4 Tech Trends Powering the Future of Banking and Finance
The banking industry has undergone significant changes in the past few years, and it will continue to do so as the rest of the world embraces digital transformation. To meet the demands of their customers as well as keep up with what their competitors are offering the market, it’s a must for corporate and retail banking institutions to remain up to date with the technologies that are shaping modern finance. This way, they can have a better grasp of their markets’ expectations of them as well as the direction that the industry will take in the coming years. Which current technology trends should financial institutions keep a close eye on? Here are 4 of them:
Leveraging Workflow Automation
Workflow automation is an approach to designing and implementing a sequence of tasks using rules-based logic. Using preset rules, a piece of software can be programmed to execute processes, thus reducing or eliminating the need for human intervention. In an effort to reduce repetitive tasks and streamline their processes, many companies from different industries have started adopting workflow automation in recent years. This option has enabled them to make better use of the specialized skills and nuanced judgment of their human resources.
In the financial sector, workflow automation is being utilized not just to speed up routine document processing but also to improve the efficiency of tedious but essential activities that don’t necessarily bring in income for the company, such as customer due diligence, compliance, and reporting. Such resource-intensive processes are highly customized for each company, so having the option to automate their workflows has enabled financial organizations to save on long-term costs and maximize the productivity of their specialized staff members. Consequently, the breathing room afforded by workflow automation gives banks the space they need to innovate and refocus their efforts on activities that directly impact their bottom line.
The Growing Popularity of Interconnected Commerce Ecosystems
Interbanking used to be an expensive and time-consuming process for consumers, enterprises, and financial services providers alike. There were plenty of factors that affected the time and cost of processing each transaction, and that made it unreliable for many interbank transaction participants.
In the digital age, however, such an issue can be easily resolved through the use of APIs or application programming interfaces. These applications serve as an intermediary between different pieces of software, regardless if the programs that an API services are components of a bank’s internal system or if they’re used by different banking organizations and financial agencies. APIs reduce the complexity and the time and resources needed to process large volumes of transactions that involve a myriad of participants and various payment channels. This, in turn, made interbanking a more affordable and reliable option for buyers and sellers of all sizes.
These days, APIs play a crucial role in uniting the different interfaces that banks use to interact with their customers. These applications enable banks to offer their customers a complete ecosystem of services through mobile applications, websites, and even points of sales. Customers, on the other hand, are able to enjoy continuity of service from their banks regardless of the platform they use to shop, pay for their utilities, or hire services. In fact, many customers now consider it a must for their preferred banks to offer an ecosystem of services and touch point that will enable them to enjoy consistent and customized experiences no matter if they use their phones, laptops, or an ATM to do their banking.
Adoption of Blockchain Technology in Banking
Many consumers have familiarized themselves with blockchain technology through their interest in cryptocurrencies. But for many companies, including those in the financial sector, supporting the existence of digital coins is just one of the many revolutionary capabilities made possible by blockchains.
The term blockchain refers to a system of decentralized ledgers. Because this system of keeping information involves the duplication and distribution of blocks of validated data across an entire network, it’s almost impossible to alter or cheat. In addition to its association with cryptocurrencies, blockchains can also serve as a source of immutable data within financial organizations. Such a system of storing information can help banks ensure the integrity of the information in their systems, especially now when these organizations are processing more transactions and experiencing greater threat from cybercriminals.
At the same time, because blockchains are distributed systems, they enable financial institutions and their corporate clients to bypass traditional banking structures while retaining data integrity. For example, a corporation can use blockchain technology to record its internal transactions, then reconcile this information later on with its corporate banking services provider. This gives corporate banks the opportunity to offer new services to companies that want to streamline their financial recordkeeping processes.
Integration of AI-based Data Management Capabilities
Artificial intelligence is also slowly but surely being utilized in the financial industry. In particular, this technology is being used by corporate and retail banks alike in processing large volumes of information and analyzing transaction details. Human agents often miss details and relationships in huge chunks of data simply due to the sheer volume of information that they have to comb through every day. AI-enabled systems can help bring these hidden connections to light and help analysts see and present a more complete image of the organization’s information to decision-makers. This, in turn, can help executives and C-suites make more nuanced decisions about the direction that the company should take. Among the areas that many banks are eyeing the integration of AI are cash flow forecasting, financial close and ledger processes, enterprise risk management, profitability management, regulatory compliance and reporting, and financial crime compliance management—including cybersecurity and detection of fraud and money laundering.
Keeping up with current trends in banking and finance requires continuous investment in technology. Financial tools and trends are currently changing at a lightning-fast pace, and it’s a must for banks to keep an eye out for the latest innovations to ensure that they can keep pace with the changes in the industry and stay ahead of the competition. These 4 technology trends play a big role in shaping the future of banking, and financial institutions that are making room to accommodate these trends are setting themselves up for success in the digital age.