Meet Cleo and Erica - top financial assistants that never sleep. Erica is a thoughtful Bank of America representative who gives information about transaction history, cash flow, and actually about anything connected with your bank account in a polite and professional way. Cleo, on the contrary, is a friendly advisor who can prevent you from going on a spending spree with $100 on your bank account. They are not just regular assistants who can help a limited number of people a day. They can process hundreds and thousands of requests a day in and day out. They are robots. Financial institutions and banks all over the world are deploying these kinds of new financial technology trends to meet the future that is impending with great speed. In today’s blog, we’ll discuss top finance industry trends which are a Holy Grail of successful BFS companies.
Fintech Trends that are Going to Dominate in Banking and Financial Services in 2021 and Beyond
Trend 1: Internet of Things
A special place among financial industry trends has been taken by a giant system of the Internet of Things. According to the analytics, the IoT market has experienced rapid unexpected growth, reaching $151 billion in 2018, and is foreseen to grow to $1,567 billion by 2025. Such rising popularity is driven by the ability of IoT devices to collect and analyze massive amounts of customer data. Through processing this data, banks and financial institutions can reduce NPAs, prevent frauds, increase operational efficiency, and completely redefine the customer experience.
Mastercard has used the technology to build strategic partnerships with market-leading companies such as General Motors, Samsung, and Coin. The purpose of these partnerships lies in the willingness to streamline some of the everyday activities. For instance, Samsung’s smart refrigerators have an in-built functionality through which you can order groceries. Customers can shop and select needed items, add them to the cart and then have them approved by a 4-digit pin and paid for in a single checkout experience. The groceries are delivered to the customer’s home directly by the store, completely redefining the grocery shopping experience.
Trend 2: Open Banking
In 2015 the EU adopted the second edition of the Payment Services Directive. Since then open banking has become one of the most desired financial technology trends. The Directive aims at regulation of online banking and payments within the EU and establishment of uniform rules for payments and transfers. According to PSD2, banks are to open access to their systems, giving their APIs to non-bank third parties for those to integrate their services to create a faster, safer, and more enhanced customer experience.The exposure of APIs to third-party developers obliges banks to more speedily innovate to meet the expectations of their customers and remain relevant in the digital economy. In return, they get a chance to monetize existing assets, enlarge new revenue streams, and become players in a large, interdependent ecosystem. According to Accenture, 90% of financial chairmen believe that open banking can increase organic growth by 10%. Customers also receive great freedom as they have the whole scope of financial services available for them. A good example is DBS in Singapore. They have recently set up an API developer portal that gives their customers access to more than 150 services such as money transfers, rewards systems, deposits, and many more.
Trend 3: Robotic Process Automation
RPA is one of the most commonly applied Fintech industry trends. Robots significantly improve customer experience, eliminate repetition, and reduce expenses. Compared to the salary of the in-house full-time employee, robot software “charges” employers nine times less not to mention expenses for company perks, vacations, sick leaves, etc. The quality of data processed and provided equals 99,5% accuracy almost eliminating the possibility of errors. They are much faster than humans due to automation of a big part of standard task performance. According to research, companies that apply robotic technologies for banking services gained an ROI of 40-100% during 3-8 months in 2020.
The aforementioned Erica, a Bank of America’s chatbot has a highly advanced feature set deeply integrated with other financial technologies and users’ bank accounts. Therefore, it doesn’t behave like a usual chatbot that is able to play out only a pre-programmed scenario, vice versa, Erica uses machine learning, cognitive messages, and advanced analytics so that to adapt to every conversation with a bank’s customer. The chatbot can remind users to pay the bills, show transaction history, upcoming bills, and even monitor recurring payments.
Trend 4: Extended Application of Artificial Intelligence
Artificial Intelligence technologies have become a key part of finance trends and banks have no other choice except to implement AI in order not to run a race with a wooden leg. The technology allows banks to meet the demands of the customers who are looking for smarter, safer, and more convenient ways to access and manage their money. There are countless ways of AI implementation in the financial sector. Most of us have already been actively using some features that rely on AI solutions such as chatbots, biometric authentication, and authorization, voice banking, etc. AI also helps banks to improve various daily processes such as reporting, data extraction, document classification, credit scoring, and many others that also have both direct and indirect impact on customer satisfaction. AI improves compliance monitoring processes, timely identifies potential fraud or money laundering transactions, and prevents banks from cyber attacks.
Undoubtedly, AI application in banking is not limited only by those use cases, there are a lot more areas where AI solutions may improve efficiency and create new opportunities.
Trend 5: RegTech
Regulatory management is one of the emerging trends in banking sector that aims at restricting fraudulent activities with the help of machine learning algorithms produced on the basis of big data. The evolution of digital solutions is followed by an increasing number of data breaches, cyber attacks, and money laundering. ID Theft Resource Center states that in the period between January 2005 and May 2020 there were 11,762 data breaches. Therefore, the technology has become actively used in the financial sector for regulatory monitoring, reporting, and compliance.
A Canadian startup Mind Bridge leverages Artificial Intelligence and Machine learning to build a data analytics platform for auditing. The platform integrates accounting data and domain expertise to find mistakes and detect possible risks. With the help of the startup, companies can have the entire set of their clients’ data analyzed and get a summary of possible risks and ways to omit them.