Technological advancements in finance are seeking to disrupt the way in which their businesses function. The diversity, or the sky-high valuations, of “fintech” innovation seem to be never ending. Peer-to-peer lenders, crowdfunding platforms, bitcoin, mobile payments, robo-advisers are some common innovations.
For years now, banks and insurers have utilized highly profitable but relatively static business models. However, today they find themselves challenged on all sides by technological innovations.
Like they say in investing, “past performance is not an indicator of future success”. The same may be true for insurers’ and banks’ record of besting technological advancements.
In a recent survey conducted by Statista, approximately 70 percent of senior banking executives said that collaborating with Fintechs and Bigtechs to create a new service was an important opportunity for banks.
Here are a few ways modern technological innovations are streamlining operations for the banking and finance sector.
1) Furnishing an Exceptional Customer Experience By Embracing Tech Advancements
Today’s consumers are highly tech-savvy. Social networks such as Facebook, Instagram, LinkedIn and public forums such as Quora influence their choices and decisions.
These platforms, and others like them, have set exceptionally high standards around digital customer experiences and how finances can be kept safe online. Consumers today expect ultra-responsive service in their interactions, both inside and outside the digital world.
Three in five Americans now use mobile banking, with 83% logging in at least once a week. The younger generation today tends to be more inclined towards digital solutions. Technological innovations in finance need to step up to meet this expectation. The demand for mobile banking is only going to grow as the years unfold.
Banks and lenders that are willing to survive in this highly competitive landscape need to look to leveraging mobile solutions. For instance, getting a mobile app developed for your organization boosts customer engagement like nothing else does. Since app development costs greatly vary across different US states, custom app development can be an economic and highly effective option.
Customers expect to be able to do more and more things online. With focus on user experience, the bar for banking apps remains high. This will continue to raise the bar for banking apps. It is mission-critical for banks to continue investing and innovating in their mobile tech.
2) Deployment of Highly Targeted Services and Products With Innovative Technologies
Today’s technological advancements are specifically aimed at targeting the intersection between areas of high profitability for incumbents and high frustration for customers. This allows them to “skim the cream” by chipping away at incumbents’ most valuable offerings.
It is hard to think of a better example of this than remittance. Banks have traditionally charged very high fees for cross-border money transfers and offered a poor customer experience. Historically transfers end up taking up to five days to arrive at their destination.
Banking organizations that have embraced state-of-the-art technology are now challenging these old protocols. They aim at furnishing an innovative network of bank accounts. A user-friendly web interface can make international transfers easier, faster, and more friendly on the pocket. This has had a positive impact on these organizations’ overall ROI (return on investment) and improved their customer satisfaction rates by a considerable margin.
3) Tech-Driven Automating and Commoditizing of High-Margin Processes
Automation is one technology that is cutting-edge in the world of business and finance at present. By automating manual processes that are highly resource intensive for established players, advanced services and personalization are now being offered to whole new groups of customers that were once reserved for the elite.
Robo-advisers have automated an entire suite of wealth management services including investment advice, asset allocation, and even complicated tax minimization strategies for customers through means of an online portal. While customers must be ready to renounce the in-person attention of a dedicated adviser, they receive many of these services without needing to have the $100,000 in investable assets typically required and at a fraction of the cost.
As a result, a whole new class of younger adults with comparatively less assets are receiving the necessary support and advice in their efforts to manage wealth, and it is difficult to comprehend if they will ever have the desire to switch to a traditional wealth adviser, even as their investments grow to the point where they become eligible for one.
4) Leveraging Technological Innovations For Enabling Strategic and Highly-Effective Use of Data
Customer data has always been the key to efficient decision-making for financial institutions. Bankers make lending decisions based on an individual’s credit score. Insurers might require a health check or look at his/her driving record before issuing a policy.
As people and their devices become more interconnected, new streams of real-time, granular data are appearing. Technologies that leverage data to support decision-making is also emerging. This has been one of the most important strategies to protect small businesses.
For example, FriendlyScore, an Account Information Service Provider (AISP) and analytical software company offering in-house credit risk solutions for retail and business, conducts in-depth analyses of people’s social networking patterns to provide an additional layer of data for lenders trying to analyze the credit-worthiness of a borrower.
Meanwhile, a new breed of insurance companies is identifying ways to generate streams of data. This can help them make better pricing decisions and encourage their policy-holders to make smart decisions.
Oscar, a US-based health insurer, provides its clients with a wearable fitness tracker free of charge. This lets Oscar see which policy-holders prefer the couch to the gym. This also enables them to provide monetary incentives (like premium rebates) to encourage customers to hit the treadmill.
As the sophistication of these analytic models and wearable devices improves, we will likely see more and more financial services companies working to nudge their customers towards better behavior and more prudent risk management.
With our move towards a digitized world, the risk businesses are exposed to are also increasing. Cyber insurance mitigates the risk and helps businesses safeguard against potential security breaches.
Fintech technologies like Blockchain, Machine Learning, Internet of Things (IoT), etc. are also making their impact felt in the finance sector. They are bringing about transformations that will revolutionize the entire industry for a long time.
With modern technological solutions rapidly transcending toward innovation right now, the future of banking sure as hell looks bright!