Financial services involuntarily had to adapt to change recently, as the pandemic forced the need for a new customer demand system. Competition was rising simultaneously with the emergence of data breaches and regulatory compliance in an unprecedented time of history.
Luckily, the digital switch that companies and customers had to make became the norm after the pandemic ended, and we’ve entered a new era of digitalization in banking, insurance, and automation by adopting several new technologies. Artificial Intelligence can be used to predict market movements, gamification supports rewards for user engagement, and blockchain increases interest in new asset classes like the ETH price.
Nevertheless, the dynamic of technology acceptance in financial services was set back as the swift was too sudden. Among the causes might be the lack of consistent digital literacy globally, which is essential in shaping the framework of technologized financial services. Subsequently, companies should expect the following trends to surface across industries in 2024 and beyond.
Generative AI
Generative AI advanced rapidly in the past as different language models were introduced to the technology. Now, it is widely used to depict various concepts as images, audio, or synthetic data. One example of such cutting-edge technology is ChatGPT, the chatbot that generates complex text responses to users’ inquiries.
Generative AI formulates solutions based on massive datasets so it can streamline financial companies by developing forecasts and budgets. According to its predictive models and scenario, AI can provide accurate budget insights for companies to improve efficiency in financial planning.
AI tools can also manage contracts and ensure compliance, which is part of protecting the business from anomalies and fraud. AI models can enhance transaction monitoring and improve financial decision-making to assess safety.
Embedded technology
Embedded systems are devices and technologies focused on specific goals. Examples include fitness trackers, whose object is to measure health activity, such as heart rate and sleep patterns, while industrial robots automate intense production tasks.
In finance, embedded technology has already been introduced through airline credit cards or car rental insurance. Still, as e-commerce is on the rise, it will change banking, payments and lending. Embedded parking ensures fast access to funds for service providers and sellers. Lyft and Shopify introduced these features.
Embedded payments are used by Starbucks, whose app saves credit or debit card information for users to earn points after payment. Finally, embedded lending helps companies increase sales by offering customers favorable loan options. The best example of this technology is the “buy now, pay later” (BNPL) feature that offers timely payment installation without interest.
Cybersecurity
Financial systems are more threatened than ever by cybersecurity issues due to the fast-paced dynamic of technologies. Ransomware, phishing, and social engineering are on the rise since companies in this industry hold valuable customer information, from credit card details to bank account data. Hence, businesses risk experiencing data breaches that end up with reputational damage and legal costs.
The financial sector must be strengthened through solid cybersecurity systems. However, modern solutions are required to withstand the ever-changing hacking systems. For instance, biometrics, such as facial features and fingerprints, provide superior security to payment and identification, as they prevent fraud. Authentication is as important to avoid cyber risks. Still, email encryption is also essential to implement, considering that email is one of the leading causes of data breaches, being the most accessible channel to hack users from.
Climate Technology
Global businesses waste resources that lead to lost profit, whether it’s from e-waste or monetary waste. The financial sector should be able to recover these losses in order to invest in innovative solutions and talented employees, so one way to do it would be to implement climate technology.
Climate technology mitigates climate change in relation to the market impact. For instance, bureaucracy is one of the causes of deforestation since most financial services require paper documents still, although most countries are making efforts to accept digitalization. Herein, the use of technology would help lower carbon emissions and reduce global waste.
Other technology solutions for climate mitigation would include natural capital, renewable energy and sustainable fuels that reduce greenhouse gas emissions and ensure waste is managed better. Generally, a significant percentage of a company’s production is waste, sometimes as high as 5% of the total products. Approaching a sustainable strategy saves profit.
Cloud Computing
Cloud computing ensures innovation by compiling multiple services, such as storage, networking, and software, to increase productivity, speed, and performance. In finance, cloud computing allows PaaS (platform-as-a-service) models to deploy solutions at lower costs rapidly. While most companies use cloud services, not all leverage it for PaaS models.
However, both technologies have significant benefits in the financial sector, from saving costs to enhancing customer personalization. If done right, these models can differentiate companies from their competitors through scalability, automation, and cost savings.
PaaS models work based on cloud infrastructure, software, and a graphic user interface. These features help PaaS tools be integrated into API security, IoT applications, and hybrid cloud.
There are unique PaaS solutions for specific purposes. AIPaaS is specially made for artificial intelligence, including machine learning and speech recognition. iPaaS is made for organizations to connect data and processes, while cPaaS enhances specialized communication hardware and software.
FinTech and the Future of Financials
FinTech, or financial technology, has emerged through automated systems and advanced analytics to mitigate the tech deficit in the industry. The future of FinTech encompasses machine learning and NLP, but also robotics process automation and blockchain. These technologies help improve data analysis and revolutionize financial reporting, supporting companies in increasing their profits and lowering risks.
However, FinTech must overcome current challenges regarding regulatory compliance and data security, considering the dynamics of cybersecurity attacks. The lack of technical expertise globally affects markets’ evolvement, hindering innovation collaborations between overseas companies.
Artificial Intelligence, blockchain, and machine learning are dominators in financial improvement, so marketers and finance experts must learn to rely on these technologies to mitigate anti-money laundering more efficiently and improve risk management. Financial services are all about massive personalization and productivity revenue, so errors must be reduced.
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