This is an excerpt from The Future of Digital Banking in Europe 2023, a Money 20/20 special edition.

Looking to the future, the financial services and fintech industries will be reliant on technology and collaboration to move the needle. Digital transformation across mobile devices, chatbots and automation has led to digital banking becoming more tailored to specific groups of customers. After mitigating threats from fraudsters and ensuring skilled individuals are hired, organisations can truly overcome challenges and navigate change with an evolved future in mind.

However, technology and collaboration are not and will never be a silver bullet for digital transformation; technology should be invested in, but performance is what will be measured, and companies must make sure that change is never a hindrance to success. For instance, mobile banking applications are crucial to digital transformation because they are no longer a nice-to-have, but a mandatory feature that fintech firms and banks should offer.

Manuel Sandhofer, senior vice president and general manager Europe, Nium believes that improving customer experience and reducing friction are part of this mandatory feature. “Opportunities to reduce friction and improve customer experience with real-time cross border payments are in abundance across Europe and beyond.” Discussing specific technologies, Sandhofer adds that “API technology works in conjunction with modern payments infrastructure to enable fast, secure, and reliable B2B transactions instantly across the globe.

“And we’re only just at the tip of the iceberg, especially when we think about one-to-many payout applications like payroll, spend management and ecommerce marketplaces. Take payroll, for example. Despite volatile macroeconomic and political conditions, most businesses still have ambitious growth plans, making the ability to hire and scale across borders a key differentiator for many. To tap into and retain global talent, businesses and payroll platforms need to pay employees and contractors in a way that’s flexible, efficient, and works for them, so funds aren’t locked in slow settlements, encumbered by hidden FX fees, or sent to an unused account, wallet, or card.

“At the same time, businesses are increasingly worried about their ability to access cash-flow, chase down late payments and offset rising interest rates. Knowing exactly when they are getting paid provides much needed peace of mind when they have no choice but to pay more on existing loans. In challenging times, businesses want to be able to choose how, when and where they get paid, so they can better plan ahead, remain nimble to new challenges, access cashflow when they need it most – and ultimately, unlock growth.”

Further to this, with the customer-centric outlook that these organisations now have, technologies such as AI, machine learning (ML), and robotic process automation (RPA) have become vital for serving the consumer base. Customer requirements and behavioural patterns are identified and analysed in real time and financial service providers can offer solutions that are relevant. But the kitchen sink cannot be thrown at the problem.

In Victor Trokoudes, CEO and founder, Plum’s view: “Technology like variable recurring payments (VRP) for example, which lets customers safely connect providers to their bank account to make payments on their behalf, is revolutionising the ease and speed of which transactions can happen.” On AI, Trokoudes says that “compliance technology has also advanced substantially, with AI being increasingly used to assess risk, prevent fraudulent behaviour and avoid account freezes and transaction delays. In general, AI will add a new dimension to interactions, improving operational experiences but also giving customers more control over their transactions by instructing providers to perform tasks for them seamlessly via AI.”

Starting small is the best bet. Working with cloud technology partners, for example, can ensure that technology, particularly core banking platforms, are managed well, data centre costs are reduced, and teams of inefficient, underused engineers are resourced elsewhere. To achieve smooth interactions with customers, financial service providers must partner to alleviate the burden of responsibility.

However, while traditional financial institutions have historically been resistant to relinquishing control over operations and processes, an ownership model where partners manage core banking frees business executives up to deliver on business outcomes, not focus on technology problems. At the end of the day, the reason for transforming digital banking strategies is to serve smooth interactions to the customer by building new products and offering personalised services.

Mehret Habteab of Visa agrees with this sentiment and said that consumers now expect seamless, intuitive and personalised payment experiences and this is “vital to staying competitive in today’s digital world. Token technology embeds payment credentials and authentication natively into the purchase experience, stripping out the friction in most transactions today. Open banking and digital identity frameworks will extend these capabilities further, by easily embedding other identity attributes – such as age, income, and address – giving consumers and businesses more personalised experiences and ultimately more control over their money.”

However, as the Societe Generale spokesperson elucidates, “digital, data and artificial intelligence are much more than just technologies: they are transformational opportunities revolutionising the financial sector with a major impact on customer experience, service delivery and operational efficiency.” They continue to state that the bank prioritises offering a “more accessible, seamless and personalised service, meeting the new market standards set by platforms and fintechs, in a fully responsible way. To manage to do so, future-proof financial services must rely on a unique combination of digital technologies including cloud, APIs, data, IA or blockchain.”

On AI, the spokesperson mentions that “even if these tools were already well-used by our customers and staff thanks to our awareness and upskilling programs, the GPT-wave has fostered a natural and massive acceleration. This massive adoption is a formidable source of potential additional value to better serve our customers with more personalised products and advice, to better understand their expectations, to respond rapidly and to develop our activities and improve operational efficiency.”

Following on from this and commenting more specifically on generative AI, the spokesperson says that “this technological revolution will complete and accelerate our digital and AI roadmap. These new models raise the performance standards in language processing that the Group “raise the performance standards in language processing that the Group already uses at scale (chatbot/call centre customer conversational interfaces, automated processing of legal documents, analysis of market conversations) and should allow us to increase the performance while facilitating the creation of new initiatives.

“In addition, the generation capacities open the field to transformative uses (e.g. computer code generation, automatic documentation) and increased productivity (e.g. help with email writing, automatic synthesis).”

This Finextra report, a Special Edition for Money 20/20 Europe, collates interviews with a range of leading players across the financial services and fintech industries operating across Europe and explores topics that will be covered at the event in Amsterdam. Key insights from Accenture, Clearscore, Deutsche Bank, ING, Nium, Plum, Ripple, Societe Generale, Tink, Visa and Zopa will discuss how digital banking across the continent will evolve.