Information technology, or fintech, is a core part of the financial service industry in the United States, the UK, and around the world. This has become the case even more so with the emergence of the pandemic. Many financial services which would have otherwise been provided in person have now had to happen remotely via technology.
While the pandemic has presented many challenges in this regard, it has also provided a push to financial institutions to embrace emerging technologies. Traditional processes using paper are becoming even more outdated as regulatory pressures and increasing customer expectations have forced the financial service industry to become more productive to remain competitive.
Artificial intelligence in the financial services
Emerging technologies such as AI are growing at an exponential rate in the financial services sector. This technology creates cost savings and opportunities for growth while improving the customer experience. To explain how Artificial Intelligence AI can aid in the financial services industry, we must first define what AI is.
AI is a task that machines can undertake in the same way that a human would. AI can work together with Machine Learning (a technology that learns by example using advanced algorithms without the need to be explicitly programmed), Natural Language Processing (technology that extracts meaning from text) or Computer Vision (technology that extracts meaning from visual elements). In wealth management for example, robo advisors can automatically invest using machine-learning technology to provide faster investment services to clients.
AI is used in credit card decision making to make quick and accurate decisions by drawing on vast pools of data. It is used in fraud prevention by studying the patterns of customers and flagging any unusual behavior. There are jobs that humans do that could be done by AI however this area has largely remained unexplored in the sector. Embracing it would see huge cost reductions. For example, Robotic Process Automation, which is being sold by technology companies like IBM, could be used to handle time-consuming tasks using software robots and AI.
There are barriers that limit the sector from achieving its full potential in AI. Management may be risk averse, especially when investing in AI is a long-term investment that would see benefits in the future. Training is also another issue, not just sourcing the AI skills, but training staff to make room for such technology. The way in which data is structured across various infrastructures also makes it more difficult to implement AI. Critical issues of data privacy, cyber security, and ethical implications also need scrutiny.
Smart analytics to better understand customers
With the aim of providing better customer service and to create an enhanced customer experience, many industries such as pharmaceuticals have tapped into smart analytics. Mining for customer data to create a complete picture of the customer’s needs, advanced analytics has contributed to major growth in organizations who have taken advantage of this technology to market products and services catering to customer needs.
While financial services companies are using this technology, they have not reached their full potential in this space. More investment is needed in analytical roles to bridge the gap between business and technology. Analytics is still yet to be embedded in banking culture, decision making and processes. Data is tied up in regulation and the potential to interface with third-party vendors has largely remained unexplored.
Blockchain technology services refers to a large, distributed ledger that is publicly visible. It acts as a verification tool that is secure, fast, and it is changing the face of the financial services industry. In the future, blockchain technology has the potential to change the way money is exchanged by unclogging bottlenecks that slow money exchange nationally and internationally. Data is decentralized in the blockchain, as in, the data exists in the different organizations that are part of the blockchain, so it puts the data at less risk of a cyber-attack.
Blockchain has become critical in providing faster settlement in the banking system. One of the main roadblocks in this technology taking off is that it requires multiple organizations to be part of the blockchain and this isn’t easy to accomplish. There are also the regulators to consider.
Cloud technology has been embraced in many industries due to the pandemic which has required a more flexible, dynamic workforce. The demand by customers for more efficient financial services has led to financial institutions taking a leap into cloud technologies.
While it began with more administrative tasks, the financial services sector is now using the cloud for more core services such as credit risk management and credit scores, customer due diligence and payment transactions. The cloud’s scalability means that there is a shortened time-to-market for new services, allowing the sector to take advantage of opportunity with minimal outlay.
The strong analytics provided by cloud technology allow the industry to identify areas of strength and weakness, feeding real-time data to management for decision making and the assessment of business models.
But cloud technology in financial services doesn’t come without its challenges. The highly sensitive nature of financial information means that financial services organizations must work very closely with cloud providers to address security, compliance, and governance requirements.
The evolving cyber security landscape
The increasing threats by malicious actors in this new pandemic world are very real and must be central to any decision making in the sector due to the sensitive nature of data. Any breach would come at a serious cost to reputation.
Experienced cyber security staff must develop strategies to enhance compliance and implement cyber-attack counter measures. There is a balance to be struck between embracing new technology whilst keeping malicious actors at bay which is why risk management is so important.
The acceleration of technology has provided a plethora of opportunities for the financial services industry to become technology driven, and there is a lot more opportunity to come. Talk to the experts at Solzorro to find out how your financial services organization can benefit.