Disruptive technologies such as artificial intelligence, interconnected devices, cloud computing, and robotics are changing forever how consumers work, communicate, and go about their lives. Arguably, nowhere is this more pronounced than in financial services.
The pace of change spanning the whole financial services spectrum, from payments and lending to insurance and asset management, is also accelerating.
As digital becomes mainstream, we take a deep dive into how technology has changed financial services and the latest technology trends shaping the current landscape.
How technology has changed the financial services industry
Modern consumers now demand optimal digital experiences across every touchpoint with their financial services providers. Digital technology allows financial institutions to offer consistent, personalized, and immersive user experiences across all channels — from mobile and web to the teller in the physical branch.
Those not prepared to respond to these pressing demands risk losing customers' loyalty and becoming irrelevant in the increasingly crowded marketplace, leaving themselves open to profound repercussions on their bottom line since digital maturity is associated with better financial performance. Failing to go digital means leaving money on the table.
The latest trends in financial services technology
Know your customer: Advanced analytics to secure growth and profitability
Technology advances have given financial services access to troves of data that reveals what users do and want. Once reliant on the information that customers say (through focus groups and surveys), customer intelligence is now based on actual, individualized data about consumer behavior in real-time. It is expected to be the most important predictor of revenue growth and profitability in the years to come (PwC, 2020).
Banking shaken to the core: Next generation of cloud platforms
Financial services have already embarked on the cloud-computing journey. The initial stage of cloud migration mostly involved software-as-a-service applications for non-core business processes, including CRM, HR, and accounting, or point solutions on the periphery of their operations, such as security analytics and KYC verification.
But as digital becomes mainstream, the cloud is expanding into the world of banking core — the heavy back-end engine designed to handle a high volume of transactions every day without any interruption.
Financial institutions are increasingly concerned about the limitations of their existing mainframe-based core architectures when it comes to costs, time to market, personalization, and building ecosystems. In fact, McKinsey's survey of banking executives in May 2019 finds that around 70% of banks are reconsidering their core banking platforms because of these concerns. Cloud technology increasingly includes core systems such as payments processing, credit scoring, capital markets, and wealth management functions.
At the same time, a new generation of cloud-native core banking platforms is emerging, allowing financial services to reduce IT costs, accelerate time to market, deliver data-driven and customer-centric propositions, and scale through partnerships and innovation.
Automation to unlock efficiency gains
Robotic process automation (RPA) helps financial firms execute repetitive tasks more efficiently.
By automating repetitive work such as rule-based processes, reports generation, data logging, and updating across all apps and servers, RPA allows financial services to do more with less. Now, companies across the sector — including banks, insurers, and wealth managers — can save money, improve accuracy, and increase processing speed while providing a better customer experience as customers complete their transactions in less time.
Cybersecurity becomes top of mind
With everything becoming more and more digital, it's vital for financial services to strengthen their cybersecurity game since cybercriminals go where the money is. Preventing them from exploiting vulnerabilities in people, processes, and technology will be top of mind for decision-makers in the years to come.
While every industry has its own set of vulnerabilities to cyber threats, financial services are particularly at risk of cyberattacks as the sector processes and stores some of the most sensitive data about its customers.
A recent NY Fed study cites Boston Consulting Group's study showing that financial service firms may experience up to 300 times more cyberattacks per year than firms from other industries.
The stakes are higher, too. According to a report from Accenture, costs to address and contain cyberattacks are higher for financial services firms than for companies in any other sector. At an average annualized value of $18.5 million, they are almost 40% higher than the average costs across the economy — and they keep rising.
But data reveals that only one-third of firms are deploying automation, artificial intelligence, and machine learning to help fight against cyber threats, even though these technologies offer the largest cost savings for security efforts. This is where financial institutions can focus their future efforts to step up their cybersecurity game.
Artificial intelligence-powered chatbots
Customers require speed, and they need personalization. One way of achieving both is to employ chatbot technology that provides a personalized user experience at a speed and availability that is not possible with human interaction.
As a conversational technology, chatbots have been making strides. The shift is especially apparent since the deployment of a special kind of artificial intelligence called conversational AI to help them become better at what humans do best — holding conversations.
Once the source of customer frustration, chatbots are quickly becoming a true aide for customers seeking help. As virtual agents, they can provide intelligent customer self-service, offering customers quick and easy access to support at a fraction of the costs for financial institutions.
But this novel technology can be much more than a supercharged customer service center that responds to the customers' need for speed and personalization. Chatbots can be an invaluable source of data — the precious fuel that greases the engines of the modern financial system.
Blockchain and decentralized ledger technology
Despite its still relatively low adoption rate, blockchain is expected to remain a technology trend transforming the financial services landscape.
Deloitte surveyed 300 financial services executives reporting that 35% of them believe they were "very" or "extremely" knowledgeable about blockchain, with 40% indicating that implementing blockchain will be extremely important or critical in five years.
Financial services companies are already taking steps to get ahead of the curve, with many working on rollouts of commercial implementations involving blockchain. The technology is expected to deliver benefits such as operational streamlining, automated compliance, faster transaction settlement, and more. Use cases include payments, trade finance, clearance and settlement, loans and credit, KYC, and fraud prevention.
Expand what's possible with Toppan Merrill
Digital technology is reconfiguring the financial services space at a rate never seen before. It allows financial institutions to provide a superb customer experience, enhance efficiency and reduce operational costs while complying with increased regulatory scrutiny.
For 50+ years, Toppan Merrill has been a part of the financial ecosystem, helping financial institutions create, manage, produce, and distribute their critical communications. We have witnessed how the industry evolved over recent decades and are well equipped to be your trusting partner as the space continues to transform in the years to come.
As a single source of truth for all marketing and sales communication, Toppan Merrill's Connect helps financial services leverage the power of digital technology to deliver content from enrollment kits and market outlooks to quarterly commentaries and broker kits, all within a single platform that connects with clients' CRM and sales desk. Technology will continue to drive the financial industry towards better processes and business models, and we are committed to remaining a part of that shift.