Revolutionizing Financial Services: Embracing Technological Disruption
In recent decades, technological disruption have radically altered the way we communicate, shop, conduct business, and provide financial services. Emerging technologies in the financial services industry have consistently shaken up the manner in which consumers engage with their money, their expectations from financial institutions, and the operations of these organizations.
Today, new technologies are making processes easier, more efficient, reducing errors, enhancing communication, and changing the way consumers perceive and interact with money. Most importantly, financial institutions stand to gain immensely from these technologies. While the impact of technology on financial services may vary depending on the specific technology, there is a high likelihood that you can adopt and substantially benefit from many of these innovations.
Here, we present key technological trends in financial services that are likely to become part of your institution's technology stack, if they haven't already.
1. Digital Experience Platforms: Pioneering User-Centricity
For instance, hybrid cloud solutions (combining cloud and on-premises servers) offer consumers privacy and accessibility. Hybrid platforms also enable intelligent real-time data integration, such as real-time digitization and advanced analytics. One of the most notable changes is the incorporation of Application Programming Interfaces (APIs), allowing customers to integrate their banking data into other applications and vice versa. While many financial institutions initially resisted APIs, European Union regulations now compel organizations to provide open APIs, a move that several U.S. organizations are following. Open banking offers numerous benefits to consumers, including sharing data with third-party budgeting apps and utilizing money management tools, which can enable smaller financial organizations that can't afford these services to offer them through third parties.
2. Blockchain and Financial Services: A Paradigm Shift
Blockchain is transforming the financial world as we know it, although its adoption rate remains relatively low. For example, Accenture estimates that investment banks could save $10 billion by streamlining processes through blockchain. While blockchain stands as one of the most popular emerging technologies in the financial services industry, it's not yet easily accessible. Some organizations are developing more comprehensive solutions, but most banks that are implementing blockchain solutions (including current accounts, money processing, trade finance, etc.) are doing so independently. This can be a significant hurdle for smaller financial institutions without the means to develop a solution. However, with the rapid adoption of blockchain in recent years, it will swiftly become a conventional solution for payments, fraud reduction, loan processing, smart contracts, and more.
Go a little deeper into the topic: https: //onlinelibrary.wiley.com/doi/10.1111/joms.12348
3. Chatbots and Artificial Intelligence: Enhancing Efficiency
Chatbots and other artificial intelligence solutions are gaining popularity among financial institutions of all sizes, from large-scale banks to small credit cooperatives, all are implementing them. While chatbots are the most publicly visible versions of artificial intelligence, AI impacts administrative office tasks, product delivery, risk management, marketing, and security.
Machines use simple algorithms to handle everything from data input to risk assessment and loan form processing, freeing up hundreds of thousands of hours of employee time for major banks. Communication with the customer and more. Here, the major challenge is delivering consistent quality in external processes, such as chatbots, where some institutions often fall short.
Many organizations also face issues related to isolated data sets, regulatory compliance problems, and concerns that AI won't get the job done, so many integrate solutions with regulation and manual management to avoid machine errors. This only means that the role of technology in finance could be delayed due to financial institutions' apprehension.
AI is also playing an increasingly crucial role in security, risk mitigation, and cybersecurity. While some suggest that new AI initiatives could increase security risks in companies unaware of the risks, long-term application, proper configuration, and quality control can potentially prevent these risks.
Why Should Banks Embrace AI?
Artificial intelligence has the ability to make smart and agile decisions, reduce working hours, and lower time investment for banks. Implementing simple chatbot solutions will allow you to provide faster customer security and improved response times for customers. It also reduces stress on front-line customer service because many customers can get answers from chatbots instead of humans. Implementing backend automation in risk management, security, document processing, etc., has many other benefits but is a newer technology that many are not yet adopting.
In conclusion, the financial services landscape is evolving rapidly, and technology is the driving force behind this transformation. By embracing these technological trends, your institution can enhance efficiency, reduce costs, and ultimately provide a superior experience for your customers. Stay ahead of the curve and leverage technology to ensure your place in the future of financial services.