Banking and financial services have generally been viewed as a staid and conservative sector of the business community, but technology allows no one to escape the threats of competition armed with innovative and disruptive ideas, as evidenced by the emergence of fintech. Artificial Intelligence (AI) and blockchain, along with a host of other innovation trends, will reshape this industry in the years to come, providing ways to compete more effectively, reduce costs, and, of course, improve the bottom line.
Staff at Forbes recently published their take on the seven biggest technology trends that could prove to be destructive and, thereby, re-constructive in the banking and financial services arena in 2020.
Here is a brief summary of their findings:
- Artificial Intelligence: Banks have always been slow to adopt new ideas, and for that reason, more competitive non-banking entities have tended to strip away the more profitable parts of their business models. Debit and credit cards were the savior over the past fifty years. AI will greatly improve customer service, help detect fraud, grant credit, enhance security, and mine mountains of data for marketing follow up. A PwC study revealed that 52% of decisionmakers in this sector are already investing heavily in AI, with savings estimated at $447 billion by the year 2023.
- Blockchain Technology: No surprise here – The Harvard Business Review has stated that blockchain will have the same disruptive effect on banking as did the Internet on media. The promise of lower costs, better customer service, and improved security will make conversions happen. Smart contracts can remove vast amounts of existing infrastructure when issuing securities to credit to less reconciliation nightmares in banking back offices. Tokenization is the catchphrase. It will completely alter how information and money are exchanged.
- Big Data: Banks create mountains of data related to credit card transactions, loans, ATM withdrawals, and even credit score calculations. The industry has also been one of the largest investors in what is called “Big Data Analytics”. Data must be “mined” in order to find usable “nuggets” of information for monetizing marketing purposes. Banks have learned that there is a competitive advantage in data analytics, and this trend will continue. Cross selling opportunities, risk management, customer feedback analysis, and detecting new trends stand out.
- Robotic Process Automation (RPA): Process optimization is the big calling of RPA, whether it is in scoring a credit application or helping with compliance reporting issues. New software can be applied in both physical and virtual situations, where there are opportunities to keep errors at a minimum, create better user experiences for customers, and reduce labor intensive activities.
- Cloud Computing: This technology has actually been around for nearly fifty years, but it reached its zenith over the past decade. There are now several versions of “Software as a Service” (SaaS) that reduce runaway costs in IT departments. Banks have been hesitant to adopt the technology due to security concerns, but the race is now own with new improved and more secure versions. Scalability and pay-as-you-go are the big draws, but the Cloud can now enable “secure online payments, digital wallets, and online transfers”, to name a few.
- Voice Interfaces: Email, phone, and text solutions of the past for customer issue resolution are quickly being replaced with AI-empowered Chatbot solutions. It is estimated that 85% of customer interactions will be resolved by the end of 2020. As Forbes notes: “Bank of America, Capital One, and Wells Fargo have used chatbots for years for simple account queries, but today’s advanced chatbots could even offer financial advice.” Customers will be able to deal with their banks more directly, with easier access, and on their own terms.
- Cyber Security and Resilience: The rise in cyber attacks has grown geometrically in recent years, and the favored targets have always started with banking institutions. Bank must continue to invest to prevent compromises of their databases of sensitive personal and private financial information. Forbes notes that: “From mobile apps and web portals to third-party networks and even susceptibilities introduced by employees and customers themselves, safety is never ensured even if you can thwart an attack periodically.” Banks will need to do more in sharing best practices, working with government authorities, and educating employees and the general public of the threats at hand.