despite possessing a wealth of personal information, the sector seems reserved when it comes to properly harnessing their data. That doesn’t, however, mean that firms are oblivious to the competitive advantages on offer.

Big Data could provide banks with invaluable insight, leveraged to inform marketing campaigns, product development and advisory benefits.

Seeing an opportunity to make better use of Big Data, HSBC have announced their intentions to move to the Cloud, allowing for the international banking giant to further explore the reservoirs of data available to them.

Big Data could, according to HSBC’s Chief Architect David Knott, potentially open five new lines of revenue for the bank, and help to solve industry-specific challenges. Using these five workable scenarios as pilot projects, HSBC were able to leverage Big Data to assist with risk analytics, money laundering and risk reporting, whilst also cutting down how long it takes to conduct a valuation and financial liquidity assessments – demonstrating how useful Big Data could be in tackling persistent challenges to the sector.

Customer Expectations

A significant modern challenge which many industries are contending with is the shifting expectations of consumers. Armed with smartphones, consumers now expect more immediate communication and service from brands, all of which fits around their lives.

Catering to this expectation of flexibility, various banks have released secure mobile apps over the last few years – with NatWest’s in particular garnering praise from users. The bank’s brand of apps has further expanded to cater to expats, and offer easy lending to its customers.

Meanwhile, with the likes of Twitter making for more open communication between consumers and brands, customers have grown to expect the same level of availability from their banks. Agreeing with this insight – and leading the way in tackling the challenge of communication – the Royal Bank of Scotland have taken to using artificial intelligence ‘chatbots’ to tackle customer queries. If consultancy Accenture is to be believed, the use of AI in customer communications won’t stop there, either, with more banks expected to adopt chatbots over the next three years.

Slow but Steady Innovation

Having partnered with a number of financial services firms to develop bespoke software solutions, Kaleida has experienced the approach the sector is taking first hand. Although innovations have been adopted at a slower pace compared to other industries, banks and FinTech companies are more serious than ever when it comes to applying innovative thinking to 21st Century challenges.

As banks embrace Big Data and AI, we can expect the development of new solutions to be accelerated amongst the sector – especially if better collaboration and the embracing of new strategies takes place. In the meantime, the likes of Barclays, HSBC and RBS continue to demonstrate that even a traditional industry such as banking is capable of steady – if slow – innovation, to the benefit of their customers.

As an experienced bespoke software house, Kaleida understands the role business software plays in overcoming modern challenges in the financial sector. To find out more about the software solutions on offer and how they can address the needs of your company and its customers, get in touch to hear back from a member of our team.