Digital banking transformation with AI and embedded finance

The year was 1995. Wells Fargo became the first major bank to give their customers online access, enabling them to create accounts, check their balances and review their bank statements.

Fast forward 30 years. The customer you serve today wants to conduct every aspect of their banking digitally, whether their money is at rest, moving through the payments system or working for them in the capital markets. If that customer perceives that your institution isn’t up to the digital challenge, they may move to a bank that is.

Everything all in one place

Consider the experience of the mid-90s customer. They endured fragmented banking with multiple logins, conflicting information at different touchpoints and blind spots that left them guessing whether their payment would reach their creditor by the due date. Doing their best to embrace online banking, they gritted their teeth in frustration as they entered the same basic information repeatedly.

Now contrast that with the 2025 customer. They demand a single source of information, whether opening a new account, making a payment, analyzing their spending, responding to a fraud notification or any of a hundred other financial tasks. They expect zero friction, no paperwork and efficient, prepopulated fields that let them get the job done and get on with their day. As for customer service, they’ve made their peace with automated troubleshooting, but they need to know that, at the end of the day, there’s a human to talk to when digital methods don’t measure up.

Despite the passing of three decades, all this is where many banks are still falling short.

The faster path to digitalization

To meet this need, the industry is steadily moving to single, integrated digital platforms that serve as data-powered hubs, with every transaction and interaction passing through them. Modular in design, these AI-driven platforms comprise an ecosystem of interconnected capabilities that allow you to digitalize your bank over time without resorting to a piecemeal approach.

For the consumers you serve, this ensures convenient, personalized experiences. For your business customers, it enables the execution of complex transactions, easier management of multiuser capabilities and the ability to take advantage of emerging opportunities such as stablecoin, a virtual currency that minimizes volatility when making cross-border payments. And for your branch staff, who serve as the bridge between your customers’ physical and digital financial worlds, these platforms provide the modern technology they need to assist your customers instantly and accurately.

In a 2024 research study by FIS® and Oxford Economics, more than 500 C-level executives in the U.K., U.S. and Singapore were asked about the financial technologies they’ve invested in to alleviate tensions caused by geopolitical instability, regulatory challenges, cyberthreats and growing customer demands for seamless digital experiences. Entitled “The Harmony Gap,” the survey found that more than half of the respondents (55%) reported that their investments had resulted in an acceleration of digital transformation initiatives.*

Greater convenience with embedded finance

The forward-looking banking customer of 1995 did their best to manage their finances online but hit roadblocks when attempting to accomplish everyday tasks: pay a creditor, borrow money, take out an insurance policy, manage subscriptions, or finance an automobile or major appliance. Switching back and forth between the provider’s website and their bank’s website created a disconnect that often ended in an abandoned effort with no winners.

Today’s digitalization journey has led to the adoption of embedded finance technologies, allowing you to provide API access to your core systems and functionality that can then be integrated into a third party’s products and applications. This creates for you a low-cost path to lucrative new markets, access to additional customer segments and potential fee income from the third party, all while keeping you relevant in a fiercely competitive environment.

In fact, The Harmony Gap research found that more than one-quarter (26%) of responding organizations have adopted embedded finance and, as a result, report an average sales growth of 8.5%. The remaining 74% of respondents are optimistic, expecting such solutions to enhance customer retention and increase revenue streams.

Privacy, trust and the use of data

As the 90s gave way to the 21st century and consumer adoption of digital banking bourgeoned, so too did the collection and use of data. With the passage of time, most institutions have developed an enterprise data strategy that, if solid, has helped them keep pace with expanding channels and changing customer demands. And with the rapid expansion of AI and data analytics tools, it’s becoming easier to ensure access to data residing in disparate areas of the organization.

But there’s a second edge to the data sword. Customers rightly harbor grave concerns about privacy and the use of their data. It’s up to you to gain their trust by being transparent about your data practices, eliciting their permission, implementing robust security measures and demonstrating a commitment to ethical data handling. It requires regular, proactive communication that specifies what information you’re using, how you’re using it and what you’re doing to keep it safe.

Just as importantly, you must continually underscore the fact that your responsible use of their data means better protection from fraud, not to mention highly targeted offers that meet their individual financial needs.

That’s a big price tag not just for your bank, but also for your customers. The research report concludes that you can address these crippling losses with a strategic, multistep approach that begins with pinpointing the specific sources of inefficiencies that are draining your bottom line. For example, a hard look at your operations may reveal that you need stronger automation for repetitive tasks that are creating widespread bottlenecks. Or perhaps with updated technology, you could replace your resource-intensive customer service practices with modern, 24/7 methods that resolve routine issues faster at a fraction of the cost.

In other examples, you may be struggling with how to turn massive amounts of raw data into insights that facilitate better decision-making. Maybe in your case, the greatest opportunity lies in reducing infrastructure costs, scaling your operations as needs fluctuate or deploying new offerings in a shorter timeframe.

Once identified, you can then prioritize remedial investments in digital technologies that are grounded in AI, machine learning, data analytics and embedded finance. In many cases, your next move may involve forming a strategic fintech partnership, especially if you lack domain expertise in building the needed capability or if time to market is a key driver.

Whichever choice you make, it’s essential that you view all strategic priorities and technology investments through the lens of how they will reduce friction and elevate the customer experience at every interaction.

*FIS, The Harmony Gap: Finding the Financial Upside in Uncertainty (with Oxford Economics), May 2025