An important thing about successful entrepreneurship is an ability to foresee the future and respond – quickly and intelligently – to the rapidly changing external environment. A number of companies have fallen from heights because they failed to foresee how evolving technologies would render them obsolete if they failed to act in time. The Fortune Magazine published its first list of 500 largest corporations in 1955. Many of these companies, hugely successful at some point, do not appear on the list today. While many succumbed to the changing business dynamics, a few of those left exist as shadows of their former glory. Hindsight tells us that most of these companies focused too much on the present, failing to anticipate customers’ future needs, which are largely driven by innovations brought about by technologies. While the signs of imminent shift are always there for everyone to see, only those who take cognizance of these signs and act in time succeed.
No other business has been more impacted by the breakthroughs in technology than financial services. There has been a massive growth in the adoption of mobile and online banking in the last couple of years and newer technology trends in mobile and computing technologies continue to shape the financial services sector like never before. Almost every product or service offered by financial institutions today is enabled by technology. These tech-enabled product/services in the financial sector provide a great customer experience and ensure survival and growth of the companies. As a stakeholder of a sector so crucial, here are some key trends that we feel will determine in the way the financial sector evolves in the coming years.
Data to Dominate
In the digital era, data is one of the most valuable resources for industries. In fact, some of the world’s largest global corporations such as Google and Amazon are built on the customer insights gained through use of information technology. Access to quality data and ability to extract insights out of that will be key to success in financial services. With more and more data generated almost every passing moment, and new more powerful tools available, data will be increasingly used to expedite operations and technology processes. Players in the financial services sector generate a tremendous amount of customer insight data that has the potential to drive real value for stakeholders, by allowing banks to better understand their needs.
Blockchain to go Mainstream
Blockchain – a decentralized, distributed, ledger that started with bitcoin – removes conflicts by being independent of individual participants. A number of startups in the financial services sector have started applying this temper-proof and transparent technology that records financial transactions between two parties in an efficient and verifiable way, to develop new, decentralized business models that have potential to be the next big thing in business. Not restricted to financial services, the Blockchain has numerous potential applications in government, healthcare, supply chain etc., making it increasingly universal. With real use cases, we strongly feel that the distributed ledger technology will be the mainstream in the next couple of years.
Artificial Intelligence (AI) to Become Natural Choice
Artificial Intelligence and Machine Learning (ML) allow computers to learn, without any specific programmed commands “instructing” them how to operate. AI/ML enable computers to alter their programming on their own and respond differently on the basis of newly-available information. Today, almost every company in the financial sector is using AI/ML to reduce costs, save time, add value and enhance customer experience. For businesses, AI powers two key use cases that will make AI/ML technology more mainstream – Natural Language Processing (NLP) and the Big Data. Financial firms have begun building interfaces such as NLPpowered Chatbots / RoboAdvisors that analyze and understand how customers spend, invest, and make financial decisions, so they can offer customized investment advice to their customers. As voice recognition technology improves, virtual assistants will become increasingly useful. AI/ML also allows software programs to analyze large sets of unstructured data. In fact, ML-powered mining of data (Big Data) allows users to draw valuable insights from much larger sets of data than were previously accessible. We feel that Big Data could potentially help financial sector is by improving fraud detection and compliance.
Fintech to drive Financial Inclusion
With the wider spread of internet enabled devices such as mobile phones/Tablets, consumers are not only moving toward mobile banking, but also toward completely new ways of spending and managing their money. Technology-driven specialized boutique financial services firms, popularly known as financial technology, or FinTech firms, are outcomes of innovative applications of software and digital platforms that deliver financial services to consumers much more efficiently and cost effectively than traditional banks and they are much easier to use. Today, Fintech firms are offering consumers more choice and freedom, access to investments, refinancing, borrowing or transferring money across borders. Fintech have huge potential in the context of financial inclusion, a key enabler to reducing poverty and boosting prosperity. Globally, around 2 billion people still don’t have access to formal financial services and more than 50% of adults in the poorest households are still unbanked. With its low entry-barriers and huge impact, Fintech have potential to accelerate the process of Financial Inclusion like n ever seen in the history.
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