Information technology has permanently changed the way we work, and financial services are no different. Financial technology – fintech – has been adopted to describe new tech that seeks to improve and automate financial service use and delivery, particularly to enhance the customer experience.
Financial services and institutions can greatly benefit from new technologies. Chatbots and automation reduce staff hours, improve customer relations, and increase profitability.
The rise and rise of fintech
Recently, IT use in financial services has seen an increase in efficiency and cost reduction. IT departments have taken over many functions traditionally handled by separate departments, such as marketing and customer service, which would previously have held more staff.
Specialized software tools and IT infrastructure in place for fintech have created a huge importance for the use of IT in finance. Finance businesses that implement up-to-date IT systems greatly improve their data storage, file management, and data reporting – as well as that top priority across any IT server, cybersecurity.
The arrival of fintech innovation has greatly affected the way we think about traditional financial services. With the emergence and introduction of new services and features, the financial industry has been able to address its shortcomings.
Three factors are contributing to the success of fintech:
- New tech like AI and cyber defenses have helped fuel innovation into the field.
- Funds that invested in the first generation of companies that tried to capitalize on the 2008 financial crash are reaching the end of their time and getting their affairs in order to return their investors’ funds.
- The macroeconomic situation has deteriorated, slowing funding to younger and newer companies.
Fintech has been utilized to help businesses and organizations manage their operations and processes through specialized software and algorithms; it has more recently broadened its use to cover education, retail banking, fundraising and non-profit.
These innovations have made it possible for financial service providers to offer more tailored solutions to their customers, whether large or small. New fintech branches have also helped drive down costs, which in turn benefits both businesses and consumers alike.
Some of the most active areas of fintech include:
- Cryptocurrency or digital cash
- Smart contracts (using digital tech to automatically execute contracts)
- Open banking, which suggests that third parties should have access to bank data to build apps that create a connected network of financial institutions and third-party providers.
- Robo-advisors that use algorithms to automate investment advice to lower costs and increase accessibility.
- Cybersecurity is entwined with fintech, given the rise of cybercrime targeting financial institutions and the decentralization of data storage.
However, fintech remains a relatively new trend in the financial sector. While it grows rapidly, little is known how IT contributes to innovation in relation to fintech. As such, financial services should pay close attention to its use across their industry yet take care as to how it may disrupt their operations.
Shifting to AI in finance
Robotic advisory solutions are a fast-rising trend across the financial industry. Using AI and machine learning to automate the process of providing advice to their customers, traditional banks have found AI can be more efficient than human advisors. For one thing, they don’t require salaries – but more importantly, they don’t make emotional decisions like humans do. With this out of the way, AI can help their clients make better financial decisions while considering all possible outcomes.
Customer service expectancies
It is imperative to have the right IT infrastructure in place for all the related operations in finance. The financial system has changed dramatically over the last few decades, which has led to the use of technology being adapted for customers to use it for things like transactions, settlements, and payments.
The primary role of IT in financial services is to improve the business’ effectiveness and efficiency. Technology is driving the industry; in this digital age, customers have a lot of choice as to where they do their banking and invest their money. As a result, customer service has become an increasingly important priority for financial services institutions.
From smart phone banking to online trading, accessing financial services has become increasingly accessible and easy for customers. Today’s customers expect the fastest and smoothest financial services; online banking and transactions are increasingly popular in today’s society, and customers expect these services to be immediately and easily accessible. It’s imperative, therefore, for traditional banking institutions to incorporate seamless digital banking into their everyday operations to retain their customers and attract new ones.
The increase in cyberthreats to financial businesses
Cyberthreats to the financial system are growing. In 2016, malicious actors targeted the central bank of Bangladesh and exploited its vulnerabilities in the global financial system’s main electronic payment system in attempt to steal $1 billion. The cyberattack was a wake-up call for the financial world, showing how today’s banking systems are vulnerable to external threats.
Cybersecurity is essential for banks and other financial services institutions; after all, they deal directly with our funds in all their forms. Cyber risk in the form of data theft, compromised accounts, destroyed files, and disabled systems – the possibilities are seemingly endless, and malicious actors grow ever more cunning in their attempts to steal funds and data. Impenetrable and fully up-to-date cybersecurity technology is an absolute must in today’s digital landscape.
What MSPs can offer financial services
The IT industry develops and maintains tools which can provide seamless customer experience by making it easier to take care of their financial needs, such as managing their funds and investments, or switching easily between accounts.
Adopting new technology and IT infrastructure is critical for financial service businesses to thrive in the real world; understanding the many growing branches of IT as it affects the financial sector is just as vital.
Managed service providers don’t just deliver IT software and hardware – they seek to fully understand your business from the inside out, so that they can enhance your services, increase your productivity, and protect your data and systems from outside threats.
Contact the IT experts at Technology Solutions today to find out more about the ever-growing role of IT in the financial sector, and how they can help you thrive amongst it.
While some of my colleagues yell wolf and laugh whenever they hear the word crypto, I’m here investing everything I can. All other industries are switching to implementing technology more and more, why should the finance sector be left behind?