Thanks to technology, we live in an ever-changing world, and this is particularly true for financial institutions (FIs). For one, the way consumers manage their money – investing, borrowing, saving, and lending – will not be the same tomorrow as it is today. Add to that the fact that FIs must also manage regulatory and compliance issues, data and personal information security issues, and much more, FIs are becoming increasing reliant upon the solutions that financial technology, or fintech, companies can bring. As a result, fintech is no longer limited to back-office functions. Fintech solutions, with their ability to help institutions streamline processes, expedite services, and secure information, are transforming this $8.5 trillion industry, most significantly in the area of customer-facing processes.
Here's the situation. The industry’s biggest players are under siege from not only small competitors such as de-novo banks (ala Grasshopper), but “non-banks,” as well; those financial service providers that are not regulated by the banking industry. Since these companies – such as the Big Four; Google, Apple, Facebook, and Amazon – can devote a greater percentage of their assets to cutting-edge financial technology, they’re well positioned to steal tech-savvy customers from traditional banks. FIs need to be both nimble and digitally savvy in order to thrive and are hoping that technology will allow them to deliver a faster, more robust experience that can contend with these new threats. Given, however, that a significant portion of their resources must be dedicated to security, compliance, and other industry-specific requirements, FIs have a tough battle ahead.
Security, blockchain and cryptocurrency
What does this technology mean to the financial services industry? Security. Around the globe, FIs are moving toward block chain technology (BCT) for operations such as money transfer, record keeping and other back-end functions. BCT is extremely useful in FI processes such as secure document management, reporting, payments, treasury and securities, and trade finance. Some FIs, including JP Morgan Chase and Ethereum, are already exploring the potential of this technology.
ATMs transformed the bank tech system when they were first introduced in 1967. The next revolution in ATMs is likely to involve contactless payments. Much like Apple Pay or Google Wallet, soon you’ll be able to conduct contactless ATM transactions using a smartphone.
Some ATM innovations are already available overseas. For example, biometric authentication – which allows the consumer to be identified by evaluating one or more unique, distinguishing biological traits like face, hand, retina, voice and ear features – is already in use in India, while iris recognition is already being utilized by banks in Qatar. These technologies can help overall bank security by protecting against ATM hacks, but may not be available to US-based FIs for some time due to the strict regulations governing North American banks.
In recent years, there has been an increase in instances of compromised consumer data. Whether incidentally allowing user information to be hacked, or covertly sharing consumer’s private search histories and other analytics, many corporations are feeling the backlash of compromised personal customer data. The good news is that this increase in cybercrime has given rise to a host of new technologies designed to enhance privacy controls and further safeguard client data. One such technology is regtech, or regulatory technology. Regtech companies, through the use of data and machine learning, are helping FIs reduces risk by analyzing data on breaches and illegal activities. Two products currently on the market that offer this protection are ProfitStars Gladiator Suite and RedOwl, which was purchased by Forcepoint.
Artificial Intelligence (AI) can provide quick and personalized services, dealing with each customer and focusing on their specific requirements. How? By collecting information and building models – and subsequently, customer conversations – based on that information. And, what about robotics, a technology that mimics the actions of humans performing simple rule-based processes? Software robotics will one day automate all of those inefficient, rule-based processes that demand little human judgement.
The banking sector has yet to fully embrace the use of artificial intelligence (AI) and software robotics, but they are making tremendous strides. Some banks are making use of robotics in combination with human support to give their customers relevant advice on how to improve their banking experience or make small changes to their accounts and services. Others are using AI in the back office. Some institutions -- U.S. Bank, Wells Fargo, and BBCA Compass, to name a few – are implementing robotics and AI to streamlining back office procedures and establish more uniform (and cost-effective) processes. The automation of every-day tasks such as cutting and pasting data from one app to another is causing a shift in banking jobs and the skills required to do them.
Another example of AI implementation is the automation of customer service lines. Some of the advancements in this area have been so great that some consumers find it hard to distinguish between a robot and a live customer care agent. (Hint: Attire is a giveaway).
Last, but not least, is the chatbot. Some FIs have been using chatbots for years, and advancements in the field of artificial intelligence (AI) technology will continue to add value in this area. As chatbots’ intelligence has increased, so too have their capabilities.
With the new “conversational banking”, chatbots can address a variety of customer service issues, and FI customers can get answers immediately. This not only gives the customer the personalized information they demand, but one, it ensures that everyone who interfaces with the FI gets the same level of attention and two, CSRs are free to focus on more important areas of the business.
As time goes on, an increasing number of remote technologies will continue to enable FIs to enhance a digital experience that consumers will access via their mobile devices. According to Samsung Insights, wearables such as smartwatches are “poised to become the future of the retail banking experience. One example is that banks could use Bluetooth beacons to push personal greetings to customers’ smartwatches when they enter a banking location.” Another type of wearable might be smart glasses for bank tellers, according to a report from Deloitte, “which could process customer banking information for the employee as the employee is simultaneously doing other customer service tasks.”
With the digitalization of the banking world growing, there are a lot of exciting things to look forward to in 2020 and beyond. Fintech solutions, with their ability to help institutions streamline processes, expedite services, and secure information, will continue to transform the banking experience and, with it, the entire financial services industry.