The rate that technology is progressing in today’s world is astounding. The ways we bank and trade now are very different to how they were just five or 10 years ago. So, if it’s changed drastically for consumers, then how is it affecting those working within the finance sector itself?
Even if you think you already know how technology is making an impact in the world of finance, or you want to find out more about this world, here are a few examples of how developments have been affecting the financial sector. Some of them may just surprise you, too.
Once upon a time, banking took place in the real world: someone would go to a bank to withdraw money, transfer funds, or just sort out their own finances. For this, you’d have to speak to a member of staff to take care of these tasks within a building. However, nowadays, these premises are becoming redundant, as more people complete these tasks on the internet. Online banking is becoming more sophisticated: someone can transfer funds or pay for something simply by clicking a button.
We can now access our bank accounts from our computers, smartphones and tablets. We can even switch banks online and choose from a list of products that meet our requirements. So online banking has had quite an impact in the banking sector, both for customers and those working in this area.
Previously, identifying and investigating fraud used to be partly done by people, and partly machine. A system would help to track what could be potentially fraudulent activity. However, a member of staff who’d be trained to find fraud would then have to look through all of the information available to them – and then determine if there were fraudulent transactions taking place with the account or not.
Yet artificial intelligence is progressing so that it can now be able to detect fraud and identify it. Such systems can track through the victim’s history, then calculate and predict the likelihood of it being fraud based on previous activity. This means investigations can be done much faster.
Although the growth in cloud banking is slow, it is indeed growing. Financial institutions are now adopting cloud banking, and back in 2014, PWC reported that 71% of financial service respondents said they would be investing in cloud-based technology.
There are examples of institutions using this technology already. De Nederlandsche Bank, the national banking regulator in the Netherlands, is already using Amazon Web Services for items such as credit risk analysis, retail banking, website hosting, mobile apps and high-performance computing. Bankinter – the sixth largest bank in Spain – has also moved over to the Amazon cloud system; its risk simulations have gone down from 23 hours to only 20 minutes. Then there’s Dutch bank Robeco Direct, which has shifted its whole retail banking platform to the cloud while dealing with assets in investment funds and mortgages.
Increase of Chief Digital Officers
The need for a CDO has increased since 2005. A chief digital officer is to strategize and monitor other branding in the market and create social solutions for investment clients, among other tasks. They essentially have a look at the digital world and its effect on the finance industry. Someone in a CDO role is typically a professional leader and business builder, with experience in corporate management, and has entrepreneurial qualities to get buy-ins from stakeholders. The finance sector, along with the media, are among the top hirers for CDO roles.
For those looking at similar high-flying financial leadership roles within the finance sector, you could consider finance degrees from institutes such as Suffolk University. Not only will you be able to unlock leadership opportunities, but you could also develop skills that are in demand within the industry.
Some financial technology companies – sometimes known as ‘fintechs’ – are connecting brands directly with individual or institutional investors to raise funds. The companies raising funds are usually start-ups or small-to-medium-sized enterprises (SMEs), where investment is exchanged for equity. However, there are also brands worth billions that are also on such platforms. The staggering rate of growth of these platforms has caught public interest. That’s because equity stakes at private companies that used to be available to only a few wealthy individuals or institutions are now available to the masses.
Some fintechs have acquired banking licenses and rolled out mono-product offers, such as current accounts that come with an all-purpose card. Others are focussing on savings accounts, with higher interest rates than traditional banks. The main attractions include low fees and a friendly user experience. Such banks have rewritten processes and structures as a digital bank. This means they can outmaneuver traditional banks in these digital services.
For this, some fintechs are using a combination of artificial intelligence (AI) and behavioral data. Historical portfolio performance data, a person’s risk appetite, plus other market and economic data are put into the system, and the AI reallocates the fund based on those details. The AI will improve as it continues to learn.
Such fintechs are also playing a role in democratizing wealth management services for people by lowering fees and the minimum balance requirement. Many of their customers are millennials, but they are also starting to attract more mature customers.
Automation and technology offer banks the chance to boost profits. This means many institutions are looking to combine new technologies, such as cloud computing, AI, and even voice recognition, for example, to help provide financial services. Automation should allow such groups to cut costs as a proportion of revenue by 15%, according to a 2017 study. There are also predictions that banks will get better at processing large amounts of data to make lending decisions quickly and to provide more tailored robo-advice to customers.
Although these are just some of the ways that finance has made an impact in this sector, there are many others. No doubt, there will be more to come in the next few years, as technology evolves and innovates.