The financial services sector is in the throes of technological evolution, giving rise to a fully digital ecosystem driven by convenience, personalisation, and security. Looking ahead to the coming year, there are several key technological trends that will continue to shape the way we handle our finances, with the highlights talked about in this article.
Generative AI for Personalised Financial Services
One of the most transformative forces is the rise of artificial intelligence (AI). Imagine a dedicated financial adviser who can monitor each pound you earn or spend that can plan your spending patterns, anticipate future needs, and suggest pragmatic advice on customised investment plans. That’s where generative AI comes in. This type of AI allows consumers to apply intelligent algorithms to process more financial data, resulting in highly customised financial products and suggestions.
The advent of AI-powered chatbots will recast customer service, allowing for real-time conversations while providing data-based financial advice. However, it’s important to consider AI’s ethical standpoint. A biased algorithmic approach can heighten existing discriminatory practices. This is why ethical AI development is critical for establishing responsible AI-based financial services that are accessible fairly and equitably.
Open Banking with AI
The ground is also ripe for further innovation with open banking, which facilitates the secure sharing of financial data between institutions. AI can bring the full force of its data analytics power to bear upon open banking data and convert it into highly valuable insights.
For instance, loan approvals take minutes, not days, and AI-enabled risk assessments can change the entire landscape of our financial institutions. In addition, AI can help banks categorise customers according to their financial behaviour and develop tailored products that ideally suit them personally.
Decentralised Finance (DeFi)
Decentralisation is a concept that is rapidly altering the financial landscape. DeFi, or decentralised finance, is a fairly new concept that refers to systems where financial products are available on public blockchains. It allows customers to make use of services like lending, savings, and trading without the need for typical finance mediators, such as banks. It’s nearly impossible to hack or falsify blockchain technology, as it works on decentralised ledgers. Therefore, it enhances financial security while also allowing for low transaction costs.
However, the technology is in its early stages and therefore, novel. This tech is new for financial institutions and consumers alike, which raises certain questions regarding the potential for DeFi. Over the next several years, we will need to see more collaboration from regulators and DeFi innovators for this space to develop responsibly.
NeoBanks & Digital Banking
NeoBanks, the digital-first banking institutions, are experiencing standout growth. These innovative challenger banks use technology to provide simplified financial services, usually via sleek mobile applications. Customers no longer need to wait in long lines for most of their standard banking services, as NeoBanks offers 24/7 online banking services, from opening accounts to ordering credit cards and making transactions.
By focusing on user experience and competitive prices, these banks are generating a growing customer base, especially millennials and Gen Z. Traditional banks may feel the heat from the rise of NeoBanks, but collaboration seems to be common now among such startups. Such partnerships can capitalise on NeoBanks’ innovative ideas while also deploying tried-and-tested infrastructure that helps both entities and—most importantly—the customer.
Next-Generation Cybersecurity
Within the next 12 months, financial institutions will have to adopt a strong cybersecurity posture due to the ever-increasing risk of cyberattacks. While the industry adapts to new technologies, this creates an expanding attack surface and consequently amplifies financial data as a target for cybercriminals. Hence, the need for next-generation cybersecurity instruments and protocols to protect against such modern cybercrimes has become mandatory.
Banks are now adopting behavioural biometrics, an upgraded authentication technology based on the user’s behaviour pattern. This technology allows customers to easily gain access to their accounts by using a combination of facial recognition and individual typing habits, leading to an even more secure, compliant, yet user-friendly experience. While cybersecurity will always be a cat-and-mouse game, there is a need for continuous investment in security infrastructure to keep up with developing cyber threats.
The Power of Data & Analytics
Data is the new gold in the world of finance and everything else for that matter. Data is the online currency. Advanced analytics are changing the way decisions are made on multiple levels, from risk management to fraud detection. Using complex algorithms, it becomes possible to recognise the pattern that emerges and predict future trends based on the movement of market forces. But the strength of data analytics is counterweighed by the burden of control and governance. Validated data security standards and transparent consent from customers are essential for the responsible collection of big data.
