Consumer Demand Driving Advancements in Financial Services
Technology-driven solutions have transformed banking and finance over the past few years. Post-recession demand from consumers for greater transparency, mobility and digital connectivity has driven advancements, but risk management, compliance and cost optimization remain top concerns for today’s banks. Modern fintech initiatives are challenged to balance innovation with security and costs while delivering high performance products and services. Together, these new advances must create a greater customer experience that helps retain and increase customer acquisition across channels.
Experts project that financial services will continue to lead industry spending on IT products and services through 2020 as firms invest in technology to advance their digital transformation efforts. Recent developments include:
Updated Banking Infrastructure
10x Future Technologies, a startup founded by the ex-CEO of Barclays, has recently received attention for its ground-up platform that utilizes encryption and machine learning to help big banks manage data and transactions. 10x seeks to provide a platform that can help banks gain active insights and plan new services while offering much-needed security and analytics updates.
While many banks have expressed interest in or have started the process of updating legacy infrastructure, the reality is that the time and cost required to modernize has historically been a challenge. New banks are banks being built from the ground up with a modern tech stack.
“Banks [with legacy technology] are at a competitive disadvantage, with fintech elements a reality at every stage of financial services today,” said Jonathan Larsen, CIO at 10x investor Ping An Insurance told TechCrunch. “Banks — even large and world-class financial institutions — have to adapt quickly or risk becoming less relevant.”
Chinese Investment in FinTech
Investment in China’s fintech market is heating up. According to TechCrunch, total investment in fintech ventures — technology used to support or enable banking and financial services — based in China and Hong Kong totaled $10.2 billion in 2016, exceeding North American investment by approximately $1 billion. Demand from consumers in China, which is the fastest-growing major economy, is driving this investment, with about 40 percent of consumers in China making payments and 14 percent having borrowed money online.
Use of AI for Fraud Detection
As the impact of artificial intelligence continues to grow in the corporate world, so too has interest in how it can be applied in banking and finance. Potential benefits include quicker and more intelligent decision making, deeper insights and earlier detection of market issues. One example is Denmark’s Danske Bank, which recently announced a new AI-powered fraud detection platform that uses machine learning to analyze and score online transactions and provide real-time feedback regarding potentially fraudulent activity. By utilizing AI in its banking system, the bank has already reduced false positives by 50 percent. Fraud cases are rare, but the AI platform has also allowed Danske to increase the rate of detection by about 60 percent.
Strides Toward Closing the Banking Gap
About two billion people around the world do not have access to banking services, according to the World Bank, and new fintech companies are working to help make this population more “bankable.” Approaches include tapping into alternative data such as overseas credit reports and mobile wallet data, to better assess risk
By applying innovative tech solutions to existing concerns and issues in the industry, the financial services sector is continuing to evolve and address the needs of today’s consumers.