Digital transformation in finance, driven by AI, blockchain, and mobile banking, continues to reshape the sector, demanding upgraded systems and remote work adaptations.
In the financial services industry, digital transformation surged in 2020 and shows no signs of slowing down. Senior executives across the sector understand its ramifications well.
Consumer habits evolved dramatically in 2020 as banks and financial firms closed their doors and trading desks relocated to home offices. Market volatility and volumes reached all-time highs. Financial institutions were compelled to adapt and adopt new technological solutions at a faster pace, laying foundations for an unforeseen future.
What is certain is that banks and financial services firms must upgrade their entire data systems and architecture to satisfy expanding client demands, increased data volumes, and their need for digital insights. Data centers in the financial services sector must evolve to enable and support the implementation of AI efforts.
Financial services firms will be able to accelerate contact and mobile payment solutions and make more use of robotic process automation (RPA) to improve and simplify operations by streamlining the development and deployment of applications.
Below are a few expected technology developments poised to impact financial services as digital innovation continues at a rapid pace:
Blockchain and Cryptocurrency
Blockchain is one of the emerging financial services technology trends revolutionizing the financial world, yet its adoption is currently modest. It underpins Bitcoin and has been adopted by major financial institutions such as JP Morgan Chase. According to Accenture, investment banks could save $10 billion by moving their clearing and settlement operations to the blockchain. While blockchain is one of the most exciting new technologies in the financial services sector, it is still not widely available. Most banks are implementing blockchain solutions on their own (including checking, money processing, trade finance, and so on). However, smaller financial institutions without the resources to design a solution may face significant challenges. Blockchain’s rapid acceptance over the last few years is swiftly making it a mainstream solution for payments, fraud reduction, loan processing, smart contracts, and other applications.
Artificial Intelligence
Artificial intelligence (AI) and machine learning (ML) were once considered optional additions of uncertain value due to their difficulty in establishing and profiting. Now, they play a critical role in the day-to-day operations of businesses, affecting everything from productivity to revenue. Financial institutions use AI to manage sensitive financial operations like investing and lending, trade decision-making, and fraud detection.
According to a Business wire analysis, AI in fintech was worth $6.67 billion in 2019, with an expected rise to $22.6 billion by 2025. By leveraging AI and machine learning, financial institutions that traditionally relied on legacy technology are catching up to digital-native competitors in the fintech and bigtech space. AI impacts back-office operations, product delivery, marketing, risk management, and security. Simple algorithms are used by machines to handle everything from data entry to risk assessment to loan form processing, saving major banks hundreds of thousands of employee hours.
Mobile Banking and Cashless Transactions
Mobile banking is a significant part of the fintech industry. In personal finance, consumers increasingly demand simple digital access to their bank accounts, particularly on mobile devices. Almost all major banks now provide mobile banking, thanks to the growth of digital-first banks, or “Neobanks.” The demand for cashless transactions is expected to grow in this pandemic-stricken economy, providing more opportunities for digital wallet providers.
Globally, more than 70.3 billion real-time payments transactions were performed in 2020, up 41% from the previous year, according to a new analysis from ACI Worldwide. Digitally linked transactions aid businesses in data collection, enhancing transaction volume. The data collected can then be used to create new services. As a result, new revenue streams emerge, limitless data offerings become available, and cost-effective business models develop.
Working Remotely
Remote employment arose out of necessity, but it is here to stay. Huge investments in technology to enable remote workforces, including collaboration tools and virtual desktops, ensure that new modes of working will continue to evolve for at least a portion of the workforce. Financial businesses must consider factors such as recruiting and retaining employees, preserving job satisfaction, updating technology, resolving security concerns, monitoring cost reductions, changes in business travel and activities, and limiting the impact on productivity and creativity.
Companies wishing to expand their remote working options should review remote collaboration and security solutions that may have been implemented under duress and could be less than optimal.
Final Thoughts
These essential technologies and trends are becoming increasingly linked and integrated, propelling fintech and finance industry innovation to new heights. It is currently a specialized financial service sub-sector that excels at leveraging technological advancements to create apps, generate value, and influence the competitive landscape. Traditional financial institutions will have to use all their resources to ride the looming wave of financial sector upheaval in the future.
