By Rohit Bhosale, digital banking specialist, Persistent

This year is bearing witness to financial service providers adopting disruptive technologies to stay ahead and deliver value to customers. The pandemic lead to difficult circumstances for many organisations, with some making the headlines for the wrong reasons, and many struggling due to legacy systems.

That said, others embraced new fintech solutions to reduce complexity and optimise operations. This will only accelerate given the wide range of emerging platforms, and the rate of innovation within this space, which means providers must keep up with the key tech trends driving change this year.

Banking as a Service will proliferate

Organisations will continue to implement technologies that aid in adapting to long-term demands and opportunities, with a key developing trend for the UK and EU being the rise of Banking-as-a-Service (BaaS) platforms. These appeal to digital natives who want banks to offer greater levels of convenience, especially with ongoing fallout from the pandemic.

The BaaS market is looking buoyant, with a forecasted CAGR increase of 15.7%, and forecasted sales to exceed $12.2 billion by 2031. Digital banking solutions are in-demand across a range of sectors and are prominent within small and medium-sized organisations, while larger firms employ similar platforms to boost customer acquisition.

We’re also seeing the integration of other technologies to widen the array of services offered by BaaS solutions, including transactions via mobile, virtual cards, voice enablement, and smart contracts. These will catch on alongside embedded finance options, with market-wide revenue predicted to exceed $7 trillion over the next decade. The increased adoption of BaaS also stands to advance open banking, where finance apps interface with third party APIs, allowing customers to pay from one central interface.

Cloud-based analytics will power hyper-personalisation and drive CX

The financial sector is exceptionally competitive, with providers being challenged to stand out amidst numerous rivals. This is made even more complex given new and unprecedented demands on the part of customers. That means hyper-personalisation will be even more important, but achieving the capacity to act on customer data requires advanced data analytics and cloud technology. Organisations will need to stay ahead of the game by generating better insights and providing access to data in real-time for more agile decision making.

The introduction of hybrid, multi-cloud, and edge services are leading to an increase of distributed infrastructures. Gartner forecasted spending on public cloud services to exceed $480 billion this year, and research from McKinsey shows 70% of financial service providers are looking to deploy hybrid or multi-cloud platforms in coming months to streamline operations and reduce costs.

These infrastructures are already proving useful in combination with AI/ML for hyper-personalisation, with banks like HSBC finding 70% of those receiving tailored emails redeemed their credit card points as intended when conducting a study of 75,000 card holders.

Additional applications include customer service bots learning from conversation data to provide basic support, and automated advice based on analysis of big data so investors can make the right decisions and expand their portfolios. Machine learning technologies are also being deployed for more complex purposes, including prediction of customer behaviours based on purchase data, plus algorithmic trading, fraud detection, and compliance analysis.

Banks will embrace diverse technologies

Providers will be keen to maintain investment in various platforms. Quantum computing is already seeing increased adoption with the need to predict shifts in the market and identify patterns in growing volumes of data. The additional computing capacity will serve to optimise standard finance operations, including trading, asset management, cybersecurity, and transaction speeds. The introduction of 5G networks will also assist by reducing latency and improving real-time data processing for better decisions.

Providers will also enhance their data protection capabilities given the increase in online transactions, and the presence of hackers attempting to find weaknesses within security systems. This includes blockchain solutions featuring secured ledgers, password-free authentication, multi-cloud data storage, and the implementation of secure access service edge (SASE) platforms. 5G will also be useful for accessing a variety of new data signals from devices, which will assist banks when analysing transaction data to detect fraud.

With governments placing emphasis on cybersecurity legislation, we can expect increased implementation of regulatory technology to aid in compliance tasks, automating data analysis and reporting by handling growing volumes of unstructured data.

SMEs will be more relevant than ever

It’s clear that innovations in fintech are advancing at a faster rate, with new and diverse offerings already driving success throughout the sector. However, this technology boom also presents organisations with budgetary challenges, as it’ll be difficult to train staff in an area that’s seeing rapid evolution, while also enabling them to perform daily tasks.

Enter the dedicated SME – technical specialists who are ahead of the curve, tracking developments within fintech before they reach market-level awareness. By consulting these specialists, financial service providers will stand in good stead to adopt the right platforms and increase profitability in the months to come.