Over the past years, technological advancements have unapologetically disrupted our society. Technology continues to transform every industry, with no sign of stopping anytime soon. The financial sector was also not immune to the impact of technology. A once unyielding brick-and-mortar institution, this dynamic industry is now a magnet of technological advancements. Before we go over how technology is shaping the financial industry, let us first take a closer look at the different challenges that the industry is facing today and how technology can address them.
Security threats: Cyber attacks have significantly increased over the years. Online thieves have been targeting large financial institutions, primarily due to the sensitive information that they carry. Sadly, these data breaches are costing financial institutions millions of dollars. It is therefore important that financial institutions invest in innovative and secured solutions to keep these cybercriminals at bay.
Data organization: Efficient data organization is another challenge for financial organizations. With the high volume of information they need to manage, it is essential that they utilize a platform or database that can proficiently store and consolidate everything. Aside from keeping these data secure, they also need to filter them out, and distinguish what is relevant and what isn’t.
Staying ahead of the competition: These days, modern consumers want a more customized customer experience. They know what they want and are not afraid to cut ties with businesses if they do not receive the service they feel they deserve. For this reason, financial institutions are being forced to collaborate with companies who can meet and exceed their consumers’ expectations just to stay ahead of their competitors.
Cultural shift: Technology undoubtedly incorporated itself in our culture. It made everything easier, convenient, accessible, and generally made our lives easier. It is therefore imperative for financial institutions to think beyond manual processes and foster an environment that embraces innovation.
Customer retention: Most financial services customers nowadays want a more meaningful client and customer relationship, rather than an indifferent one. Regardless if they are in the higher or lower end of the society spectrum, they all want to be treated in a special way by their financial institutions. By understanding and engaging with their customers, financial companies can increase customer satisfaction and decrease customer turnover.
Compliance: Regulatory compliance is another obstacle of the financial industry. There are several regulations that financial organizations have to comply with and it is significantly taking a toll on their income. If financial organizations want to ensure their businesses will continue, they need to ensure that their systems are up to date with the current industry standards.
Higher customer expectations: Financial consumers now have a higher degree of expectations of their financial institutions. Since they are more savier and well-versed with their rights and privileges, they now expect a higher level of service. In addition, the demographics of customers also have changed. Generations today are more driven and technologically-literate and, because of this they want a more digitized experience rather than conventional one.
Outdated systems and applications: Even if most financial companies understand the value of technology, there are still some who use outdated business management systems and applications. Unfortunately, if these financial organizations do not change their approach and still continue to use these ancient tools, they will be unable to keep up with this competitively digital world, which could ultimately cause their businesses to fail.
With all these challenges, it is vital for financial organizations to leverage on technology if they want their businesses to thrive. Here are some technological developments and trends that can help address some of their market demands and improve their overall operations.
Gone are the days when you had to personally visit a financial institution to process and complete a transaction. Mobile applications have made it easier and convenient for consumers to streamline their financial businesses with just a few clicks on their mobile phones. With the help of these applications, they can pay their credit card bills, transfer money to their loved ones, settle their investments, and process other essential tasks without having to go to their respective banks. Mobile applications significantly made a difference in the lives of consumers especially during these difficult times and enhanced the relationship between financial institutions and their customers.
Blockchain is another technological innovation that is slowly changing the landscape of almost all industries. The popularity of blockchain continues to grow through the years, as seen by the influx of financial companies incorporating this game-changing technology into their operations. Some benefits of blockchain include:
Less bureaucracy and paperwork
Integrity of data
Financial transactions are processed faster and at a lower costs
Autonomy from central repositories
Eliminates the need for a middlemen
Improve efficiency and accuracy
In addition, with the help of this decentralized database, financial consumers can process international payments, have more secured trading transactions, and revolutionize the process of validating critical data. On the other hand, financial companies can automate and streamline their processes through the use of smart contracts. Moreover, with the help of blockchain technology, banks and other financial institutions can efficiently manage and run their operations, using a safer and more transparent platform.
Another technological advancement that has disrupted the financial sector is cloud computing. The information technology infrastructure of conventional financial institutions is very costly. With the amount of information that financial businesses have to consolidate and process, these firms need a more scalable and cost-effective solution to store and classify all of this data. With the help of cloud computing, banks or financial firms can manage their financial data at a more affordable cost. Cloud computing solutions can also minimize potential risks, as it can efficiently identify threats and fraudulent transactions. It is important to note that even if the industry was quick to embrace this innovation, it still has a long way to go compared to other industries.
Technology has also transformed the expectations of consumers and businesses when it comes to payments. Instant payments allow financial consumers to send and receive payments simultaneously, and in real time, thereby increasing customer satisfaction and their overall banking experience.
With the help of instant payments platforms, consumers can carry out their electronic payment transactions more efficiently anywhere and anytime that they need to. In addition, since transactions are made digitally, the chances of miscalculation or human error is relatively lower. By incorporating this technology with other financial innovations, financial institutions can widen their client network and develop global opportunities that can help them grow their businesses even further.
The Internet of Things
The internet of things (IoT) has greatly influenced several industries such as retail and automotive. It has also dramatically shaped the financial sector over the past years. With the help of IoT, financial companies are able to save valuable time and resources since they are able to gather data real time. In addition, IoT can also better detect multiple threats and vulnerabilities, improve trading and investment transactions, and enhance the overall customer service experience.
Robotic process automation
Robotic process automation (RPA) is another technological innovation that is changing the landscape of the financial industry. RPAs allows banks and other financial institutions to efficiently streamline their business processes through the use of a virtual workforce. With the help of RPAs, processes are able to make sound decisions on their own, based on previous data patterns, making the entire process faster and more efficient. Additionally, this dynamic automation significantly helps these firms to alleviate financial risks and meet compliance protocols since they are able to retain a detailed log of processes, which in turn reduces human errors.
Chatbots are innovative tools that financial institutions can use to increase customer engagement. With the help of these bots, financial companies do not need to spend a lot to deliver excellent customer service. Consumers also no longer need to visit their respective banks just to resolve their issues since they can do it virtually. Since chatbots are capable of analyzing and understanding the context of a conversation using the data they have collected, they can efficiently and naturally converse with customers, thereby boosting the resolution time. By utilizing these chatbots on their digital platforms, financial institutions can widen their client reach and gain a larger share in the market.
Artificial intelligence (AI) solutions are also becoming game-changers in the financial industry. This intelligent innovation can assist financial organizations in several areas including product delivery, security, marketing, risk management, compliance, back-office operations, and customer service experience. AI can address multiple business complex issues through the use of simple learning algorithms. It can help companies alleviate risk, automate and streamline their operations, and efficiently detect fraud. For instance, banks can use an ID or driver license scanner to validate the identity of a client. By using this type of AI verification tool, financial companies can speed up the verification process.
Technology has made a significant impact on the financial sector. While there is no shortage of benefits when it comes to technological innovations, it is still essential for financial institutions to evaluate these initiatives carefully to make sure that they suit their respective businesses.