The digital transformation of the financial services: what to expect in 2018
By Jim Schulenberg, Market Development Executive, financial Services, DMI
2017 saw many functions within the finance industry being transformed by the power of technology. In the next year we expect to see widespread digitalisation of financial services, so much so that organisations failing to keep pace will be left behind. This transformation will see the replacement of legacy processes with automated digital processes enabled by the cloud. Because of this, issues with data analysis, transaction security, and scalability will all be removed. Here are our top five predictions for the year ahead:
- The continued digitalisation of financial services
A survey conducted by bankrate.com last year reported that 40% of Americans had not visited the bank in the last six months, falling in line with the general trend that less and less people visit the bank. Banks across developed regions will continue to catch onto this insight and use it as an opportunity to go digital. Therefore, we are going to see a change in existing physical infrastructures and legacy delivery options across geographies as the financial industry goes digital.
The elimination of physical banking infrastructures has a wealth of benefits for its various stakeholders. For providers, it drastically reduces outgoing costs, removing the need to fund the upkeep of physical branches. Consequently, this has provided an inviting space for start-ups, with a more equal playing field. As well as this, the digitalisation of the industry has also provided a platform for the fintech industry to continue to grow as more technical solutions become available and needed.
This year, we can expect to see more financial services relieving themselves of real estate, eliminating their computing liability and moving to the cloud and other digital services to simplify banking and improve engagement with their modern customers.
- The adoption of blockchain for transaction services
The technology behind bitcoin creates a distributed record of digital events that is shared and reviewed between parties. Blockchain technology creates a database of digitally recorded data that is organised into blocks, which is then stored in a linear chain that is cryptographically hashed.
For the financial services industry, blockchain will become integral for transactions both within and between enterprises. This technology will enable all transactions to be recorded and traced and will provide the customer with a digital log of previous payments, receipts, timestamps, warranties, and contracts. This provides a much cheaper and more efficient way of tracing all interactions, whether that be B2B or between banks and customers.
- Increased use of customer intelligence technology
Customers will increasingly expect their financial providers to understand their needs and preferences. Providers that fail to do this, will lose valuable customers. For example, banks that recognise language preference at ATM’s or on their online interface will stand out and raise customer expectations. It is because of this that we can expect to see more companies using technology specifically focused on actionable insights. Central to this is the technology behind data analytics, allowing the financial industry to better understand their customers and employees. Data analytics will enable businesses to store useful information on customer activities across all channels. Because of this, customer intelligence is going to be the most important predictor for revenue growth and profitability
- The localisation of services through robotics and Artificial Intelligence (AI)While a small handful of financial institutions recognised the value of AI technology and invested early, the majority are now catching on. Through the advances made by big data analytics, opensource software, cloud computing and fast processing speeds, customers regularly come face to face with AI, whether it’s through online banking or the investment banking system.
Through AI technology and robotics, banks will be able to automate various tasks at much lower costs. Previous tasks conducted by people, can now easily be carried out through robotics and AI, often at higher quality and lower cost. This change is going to have a knock on effect on outsource financial centres around the world.
- Necessary Improvements in cyber security
The media is constantly picking up on security breaches across industries and the finance industry is no exception. The barrier for hackers is currently relatively low, with organisations taking up to nine months before they realise they have been breached. As cyber security becomes a growing concern for both customers and providers we can expect this to be top of the agenda for financial institutions this year. Blockchain technology will have a major role to play in safeguarding against hackers and improving security as it extends security levels beyond two factor authentication.
For the financial services industry, technology will continue to offer new ways to digitally spend, manage, invest, and protect money and investments. This transformation is forcing the entire industry to rethink how it operates and the services it provides. The implications for the financial services industry are massive—and the opportunity to act or react is now, if not yesterday.
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