Transactions that once took days to process can now be completed in a matter of seconds. Fraud detection once was an insurmountable task, now it can be picked up by a machine by analysing patterns. All of this, and more, is possible thanks to the advancements and integration of technology within the financial services industry.
Keep on reading to explore the benefits, challenges, and ethical dilemmas new technology poses in financial services, and what the future relationship between tech and personnel will look like.
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In an age defined by technological disruption, few sectors have undergone a transformation as profound as the financial industry. Gone are the days of long queues and cumbersome paperwork at traditional brick-and-mortar banks. Instead, today's consumers wield the power of technology in the palm of their hands, conducting financial activities with unprecedented ease and convenience.
Customers now have the freedom to manage their accounts, transfer funds, and even apply for loans from the comfort of their own homes, using nothing more than a computer or smartphone.
But the impact of technology on the financial sector extends far beyond traditional banking. By leveraging technology in clever ways, fintech companies have redefined the very nature of financial services. With their agility and forward-thinking approach, fintechs have become vanguards of progress, capitalising on the strengths of tech to deliver faster, more tailored solutions that meet the evolving needs of consumers.
At its core, the marriage of technology and finance has brought around an era of unprecedented efficiency and accuracy.
Technology has given rise to a myriad of trends within the financial industry, from the emergence of embedded finance to the growing popularity of digital currency payments.
One of the most prominent trends is the development of blockchain technology, initially synonymous with the rise of cryptocurrencies like Bitcoin. By leveraging decentralised ledgers, blockchain promises lower costs, faster transactions, and enhanced transparency – potentially reshaping both financial institutions and the financial industry. The technology behind blockchain has been the focus of fintech developers for some time now, however, there’s still isn’t a viable solution for the financial sector, making its widespread adoption challenging.
Buzzwords are everywhere in the world of finance nowadays, but Artificial Intelligence (AI) is one we can’t escape. AI has swiftly expanded beyond stock markets, empowering financial firms to streamline processes, automate tasks, and bolster customer service.
According to Statista, 43% of global financial services providers experienced operational efficiencies in 2023 thanks to the deployment of AI technology, while 42% felt it provided their business a competitive advantage.
As the financial ecosystem expands, collaboration has become equally important and complex. Cloud-based collaboration has shattered traditional physical barriers, enabling seamless cross-functional alignment within teams and the wider industry. By providing real-time access to financial data and insights, the cloud fosters collaboration across global teams and entities, promoting a holistic understanding of the financial health or organisations and the wider market.
Finally, the emergence of Large Language Models (LLMs) has shown potential to improve efficiency and safety in the finance sector by detecting fraud, generating financial insights and automating customer service. Because LLMs can quickly analyse large amounts of data and generate coherent text, there is a growing acceptance of their capabilities to improve services across a range of use cases in financial services including banking, insurance, and financial planning.
These trends represent not just incremental changes, but rather a thorough overhaul of the landscape of finance as we know it. As we observe the evolution of finance, one thing is abundantly clear: technology will continue to be the driving force behind innovation and progress. For consumers and businesses alike, that promises a future that is faster, more efficient, and more accessible than ever before.
For banks and financial services providers alike, the benefits of integrating technology are manifold. Embracing technology facilitates more efficient processes, enhancing both the customer experience and internal operations. For instance, by leveraging cutting-edge tech like chatbots and AI, players in the financial industry can streamline customer interactions and improve the service quality, propelling the overall business performance to new heights.
Timely fraud detection is critical in an industry fraught with security concerns. By harnessing AI's machine learning prowess, natural language recognition, and pattern identification, businesses can swiftly identify and thwart fraudulent activities, safeguarding assets and fostering trust among consumers. The efficiency and reliability of AI-driven fraud detection capabilities not only fortify security measures but also yield substantial savings in time and resources, essential for sustaining competitiveness in today's dynamic financial landscape.
Research by The Economist Intelligence Unit reveals that over 57% of global banks utilise AI for fraud detection purposes, and more than 53% to optimise operations.
The increased usage of technology, by financial services providers and consumers alike, supplies vast troves of data – the complexity is in the analysis. AI systems are a strong tool that facilitates financial data analysis, empowering professionals to derive actionable insights data in real-time. This allows investors, advisors, and financial personnel to make informed decisions with confidence. What’s more, this capability not only enhances strategic decision-making, but also lays the groundwork for advanced machine learning algorithms to further optimise financial processes and outcomes for the end user.
Lastly, automation liberates professionals from routine tasks and enables them to focus on more strategic functions. By automating tedious processes, technology enhances productivity, while minimising the risk of costly human errors, ensuring greater accuracy and efficiency across operations.
As the integration of technology increase, the financial services sector grapples with unprecedented challenges and ethical dilemmas. Foremost among these challenges is the implementation of robust cyber security measures to safeguard sensitive financial data. While technology offers unparalleled efficiency, its susceptibility to cyber-attacks highlights the critical need for human oversight to mitigate risks and ensure data integrity.
