It has become the norm that of the seven vertical industries retail and travel have always been the front-runners in responding to innovation and the adoption of new technologies when compared to the finance and banking sector. But recently, the financial services vertical has begun to re-establish itself striving to become more consumer-centric. This has become necessary due to changing consumer expectations, high-voltage competition and the overall adoption of the latest technologies by other industries resulting in it becoming necessary for financial services to embrace digital transformation. In addition, in the digitized world, the emergence of “FinTechs” (financial startups based on new technologies) are giving immense opportunities to traditional and age-old financial players to come up to speed to compete or collaborate with these new types of firms and co-exist.
Responding to customers’ expectations – bringing about innovation & technology to financial sector
Financial players are integrating the latest technologies into their day-to-day operations and all areas of banking. Some of these are turning to next-gen technologies allowing for remote expert consultation via video and chatbots, analytics-enabled trading platforms and customized services as well as enhancing transactions on the go from any mobile device. Interestingly, financial firms and banks became advanced players to adopt and adapt machine learning (ML), artificial intelligence (AI), data analytics, blockchain and cloud computing. This has allowed them to meet the consumers’ expectation, provide better customer experiences, and to attain operational efficiency and business compliance.
Recent changes inspired large financial institutions to collaborate with fintech firms to acquire the strength of advanced technologies to lure more customers such as small businesses that need hassle-free time-saving technologies to help increase growth. This also allows them to reach millennials who prefer to do all financial functionalities through their mobiles using mobile-friendly apps. Previously, financial firms were using technology to innovate their improvised internal operations and maintenance but with the saturation of mobile devices and the appearance of fintech firms, all focus has turned to providing more efficient & effective customer experiences. This is being done via mobile-friendly innovations contactless payments, payment on-the-go, e-deposits, digital lending, capital markets, P2P payments and many more.
Let’s explore some of the important tech-innovations making their way to the financial domain that are bringing about much-needed change.
Artificial Intelligence (AI)
AI in all verticals, including financial services, aims to provide a more personalized and relevant customer experience. Digitization of banking procedures has enabled a greater number of touch-bases than the traditional banking system. Customers feel more engaged and involved while getting messages from all sorts of channels (traditional as well social media channels). One of the world’s leading banking & financial services launched an AI-driven Facebook chatbot to answer customers’ queries. Such as what’s their current account balance or to locate the nearest ATM using Facebook Messenger.
AI-enabled banking procedures are making the customers’ experience more convenient and well-connected. An AI-enabled facial recognition system can identify an individual the moment they enter any bank branch and access relevant related information such as spending patterns and recent financial transactions. AI technologies are also helping financial firms in cost-management and maintaining efficiency in their operations. Modern technologies – Robotic Process Automation (RPA) and Intelligent Process Automation (IPA) are great enablers to improve efficiency and productivity. An AI-enabled system analyzes all types of business data and establishes greater internal control of the operating system.
Machine learning (ML)
Machine Learning has been used in many day-to-day activities from email sorting through Natural Language Processing (NLP), automatic update of customers’ records in Customer Relations Management (CRM) solutions, efficiently assisting customers’ through customer self-service portals and many more. In recent time, ML became an important component in many aspects of the financial ecosystem like approving loans, asset management and assessing risks to name a few.
ML in a different format is assisting in essential financial procedures such as portfolio management, algorithmic trading/ high-frequency trading (HFT), fraud detection and loan/insurance underwriting. ML is used to a larger extent to strengthen customer service through chat bots and conversational interfaces, ensuring security (Security 2.0), sentiment/news analysis by analyzing social media, news trends.
The use of blockchain (not the open blockchains such as bitcoin rather the private, permissioned blockchains) will be the future of technology in the financial sector. With trusted third parties handling back office transactions, post-trade settlements, trade finance, insurance, and compliance and regulations. Blockchain can be utilized to create client identification systems based on distributed ledger technology and can be used by other branches and different banks in the financial ecosystem.
Blockchain technology would be crucial in insurance deposits and loan decisions by identifying fraud and unreliable sources in the overall financial system. Another significant role of blockchain would be to improve traditional insurance by automated payments.
Cloud-enabled applications help the financial sector to streamline many processes such as new digital workflows, to establishing effective collaboration among else-while siloed departments, business units and individuals who are working with the financial organizations. Many in-house systems and processes can be handled more effectively with cloud-based SaaS applications, such as HR, CRM, ERP and financial accounting. The cloud system can secure the overall finance ecosystem in terms of cyber security protection without hiring a specialist team or deploying any technology.
Digital path-way to financial sectors
In recent times, all industries are trying to transform digitally. So is the financial sector where ensuring security, data maintenance & management is almost as important as sustain customers’ trust in the institution. All modern technologies (A-B-C – Artificial intelligence/machine learning, blockchain and cloud) are thus leading the way to attain this revolution in financial sector. In coming years, digital transformation will be a significant component of the investment strategy of any financial firm thereby embracing the digital disruption happening in all verticals.
~ Arpana Bharti, Research Analyst