Professor LC Megginson, lecturer at Louisiana State University, in a journal article reflecting on Charles Darwin, commented: “It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”
It’s highly unlikely that any financial services business owner, banking executive or anyone operating in financial markets, or within any industry for that matter, would not relate to this statement.
Businesses need to continuously adapt not only to respond to new customer behaviours and demands, but also to the myriad of ever-evolving technologies being released to meet them.
Many issues, outside of customer expectations, are driving adaptability in the financial sector, including, but not limited to, ever-tightening regulatory compliance mandates, the emergence of new competitors, disruptors in the market, and more.
It is undeniable that the future of financial services and banking will be very different going forward. New technologies, such as application programming interfaces and platforms − for example, Open Banking − are transforming the sector, and these in turn are providing opportunities and challenges for financial institutions.
The financial sector is challenged on various fronts, including the constant drive to develop new revenue streams, the need to ensure fulfilment of customer demands, providing more customer value at lower costs, plus the security issues that accompany compliance.
Fintech organisations are generally dynamic and agile – they must be if they are to compete and survive in a customer-centric economy. Providing seamless financial services has never been more crucial.
Technology is the key driving force that enables financial businesses to deliver unsurpassed services, and new experiences to reimagine customer expectations. In the era of digital transformation where everything happens at the click, swipe or tap of a button, customers increasingly want more.
Fintech organisations are generally dynamic and agile – they must be if they are to compete and survive in a customer-centric economy.
PwC’s paper on Financial Services Technology 2020 and beyond notes fintech will drive the new business model in the sector. The paper predicts a myriad of scenarios in the not-too-distant future where banks are competing with global, multi-service, low-cost, digital banks, and trying to satisfy customers who can access their accounts from anywhere, at any time, on any device.
It is even possible now for them to pay with a tap on their wearables and sweep savings to an Exchange Traded Fund portfolio (designed by an artificial intelligence (AI) engine based on their savings goals and risk profile). These disruptive banking offerings provide no-fee, cross-border payments and more.
These disruptors are said to have a low and nimble footprint, prototyping new services quickly, managing regulatory compliance transparently, using an AI system to limit fraud losses, and hedging currency risk using crypto-currencies. Some of the foregoing is already in place, specifically on the consumer front. Other aspects are not yet readily available but are on the horizon for the very near future.
The pace of change
This is exponential. Financial institutions are looking to IT organisations to do more to ensure they are well-positioned to succeed in the future.
The PwC report cites several fintech technologies that are destined to drive a new business model:
- The sharing economy will be embedded in every part of the financial system.
- Blockchain will shake things up.
- Digital becomes mainstream.
- ‘Customer intelligence’ will be the most important predictor of revenue growth and profitability.
- Advances in robotics and AI will start a wave of ‘re-shoring’ and localisation.
- The public cloud will become the dominant infrastructure model.
- Cyber security will be one of the top risks facing financial institutions.
- Regulators will turn to technology also.
It would make sense to include ‘automation’ to the above list. Automation software powers intelligent business decisions and choices, and industry players endorse this.
Decision-making support systems are not the same thing as automation where the software can make decisions based on pre-determined logic, instead of just offering information to humans who then make the decisions.
AI is already established in the accounting arena and is a driver of change in the profession. Accounting firms are scrambling to adopt AI technologies to stay competitive. The global Big Four public accounting firms (PwC, Deloitte, KPMG, Ernst & Young) have adopted AI technologies in their services and products.
AI is very much a part of our reality in today’s world where we often interact with it unknowingly and daily from Google search engines, e-commerce shopping predictions, smartphones, Alexa and Siri, etc.
It is also changing the way in which we work. Deloitte recently noted: “AI technology will exert an enormous impact on economic development and the nature of work. It will also radically reshape the competitive dynamics of many industries.”
The inherent message to the financial services industry is essentially: don’t get left behind. Adapt, get the right advice, and leverage the power of technology to not only stay on a par with competitors, but rather get ahead of them.
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