While advancements in technology have revolutionised the industry by enhancing efficiency, data analysis, and customer experiences, the human touch remains essential. Automated systems excel at processing data and reducing costs, but humans will always have an edge, being able to offer personalised advice, empathy, and emotional intelligence critical for building trust and addressing complex client needs.
I’m certain that AI will very soon be capable of all those things and will mimic what we do as humans to achieve the right result, but human touch will always remain relevant, especially when it comes to building partnerships. Human judgement and interpersonal skills remain crucial for decision-making, customer relationships, and ethical considerations.
Artur Palka
Partnerships Director, Edenred Payment Solutions
Operational challenges further compound the complexities of the digital transformation of this sector. As businesses navigate the integration of disparate systems and tools, collaborating in real-time and sharing up-to-date data become daring tasks requiring collective efforts to centralise data.
Since its rise, the implementation of AI has often been criticised due to ethical considerations surrounding its bias, discrimination, and misuse, highlighting the delicate balance between tech advancements and safeguarding individual rights. As regulatory frameworks evolve to address these concerns, organisations must focus their efforts on ensuring AI innovations are tempered with robust data protection measures, preserving privacy rights, and fostering ethical AI practices.
The adoption of advanced technology is not only challenging for individual players. Indeed, systemic issues that could affect the wider industry loom large - AI-driven innovations pose potential threats to market stability and employment dynamics. The complex nature of AI systems, coupled with their integration into critical financial processes, necessitates vigilant risk management at organisational level, supported by the industry regulatory oversight to pre-empt and mitigate risks that could affect the industry long-term stability.
Ensuring the efficient, yet controlled, use of technology within the financial services industry calls for a multifaceted approach that acknowledges the evolving role and responsibilities of financial professionals.
With modern tech increasingly integrated into finance, professionals are transitioning from routine operational tasks to more strategic roles. However, ongoing skill development and adaptability are paramount, as the rapid advancement of tech demands a deep understanding of both finance and modern technologies.
The advancements in tech will be unrecognisable in a lifetime, but human interaction is highly important in tech companies. People forget what has been said or done, but will remember how you made them feel, and that goes hand in hand with why people do business with people they like.
Nicky Scarr
Head of Service Delivery, Edenred Payment Solutions
While technology offers unprecedented data processing and analysis capabilities, the ‘human-in-the-loop’ approach remains indispensable. This approach emphasises the importance of human oversight and intervention in critical decision-making processes. Despite technology efficiency, human judgement and expertise are essential for interpreting insights, especially in nuanced financial contexts.
The optimal approach often involves a synergy between tech and human expertise, leveraging the strengths of each to improve service quality and innovation. Striking a harmonious balance between technological innovation and human interaction is key for financial services firms to deliver tailored, comprehensive services that cater to diverse client requirements, while remaining competitive in an ever-evolving landscape.
Artur Palka
Partnerships Director, Edenred Payment Solutions
By maintaining the balance between leveraging tech capabilities and human oversight, organisations can mitigate risks, ensure compliance, and make ethically sound decisions. Fostering a culture that values the balance between technology and human expertise is crucial for navigating the complexities of the modern financial landscape and its future.
Having the people with the right attitude, and focus on the end user, is still a critical factor to success. The human approach creates that feeling of being safe, something essential for people working within the company, but also when passed on to businesses we work with.
Companies need to be professional, knowledgeable, and credible with the right skills and services. But more often a decision isn’t made on price alone, but the feeling you have about doing business with that organisation, which comes from the interactions you have with them.
When bringing people into my team, who will work with our clients, I look for a positive attitude, the ability to easily communicate and learn. I want team members to give me that positive feeling they want to keep our clients safe and well-looked after.
Nicky Scarr
Head of Service Delivery, Edenred Payment Solutions
The integration of innovative technology in the financial services industry presents equally critical benefits and challenges. From enhanced operational efficiency and improved customer experiences, to heightened cyber security risks and regulatory complexities, the ecosystem powered by technology is rapidly evolving.
While innovations offer unprecedented efficiency and data processing capabilities, the nuanced judgment and emotional intelligence of human professionals remain irreplaceable. The future of finance lies not in choosing one over the other, but in fostering a relationship where technology amplifies human potential, and human insight guides technological application.
This balance ensures that the financial services industry can leverage the strengths of both worlds, providing sophisticated, personalised client experiences while maintaining the ethical and empathetic compass that only humans can provide.
David Mason
Product Deliver Manager, Edenred Payment Solutions
Leveraging innovations like artificial intelligence, blockchain, and big data analytics promises to shape the future of the industry. However, prudent navigation of the associated hurdles is crucial for sustainable success. Ultimately, deploying technology with a strategic approach and human oversight will empower financial institutions to unlock new opportunities and thrive in the digital era.