The Buzz About changing Financial Services
Lately, there has been a lot of buzz in the financial services space over the quick and radical changes in the sector brought about by its shift to a new, digital model that will fundamentally transform everything.
In this piece, we take a look at the trends shaping the financial services industry to bring you up to speed on events.
Our world is becoming very tech-inclined with a growing reliance on technology and online resources. This, coupled with increased competition from fintech and regtech firms whose business model revolves around a variety of new technologies has forced traditional financial institutions to invest in digital technologies to remake processes and become more efficient.
Artificial Intelligence (AI) and Blockchain
AI and Blockchain continue to expand the frontiers of technology, enabling companies to solve even harder problems and disrupt the financial services landscape with huge competitive advantages. AI, for one, is taking the financial services industry by storm.
Several financial services firms now rely on artificial intelligence to cut cost, save time, and add value. For instance, wealth management institutions now use robo-advisors to analyze and understand client investment, spending, and general behavior regarding money management so they can customize the advice offered to customers.
Similarly, the blockchain, the technology which runs cryptocurrencies, continues to power innovation in the financial services sector. It offers an opportunity to speed up and simplify cross-border payments, ensure greater trade accuracy, improve online identify management, and ensure transparency in financial operations.
Through smart contracts, transactions and agreements are executed automatically once the conditions coded in them are satisfied. This help eliminates the need for an intermediary and leads to a reduction in cost.
Digital-Only Banks Influence in the Financial World Continues to Grow
Digital-only banks and fintech companies are threatening to replace traditional banks as the focal point of the banking experience. As technological advancements continue to expand and consumers become more comfortable using the internet, their expectations for instant and straightforward digital interactions will continue to increase.
By their very nature, digital-only banks possess the tools necessary to offer consumers what they expect and prefer. Not operating from any physical location means they attract low transaction cost, which allows them to distribute resources better to provide customer experiences that are uniquely differentiated.
For instance, DBS Bank, a Marina Bay-based digital-only bank offers up to 7% interest rates on savings accounts, unlimited access to ATMs, zero balance requirements, etc., all of which can be difficult for legacy organizations to provide.
Big Data Continues to Drive Modern Business Operations
Organizations continue to find new ways to leverage big data. This data now enables companies to create real competitive advantages by providing large amounts of information to assist with their research, marketing, etc. It is predicted that the Internet of Things will make big data even bigger by providing plenty of storage space as well as by offering the big data itself.
Banks and Financial Institutions Embrace Cloud-Based Offering
Cloud innovation has been a thing in the financial services industry for a while now. However, it wasn’t until recently that banks started to embrace it. The innovation was generally not well received by traditional banks due to security issues. Brick and Mortar institutions feared that entrusting data to cloud will make it more susceptible to hacks.
Today, however, the technology is becoming more widely accepted, as banks now use cloud computing for non-critical functions like email, human resource, customer relationship management (CRM), customer analytics, as well as for development and testing.