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 the financial services sector will spend over $300 billion on IT products and services through 2020 as firms invest in technology to advance their digital transformation efforts. Recent developments include:
More Competition From Legacy Companies
Legacy financial companies are finally starting to realize the value of investing in fintech. In the first month of 2020, Visa purchased Plaid, a company that provides a data transfer network for powering fintech and digital finance products, for $5.3 billion. Other large financial brands that have acquired smaller fintech companies include Paypal’s acquisition of Honey for $4 billion and Charles Schwab’s acquisition of TD Ameritrade for $26 billion.
In 2020, customers expect better digital experiences from their financial providers. While many already established financial services companies 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 financial institutions are being built from the ground up with a modern tech stack.
“What’s exciting is that we can take the functionality Honey now offers — which is product discovery, price tracking, offers and loyalty — and build that into the PayPal and Venmo experiences,” PayPal SVP of Global Consumer Products and Technology John Kunze told TechCrunch.
Use of AI
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.
In 2020, AI will continue to improve the customer experience in financial services. According to Business Insider, the aggregate potential cost savings for banks from AI applications is estimated at $447 billion by 2023, and 75% of respondents at banks with over $100 billion in assets say they’re currently implementing AI strategies.
AI allows financial institutions to provide a 24/7 customer experience. Uses of AI by financial institutions range from fraud detection services, chatbots and cybersecurity.
Citi has recently implemented virtual agents in its call centers, in a move to provide quicker service to more of their customers. “Our intent is to try to handle the more routine calls that cardholders and our corporate clients are telling us they want serviced as quickly as possible so that we could let the live agents handle the more complex questions,” Gonca Latif-Schmitt, the bank’s global head of commercial cards, told American Banker.
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 apps such as SadaPay in Pakistan, which is a digital mobile wallet in the Mastercard network, that allows customers to open an account on their phones by uploading a selfie and a picture of their CNIC and quickly start spending.
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.
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