Financial institutions generally agree that automation is increasingly changing their industry in many ways, even though many are yet to grasp the depth and scale of such transformations.
Currently, emerging technologies are expected to expedite transactions and minimize their cost through digitization.
They will also spearhead a massive restructuring of the whole financial sector, change the way people spend and manage their money, and shift the balance of power between newcomers and established players.
Three technologies are expected to play influential functions in this change.
1. Artificial Intelligence
The transformation spearheaded by artificial intelligence will allow financial services entities to not only predict their customers’ requirements but also provide unmatched levels of personalization.
Many sectors, including financial services, have acknowledged that artificial intelligence-ready enterprise applications are increasingly becoming mainstream and that they help expedite digital transformation endeavors.
The ability of artificial intelligence to forecast outcomes with a high-level of accuracy brings about new possibilities in numerous areas.
For instance, in the lending space, business applications featuring data-powered intelligence platforms that are driven by machine learning are assisting organizations to improve operational efficiencies, boost recoveries, and minimize delinquency rates.
Fortune 500 banking institutions have saved a lot of money through intelligently digitizing the reconciliation of fraudulent transactions using both conversational AI technology and data-processing bots.
As artificial intelligence evolves, there is an immense ability to create new paths that lead to economic growth.
Previously, consumers seeking a loan were evaluated based on their previous credit history, which was captured by entities like TransUnion, Experian, and Equifax among others,
With AI-based algorithms, the potential to forecast creditworthiness using credit scoring can expand the market to cover more than 45 million individuals in the United States alone, especially those without any credit score.
Globally, the unfulfilled financial requirements of small enterprises without credit data is approximated to be $5.2 trillion.
Blockchain has proven to be a potential alternative model for settlement transactions, payments, clearance, among other financial functions.
Even though the intricacies of blockchain technology are rather sophisticated, the benefits for financial, markets are clear:
- Security – each transaction is protected cryptographically.
- Disintermediation – a blockchain has no middlemen, and this aspect poses a significant obstacle to most established enterprises.
- Unhackability – Even though no existing system is hacker-proof, blockchain comes really close.
- Transparency – each blockchain network participant enjoys real-time visibility into all transactions, which is good news for parties that don’t trust one another.
- Automation – Blockchain boasts another aspect dubbed as smart contracts, which take action when various conditions are met.
Smart contracts can be utilized in automating processes like digital order fulfillment and insurance claims processing among others.
Even though blockchain has a lot of potentials, commercial acceptance is lagging behind by 3-5 years.
However, some early adopters have made some successful strides thanks to the technology.
3. Cloud Computing
As cloud technology grows and becomes increasingly sophisticated, its function in the financial sector also changes.
DBS Bank, which is South-East Asia’s largest bank, is a good example.
The bank has shifted nearly 50% of its entire compute workload to the cloud.
The moving of essential systems to the cloud is partially spearheaded by technology giants like Facebook, Amazon, Google, and Alibaba.
These entities among many others have come up with proprietary cloud assets featuring application offerings, infrastructure, and databases, which are available on an “as-a-service” basis.
Availability and performance service level agreements, especially for such cloud provisions currently outdo those from on-premise solutions.