How technology is transforming financial services
THE financial sector has experienced tremendous transformation in recent years, propelled by development in technology and this trend is expected to pick pace in the coming years.
In the grander scheme of things, the industry has a whole has embraced digital transformation and along with it, innovative tech-driven initiatives to enhance customer experience, improve efficiency and reduce cost, all the while complying with regulatory oversights.
However, the rapidly accelerating advancement in technology will continue to disrupt business as usual in the finance space, and global consulting firm, PWC outlined some of the vital forces that will drive that disruption.
# 1 | FinTech will drive the new business model
There was a time when the industry was an exclusive club whereby a new player would find it hard to break into the market. That is not the case anymore as fintech providers have not only entered into the financial space but continue to chip away market share that was traditionally held by banks.
Often a dynamic and fluid start-up, the fintech providers specialize in a particular technology or process and offers services such as mobile payments, microloans, and insurance premiums.
And since these services are some of the most profitable functions of financial providers, the emergent of new players are could potentially big a big blow to the incumbents.
# 2 | The sharing economy will be embedded in every part of the financial system
Banking services are crucial for consumers, but in the future, they will increasingly get them outside the traditional banking system that we know today.
The sharing economy that started with transportation services and lodging had already expanded to the financial services and the trends decentralized asset ownership model that is matched by internet will continue to grow.
# 3 | “Customer intelligence” will be the most important predictor of revenue growth and profitability
Customer intelligence that and insights derived from focus groups and surveys in the past, while based on real individualized data, it is still hazy at best.
But thanks to new technology such a big data and deep analytics, businesses can tap into massive data set and far more accurate insights on consumer behavior.
# 4 | Advances in robotics and AI will start a wave of ‘re-shoring’ and localization
In the past 20 years, many companies, specifically the ones from the US and Europe outsourced some of the more repetitive and mundane tasks to parts of the world that offers more cost-effective labor.
At the same time, artificial intelligence or AI has been steadily integrated into the banking sector for years now, starting with the ATM, all the way to the customer-facing chatbots to maximize efficiency and increase service speed.
As AI capabilities continue to become more robust and accessible, coupled with the increasing cost of labor globally, functions that were once shipped off-shore will make their way back home and localized.
# 5 | Cyber-security will be one of the top risks facing financial institutions
In a 2016 PWC survey, 69 percent of CEOs from the financial industry stated that they are somewhat or extremely concerned about cyber-threats and the trend is likely to stay way into the future due to several factors, such as;
- Increased dependency on third-party vendors
- Rapidly advancing complex technology
- Cross-border trade and data exchanges
- Proliferations of mobile and IoT devices
- Increased cross-border information security threats
Moving forward, the financial service provider may have to spend more resources and invest in proper cybersecurity measure to protect themselves from sophisticated cyber threats and attacks.