The banking industry has been at crossroads for quite so many years now. Whether it is the rise of the crypto-based economy, disruptive nature of fintech or the frequent data breaches haunting the large banks, this industry has been quite slow in adapting itself to the world dominated by new tech. Not all the blame can be put on the banking industry as well because of the strict banking guidelines, swaths of bureaucracy carrying out banking operations and less than innovative regulators who are a major cause for slow adoption of new technologies in the banking industry.
But in 2019, the challenges faced by the banking industry are crucial and vital because although they do not have the potential to rock the banking industry to its core, they do have the potential to become revenue threatening if the banks are not careful to adapt according to these challenges. Here are the top 3 challenges that the banking industry faces in 2019.
The burden of Manual Compliance
There are thousands of banks around the globe that have to follow strict regulations in order to conduct their operations. Some of these compliances address their core business model while others address the prohibitions that a bank should follow. Anti Money Laundering (AML) Compliance is one of them that is mandatory for banks and if any bank is found guilty of not adhering to AML compliance, they can be slapped with multi-million dollars fines. Whether the action was done deliberately or in ignorance, the strict action of regulators will not have any effect because of that.
For now, banks have employed thousands of employees in hundreds of offices to perform these tasks of AML Compliance. Transactions beyond a certain limit are thoroughly checked, the source and destination of the transaction are checked diligently, still more often then a bank would like, there are cases unearthed in which banking services were being used by either banned entities or they were being manipulated for money laundering activities. The quicker the banks can adapt to an automated system driven by big data and machine learning, the faster it will be for the banks to get rid of this hanging sword of regulatory fines.
Everchanging Regulatory Landscape
Banking and finance regulators are constantly bombarded with new regulations and guidelines not only from their respective national regulators but by international regulators as well. Not to forget the strain these banking organizations have to undergo in order to comply with the guidelines issued by law enforcement agencies to safeguard their banking operations from being used as a medium for transferring funds for illegal and criminal activities.
Although, there is no set standard to tackle this challenge the efficiency to adapt to these changes are important for banks to perform their operations in a streamlined and effective manner. A workforce that can quickly embrace these regulations and fine-tune their practices accordingly can go a long way in successfully executing these guidelines.
Fintech & RegTech
Last, but not the least, Fintech and regtech pose the most serious challenge to the overall banking industry. Although, with online banking services and universally accepted cards, conventional banks have tried to catch up their shiny and younger competitors in the financial world but still the ability to understand the banking needs of millennials and the ability to use technology to actually streamline their own banking operations is something banks have to seriously work on.
Just as we have discussed in the above lines, there are several Fintech service providers that offer their services as a 3rd party service provider to large banks in order to comply with regulatory guidelines. Anti Money Laundering (AML) compliance is also one of them that can be easily used to automate the process of capturing individual and corporate entities blacklisted for their involvement in financial crimes or money laundering. Several AML Screening software are available that offer to seamlessly integrate with any pre-existing applications, online system or banking software via API or SDKs in order to perform AML background checks. They also offer to check the financial risk attached to previous customers of these banks, in addition, to constantly monitor any number of users.
Identity verification services or KYC authentication solutions are also available that can reverse the rising tide of bank account takeover, that is hailed as the biggest epidemic faced by the banking industry in 2019. A typical KYC service provider such as Shufti Pro can not only verify the true identity of incoming customers in under 60 seconds through authentic identity documents but at the same time, it can identify the potential financial risk attached with that person.
If the banking industry wants to end the 2nd decade of the 21st century at a high, these above challenges must be tackled with serious and immediate resolve.