Technological disruptions over the last few decades have changed how we communicate, talk, make purchases, and do business. Emerging technologies in the financial services industry have consistently disrupted how consumers interact with their money, what they expect from financial institutions, and how those organizations operate. Today, new technologies make processes easier, more efficient, reduce errors, improve communication, and change how consumers see and interact with money.
Most importantly, financial institutions can greatly benefit from these technologies. Emerging trends in financial services like chatbots and automation reduce man-hours, improve the quality of customer relationships, and improve profitability. While the impact of technology on financial services will differ based on the technology, you can likely adopt and greatly benefit from many of them.
Financial Services Technology Trends
Expect these financial services technology trends described below to become part of your institution’s technology stack, if they aren’t already”.
Digital Experience Platforms
Digital experience platforms are nothing new, but modern technologies are allowing financial institutions to revolutionize an already relatively new technology in financial services. For example, hybrid cloud (cloud/server) solutions give consumers both privacy and accessibility. Hybrid platforms also allow for real-time intelligent data integration, such as real-time digitization, and advanced analytics.
One of the most important of these changes is the addition of API platforms, where customers can integrate their banking data into other apps and vice-versa. Many financial institutions have fought API, but with the regulation in the EU forcing organizations to offer open API, many organizations in the U.S. are following suit. Open banking offers numerous advantages to consumers, such as sharing data to third-party budgeting apps and using money management tools, which can allow small financial organizations that cannot afford these amenities to offer them through third parties.
How can you take advantage? Offering a modern digital experience platform to customers through an online portal will attract customers, will offer more value and will give customers the freedom to do what they want with data. In addition, hybrid solutions offer increases in security while cutting costs through automation and real-time data transfer.
Blockchain is transforming the financial world as we know it, but it’s still at a relatively low adoption rate. Blockchain is the technology behind Bitcoin, has been used by major banks like JP Morgan Chase and is widely regarded as one of the largest opportunities for banks and other financial organizations today. For example, Accenture estimates investment banks could save $10 billion by clearing and settling processes to blockchain.
While blockchain is one of the hottest emerging technologies in the financial services industry, it’s not yet readily accessible. Some organizations are developing wider solutions, but most banks that are implementing blockchain solutions (including checking, money processing, trade finance, etc.) are doing so on their own. This can be a significant impediment to smaller financial institutions without the means to develop a solution. However, with the rapid adoption of blockchain over the past few years, it will quickly become a mainstream solution for payments, fraud reduction, loan processing, smart contracts, and more.
Chatbots and Artificial Intelligence
Chatbots and other artificial intelligence solutions are increasingly popular for financial institutions of all sizes, with everyone from large-scale banks to tiny credit unions implementing them. While chatbots are the more publicly visible versions of artificial intelligence, AI impacts back-office, product delivery, risk management, marketing, and security. Machines use simple algorithms to complete everything from data entry to risk evaluation to loan form processing, clearing up hundreds of thousands of employee-hours for top banks. These emerging technologies in the financial services industry are readily available for smaller banks as well, with tools to automate specific processes such as documentation, data sharing, data analysis, customer communication, and much more.
Here, the largest challenge is in delivering consistent quality in external processes such as chatbots, where some institutions often come up short. Many organizations also face issues relating to siloed data sets, regulatory compliance issues, and fear that AI won’t do the job, which is why many integrate solutions with manual regulation and management to prevent machine error. This just means that the role of technology in finance could be delayed based on the apprehension of financial institutions.
AI is also playing an increasingly large role in security, risk-mitigation, and cyber-security. Because cyber-security threats and other risks are impossible to eliminate fully, AI is used for real-time analytics and monitoring, creating instant alerts when something is flagged as a threat. This allows for faster responses, reducing the likelihood of actual breaches. While some suggest that new AI initiatives could increase security risks in firms that are unaware of risks, long-term application, proper setup and onboarding, and quality control can potentially prevent these risks.
Why should banks use AI? Artificial intelligence is capable of making smart, agile decisions, cutting man-hours, and reducing time-investment for banks. Implementing simple chatbot solutions will allow you to offer faster customer security and improved response time to customers. It also reduces strain on first-line customer support, simply because many customers can get answers from the chatbot rather than a human. Implementing backend automation into risk-management, security, document processing, and so on has many other benefits, but is a newer technology that many are still not adopting.
Automation In Financial Services
Robotic process automation or RPA is the most common tool used for automation, simply automating fixed and repetitive processes. Automation, unlike AI, uses a simple series of rules (If this = then that) to create relatively simple but reliable results. These pre-programmed rules can encompass structured data (incoming data on interest charts) or unstructured data (forms filled in by hand) to handle digitization, approval, risk flagging, and so on. Many also integrate learning patterns, so that they improve over time based on increasing volumes of data.
RPAs primarily function to generate reports, logging data, automating repeatable processes, and maintaining logs. For example, RPA can manage instant payments, using a programmed rule to automatically approve a payment if all conditions are met. Another RPA would then log this transaction into documentation, move that documentation into a greater file, and update data across all apps and servers using the data.
Solutions like RPA allow banks to save money, cut down on human error, and improve processing speed. They also offer convenience to customers, who spend less time waiting for human approval.
RPAs also improve compliance and auditing for financial institutions, simply because they typically automatically generate documentation and reports. This can result in a greatly simplified audit process because RPAs will log and store all data without the complication of silos, human error, or differences in how teams log and collect data.
Are You Ready for the Changing Role of Technology in Finance?
While developing chatbots, experience portals, or a blockchain solution yourself would be inefficient and costly, these emerging technologies in the financial services’ industry are becoming increasingly accessible to banks of all sizes. Digital experience platforms and developers specifically develop solutions for financial institutions, allowing them to lease and modify apps, chatbots, and other solutions that would otherwise take years to develop to any standard of quality. Financial institutions can then benefit from emerging technologies without steering away from their core business.
No emerging technology is a guarantee, but many have a lot to offer. If you’re looking for solutions for your financial organization, it’s important to explore the options, adopt what works for you, and continue to expand and grow those options.