Top 5 Low-Code Driven Innovations in Banking
March 21, 2024

Sandeep Hinduja
Newgen Software

With markets at all-time highs, the banking industry had a better 2023 than was initially expected. Inflationary pressures are continuing into 2024 and the industry now anticipates rate cuts in expectation of improving the performance of core sectors of the economy, including banking and finance. As the year unfolds, banks grow focused on cost-takeout strategies while continuing to sustain revenue growth.

Innovation is at the core of cost efficiency and the traditional banking model is rapidly becoming a thing of the past as institutions embrace digitization to meet the needs of modern customers. AI has accelerated the pace of digitization and at the epicenter of all this transformation is the low-code revolution. Staying ahead of competition demands agility and low-code platforms can be the compass guiding banks toward continuously evolving customer-centricity and an innovation-defined future.

Low-code development has been around for some time but has gained traction in recent years with a remarkable surge in its market share. According to Statista, the global low-code development platform market revenue, valued at $22.5 billion in 2022, is projected to reach a staggering $32 billion in 2024 (21% growth YoY). Financial institutions are using low-code for process automation, data modeling and visualization, data security, building customer-engaging applications, and more.

Let's explore how this technology drives innovation in the financial services industry.

1. Paperless Processes and Automation

Low code is a catalyst for the paperless revolution within the banking sector. A 2023 Forbes Advisor US Consumer Banking Statistics Study showed that 78% of adults in the US prefer to bank digitally rather than in-person. Banks can leverage low-code platforms to automate and digitize a plethora of processes to meet customer demand and eliminate the need for cumbersome paperwork and manual interventions.

Digital customer onboarding, product origination, automated underwriting, account management, and transaction processing are just a few areas where automation powered by low code brings efficiency, reduces errors, and accelerates the pace of operations. Traditional lines of business such as commercial lending are also witnessing automation in erstwhile manual tasks such as financial spreading and pre-qualification. Low-code platforms significantly reduce the time to market for these innovations.

2. AI for Smarter Banking

Low-code is a pivotal component of the AI revolution in banking. The ability to easily assimilate AI capabilities into applications allows banks to offer personalized services, predictive analytics, and intelligent automation.

Some common use cases include Chatbots, predictive analytics for customer experience and risk, virtual assistants, AI-driven fraud detection systems, document, and digital content orchestration, etc. These features deliver cost efficiencies in the short term while also enhancing customer interactions for revenue growth and ensuring the security of financial transactions. The symbiotic relationship between AI and low code positions the banking industry at the forefront of innovation, offering a seamless blend of traditional services and cutting-edge AI capabilities.

AI is modernizing the software development lifecycle with things like Use Case Generation (including use case-specific testing scripts), SQL Tuning, Traffic Monitoring, Vulnerability Assessment, etc. Rather than adopting these capabilities organically, leading providers incorporate these into their low-code platforms while also extending the paradigm to deliver "AI as a platform." Besides other benefits, these AI platforms provide a sandbox environment enabling data scientists to build, import, and export data models from multiple sources before deploying them in production. Gen AI further adds to the value spectrum through probabilistic models, a more qualitative touch to the data-model driven quantitative touch.

3. Security and Compliance

With the increased digitization of banking services, cybersecurity has become a paramount concern for financial institutions. Low-code platforms prioritize security, offering built-in features and tools to safeguard sensitive customer data. With secure authentication methods, rules-based access to data, and encryption protocols, low-code empowers banks to build robust and secure applications that comply with stringent cybersecurity standards, instilling confidence in customers wary of digital threats.

Alongside security rides compliance. Banks provide the kiln for worldwide growth and governments are focused on ensuring that growth is uniform across different sections of society. As lawmakers define new rules and regulations, banks are required to be nimble in the adoption of those regulations. Some of these regulations require significant changes to the operating model and underlying systems, thereby incurring millions of dollars in investment. Examples include Dodd Frank (2010) and TRID (2015) to name a few.

New regulations continuously hover on the horizon and banks can lean on low-code platforms to stay agile in their adoption as they become the law. A typical case is Section 1071 – Small Business Lending Rule, which is going through its origination lifecycle before it becomes the law.

4. Fintech Collaborations

We live in an interconnected world and low-code development acts as a bridge between traditional banking systems and the innovations brought forth by fintech companies. By facilitating rapid development and deployment of new features, low code enables banks to adapt quickly to the changing financial landscape. Low code platforms also offer configurable workflows that can intersperse products and services into existing journeys thereby rendering faster, more accurate, and low-touch end-user experiences. Collaborations with fintech companies become seamless, allowing banks to integrate cutting-edge technologies and services into their existing infrastructure, ultimately offering customers diverse financial solutions.

5. Customer-centric Applications

Low-code development allows banks to create omnichannel, user-friendly applications and platforms that enhance customer experience. From online account opening to intuitive mobile banking applications, low-code enables faster development cycles, ensuring that banks stay ahead in the competitive race to provide innovative and customer-centric services. Banks and financial institutions can now maintain a single version of their application deployments that can then be intelligently "rendered" across multiple channels. e.g. low code platform providers are able to render a simpler customer origination journey online as compared to a more comprehensive "in-branch" journey.

As business users make rapid changes and implement the applications via various touchpoints, the customer journey is enhanced. This improves the speed and accessibility of banking services and contributes to a seamless customer experience.

In Summary

The pace of innovation in the banking sector has accelerated significantly with the adoption of low-code platforms. Banks can respond to market demands swiftly, introducing new features and services without the prolonged development timelines associated with traditional coding practices. This agility allows continuous improvement in customer-facing processes, ensuring banks remain at the forefront of technological advancements and can effectively cater to evolving customer needs. While innovation and efficiency are core levers, cost reduction is the cherry on the cake.

Sandeep Hinduja is Head of Business (US Banking) at Newgen Software
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