Although financial services and banking have taken longer to adopt new technology than other industries, they are now trying to catch up. Financial organizations are incorporating artificial intelligence, Blockchain and other technology to improve their customer service, stay competitive, and increase their business results. These are the seven biggest tech trends that will impact banking and financial services in 2020.
Although banking and financial services tend to be slower to adopt new technologies, a PricewaterhouseCooper study confirms the majority of financial services decision-makers are investing in artificial intelligence (AI)–52 percent of executives confirmed they are making “substantial” investments in AI while 72 percent believe it will be a business advantage. The expected cost savings of $447billion by 2023 will be one thing that will convince the rest to believe in artificial intelligence’s potential.
How do financial institutions use artificial Intelligence? Chatbots and robots are the most prominent way that artificial intelligence (AI), is used in banking. AI is used by many of the biggest financial institutions like JPMorgan Chase and Bank of America to improve customer service. A second way that AI can be used to improve customer service is by facilitating mobile banking, which allows consumers 24/7 access to their banking transactions. AI can also be used to improve security and detect fraud. This technology aids financial institutions in risk management and lending decisions. It is also foundational for other technologies such as big data analytics and robotic process automation.
Blockchain technology was first used in Bitcoin’s cryptocurrency. It is a distributed database that keeps track of transactions in a verifiable, permanent manner. The Harvard Business Review predicted that blockchain would disrupt banks in the same way as the internet did media. Blockchains are highly transparent and secure. They are also relatively inexpensive to operate. Blockchain technology will be adopted by more financial institutions as they realize its potential to improve security, save money, improve customer satisfaction, and reduce costs.
There are many ways blockchain can be used to support banking. Bitcoin demonstrated how blockchain can be used to pay, but it also has the potential to transform capital markets by tokenizing stocks and bonds and placing them on public blockchains. Blockchains could remove third-party gatekeepers from the credit and loan system, as well as making it safer to borrow money and lower interest rates. The blockchain could also be used to automate bank reconciliations. Smart contracts that use blockchain technology will change the way money and information are exchanged today.
An industry’s investment in a technology can help determine its impact on the industry. According to the IDC Semiannual Big Data and Analytics Guide, the banking sector is one of the largest investors in big data and business analysis solutions. It is staggering how much data the financial sector generates–credit card transactions and ATM withdrawals as well as credit scores–every year. It is crucial to be able to use that data in business decisions, and to process it efficiently to gain actionable insights to stay competitive in the future.
Financial institutions can use big-data to gain insight into customers and make real-time business decisions. This includes learning about customer spending habits, sales management and segmentation to optimize marketing and product cross-selling. Big data analysis not only helps identify market trends but also streamlines internal processes and reduces risk.
Robotic Process Automation
Robotic process automation can reduce labor costs and errors and help financial institutions remain competitive. Many financial institutions are beginning to use this technology to provide the best user experience possible for customers and stay competitive. RPA is software that allows robots and virtual assistants, without the need for human intervention, to perform repetitive tasks and labor-intensive tasks quickly and accurately.
RPA is used by banks to assist customers with low-priority questions such as account or payment queries. This allows human customer agents to focus on the more important issues. RPA is used in insurance companies to automate certain claims-handling processes. RPA is also used to ensure compliance in highly regulated industries. RPA allows customers to get a decision about their credit card application in a matter of hours, sometimes even as soon as they submit the information. It also optimizes mortgage processing.
Cloud computing refers to technology that enables data storage and delivery over the internet. This includes servers, databases and software as well as networking and software. A cloud provider charges a fee based on the amount of usage and pay-as you-go pricing.
Cloud computing allows customers to access 24/7 customer service from any location. Cloud computing also increases the agility and speed of financial institutions, making it easier to scale up services faster and more efficiently. Cloud computing allows financial institutions to reduce costs by only paying for the services they use. Cloud computing allows secure online payments, digital wallets and online transfers.
Financial institutions are using chatbots that are powered by advanced artificial intelligence to lower costs and satisfy customers’ needs for quick resolution and effective communication. Chatbots can replace traditional forms of communication like email, text, and phone calls. According to Gartner, chatbots will handle 85 per cent of customer service interactions by 2020.
Chatbots provide a fast and personal conversational experience. Customers get premium service quickly. Wells Fargo, Capital One, and Bank of America have used chatbots for simple account queries for years, but modern chatbots can even provide financial advice. Bots can also provide central financial management across the many channels customers use to interact with their financial institution. This is a significant improvement on the disjointed experience in the past. This technology is constantly improving and customers will be able to connect with their bank at their own terms.
Cyber Security & Resilience
Financial institutions are responsible for protecting sensitive financial and personal information. Financial institutions should assume that there will be a security breach, and then plan how to minimize it. This is because of the many ways that consumers interact with money and the vulnerability that exists regardless of the effort and time spent to stop cyberattacks. Safety is not guaranteed, even if an attack can be stopped periodically.
Financial institutions cannot just invest in cybersecurity technology. They need to share their knowledge and best practices, collaborate with governments to ensure cybersecurity priority, educate employees about cybersecurity responsibilities, the importance of following protocols, as well as reach out to the general public to assist them in understanding the situation and how they can keep their personal data safe.