The Future of Digital Banking- Trends in Fintech App Development

Payments, lending, insurance, and investments are the core driving factors of digital banking. What trends make up the future?

Financial firms facilitate the flow of capital and manage financial risks by offering services like banking, investing, insurance, and lending, serving both individuals and businesses. They act as intermediaries, channeling money from savers (investors) to borrowers, which can include individuals, businesses, or governments.

They manage and redistribute financial risks by offering services based on Fintech app ideas like insurance, investment management, and risk assessment, banking, investing, insurance, lending, wealth management, financial planning, and payment processing. Fintech Apps integrate with financial institutions through open APIs to offer secure, transparent, and faster transactions. They enhance security with fingerprint and facial recognition for logins.

Digital banking has evolved from basic online transactions in the 1990s to mobile-first, personalized financial services, driven by technology and changing customer preferences. To understand this evolution, it is essential to go back to the era when it first came into being.

The proliferation of smartphones made mobile banking accessible to millions, enabling on-the-go banking and transactions from the mid-2000s onwards.

Now digital banking has shifted from a product-centric approach to a customer-centric approach, focusing on convenience, accessibility, and personalized experiences. Artificial intelligence, machine learning, and big data analytics are being used to personalize financial advice, improve fraud detection, and enhance customer service.

Fintech app trends suggest that the future of digital banking is likely to see even greater personalization, seamless integration of banking services into everyday activities, and the use of technologies like virtual reality for engaging financial experiences.

Here are some examples to understand it better

• Online banking applications allow customers to access their accounts and perform transactions from anywhere. 
• Mobile banking apps provide on-the-go banking services and features. 
• Virtual assistants offer automated customer support and personalized financial advice. 
• KYC system software ensures secure and compliant digital transactions. 
• Data encryption software protects sensitive financial data. 

Personalization in Digital Banking

Beyond online and mobile banking, virtual assistants, KYC systems, and data encryption, the future of digital banking includes AI-powered fraud detection, blockchain for secure transactions, and personalized financial products and services.

What does the future of digital banking look like?

The foremost point would be related to AI (period) because it drives almost everything. In digital banking and Fintech, AI automates data processing, analytics, document processing, onboarding, and customer interactions. AI fraud detection systems begin by collecting vast amounts of transactional and behavioral data from various sources. This data includes transaction amounts, times, locations, user behavior, and device information. Relevant attributes or features are identified and extracted from this data which indicates fraudulent behavior.

If a user who usually makes small purchases suddenly starts making large ones, the system would flag these transactions as possible fraud.

AI models continuously look for deviations from established norms. When suspicious activities are detected, the system flags them for further review or investigation. This allows for early detection of fraud, minimizing potential losses.

Besides AI, the next technology that is affecting digital banking is Blockchain. Unlike traditional databases where data is stored in a single location, blockchain technology distributes data across a network of computers (nodes), with each participant maintaining a copy of the ledger. Once a transaction is recorded in a block and added to the chain, it cannot be altered or deleted without invalidating the entire chain. Transactions are validated and added to the blockchain through a consensus mechanism, ensuring that all network participants agree on the validity of the transaction before it is finalized.

The combination of immutability, transparency, and a decentralized system makes it difficult for unauthorized parties to alter or tamper with financial records, thus reducing the risk of fraud and errors. The transparent and immutable nature of blockchain makes it easy for auditors to track transactions from their inception through to completion, improving audit efficiency and strengthening trust in financial reporting.

When you hold a mobile phone with a banking application, you are free to transfer funds, pay credit card bills, open an account, move funds across the accounts, create a digital wallet, and lock funds in fixed deposits.

Managing the account remotely, checking saving account balances, paying bills online, setting up recurring payments, and managing invoices reduce paperwork. Also accessing cash through ATMs and other digital payment methods is hassle-free without the interference of a human third party.

Functionality and Features

Digital banking platforms implement advanced security measures to protect user data and transactions, including encryption, authentication protocols, and fraud detection systems. The user receives timely notifications about transactions, account activity, and potential security threats. It also includes features that help users track expenses, set budgets, and manage their finances effectively. It should make applying for various types of loans - personal, home, and auto loans easy.

Embedded finance or embedded banking involves integrating banking services into other applications and platforms, like e-commerce websites or social media apps, allowing users to access financial services directly within those platforms without leaving. This also includes payments, lending, insurance, and investments, directly into the infrastructure of non-financial businesses.

This integration is typically achieved through Application Programming Interfaces that connect these platforms to services provided by financial organizations.

Wisdom to Transact Online

Online banking allows third-party developers to access customer data and build innovative financial applications using APIs. It features increased innovation, new product offerings, and enhanced customer experience. Building apps that compare loan offers from multiple banks, track spending habits, or manage personal finances.

Rolling Out The Real FinTech App

To develop a Fintech app, identify the problem that it needs to resolve. Will it be different from other existing applications in the market? Clearly define your ideal customer based on age, income level, lifestyle, and financial goals. Articulate the unique benefits and value your digital bank will offer to attract customers. Plan to add core banking features like account opening, fund transfers, bill payments, account balance inquiry, personalized financial insights, goal-based saving, investment platform, peer-to-peer payments, and credit scoring and loan applications.

A functional app, with interactive features, clear navigation, visually pleasing design, and accessibility is desirable.

Additionally, choose robust backend frameworks like Java, Python, or Node.js for scalability. Select a reliable database for storing sensitive financial data (PostgreSQL, MongoDB). Utilize cloud platforms like AWS, Azure, or GCP for flexibility and scalability. Implement multi-factor authentication, data encryption, and regular security audits.

Gently proceeding to code requirements, agile will be a great approach that employs iterative development cycles with continuous feedback and testing. The final build should be preceded by a minimal viable product that is launched to reveal a basic version of the app with core functionalities to gather user feedback and refine features. 

Mobile banking app testing features include functional, performance, security, usability, and compatibility testing with specific banking functionalities like transaction processing, account management, and QR code payments.

Functional testing will involve checking the core functionality of the app, login and authentication, transaction processing, account management, QR code payments, and transfer of funds between users.   

This will be followed by performance testing - load and stress testing, network performance, transaction speed, and resource consumption; and security testing with vulnerability assessment, data encryption, authentication and authorization, malware and phishing protection, and testing of API endpoints and ensuring they are protected against unauthorized access.

Usability testing is mandatory for a customer-facing app, and it includes user interface testing, user experience testing, accessibility testing, and user feedback. 

Plus testing across various operating systems and devices of all sizes is mandatory for proper functioning without a break - this will include device compatibility, operating system compatibility, localization testing, and cross-platform compatibility.

As a wrapping procedure for finishing the Fintech app development services, do it with caution with regulatory compliance - know your compliance, anti-money laundering, and compliance with data privacy laws like GDPR and CCPA.

What’s your call?

To create your own Fintech app, online banking app, or digital banking app, or finance insurance app? Or to hire a Fintech app development company to do it for you?