Are trends even worth following?
For many of us, following trends are considered one of the most unsustainable ways of living. But the one area that requires you to keep abreast of the current trends is the financial world. It becomes necessary for businesses to grow and financial institutions to make profits.
Consumers also need to know about these trends because all finances are connected to the institutions, directly or indirectly.
A lot of changes have hit the financial world in the last couple of years. Cryptocurrency and artificial intelligence are the two most revolutionary trends that have shaken the finance industry.
Considering the level of impact they are having, it does not look like they will fizzle out quickly. While these financial trends are still unpredictable, as is the nature of finance, they are becoming more mainstream earlier than anticipated.
Digital Finance in a Digital World
A few decades ago, we used to make all kinds of payments with cash. But things have changed now. Today, we need not go to the shopping mall with cash or even a credit card. There are numerous ways to make payments online.
Every year we hear of new gadgets, mobile applications, and some other futuristic-looking devices. These are designed to provide maximum security, allow the customers to have easy access to all of their financial needs, and connect with the world.
In today’s world, almost everyone has a good understanding of what digital finance means. Most of us partake in it, one way or the other.
However, nobody knows for sure where it’s going to lead us, how it will evolve a few years from now. When it comes to technology and the future of finance, even the experts are skeptical. They’re continuously engaged in a heated debate. It is because they are notorious for being unpredictable.
Financial services will continue to keep changing. One of the main reasons why they are transforming so fast is because there are competitors, and lots of them. Along with the emergence of large corporations, new systems are rising to change the way the financial institutions run their businesses.
Quite a lot of people often get the wrong idea when they hear artificial intelligence (AI). It’s not like one of those science fiction movies where advanced robots take control of the world. Artificial intelligence is all around us, and it’s been used for many years now.
The finance industry is one of the first amongst many others that adopted AI. As consumers, we want the banking system to be more secure, reliable, smarter, and more convenient. AI has been proved to be more accurate, smarter, and faster. It has revolutionized the way we deal with money.
According to a recent study, a majority of Americans prefer to make their payments using credit cards or debit cards. Only a few of the remaining few are in favor of paying with cash. The reason why most consumers pay with cards is the convenience. Card payments also offer more flexibility, as well.
But it’s not the only reason. Everyone can benefit from having good credit health. And this is where AI comes in.
Some of the ways AI-powered solutions are helping the companies and organizations include:
- Making smarter decisions
- Storing accurate data
- Keeping the data secure
For example, ZAML, which stands for Zest Automated Machine Learning, is an underwriting solution that can even assess consumers who have no credit report information.
When dealing with a large number of documents or data, human error is almost inevitable. When it comes to a financial institution, a small mistake can cause a lot of trouble.
This is not the case with AI platforms. It can perform several tasks without any errors at a much faster pace, thereby cutting losses and saving a lot of time. It also creates transparency in the system and provides better service and security.
Banks have also started using chatbots to ease the task of communicating with consumers. Erica, the chatbot, which was launched in 2017 by the Bank of America, is an example of an AI used in banks.
Time is one of the most crucial things in the works of finance. And many companies have already witnessed the outcome of having artificial intelligence powered solutions. With AI solutions, there is no risk involved, as it can make an accurate and smarter assessment or prediction within a fraction of a second.
It is no surprise, then, that more and more financial markets are now shifting their attention to AI.
Why is the finance industry paying attention to artificial intelligence services?
According to Forbes, AI in financial services is growing at a much faster rate than it was anticipated a few years ago. Studies have shown that firms that are making use of AI powered solutions are performing much better and faster. They also have improved customer service and are generating more revenues.
This result has inspired many more companies. Some of the top firms around the world are investing millions of dollars in AI initiatives. It is expected that artificial intelligence will be performing more tasks than just analyzing credit scores, making cash flow prediction, and identifying errors.
It’s good news for those who are already familiar with banking through smartphone apps. But for those who still rely heavily on credit cards or debit cards, consider a little change because it’s going to be a lot different.
This does not mean that credit cards are going to become obsolete in a flash. But you have to be prepared to embrace anything that comes your way because it’s happening fast.
Rise of Cryptocurrency
Cryptocurrencies are still at its infant stage. This is the reason why experts are still not sure how they’re going to be used or what they can do. However, its popularity is skyrocketing, although it is considered volatile by many.
Blockchain technology, which is the base of cryptocurrency, is well-reputed for its security. Its data cannot be modified, and it provides maximum transparency. In short, this technology could be used to combat corruption.
One of the most significant features of cryptocurrency is that banks cannot devalue it. In fact, it cannot even be done by the government. It remains secure. The consumers get to have control of their finances autonomously.
Blockchain technology is still under experiment. However, it is already changing the views or perspectives of the financial experts. It is also slowly altering the banking industry.
Why blockchain and cryptocurrency?
In the financial service industry, identity theft, forgery, and all kinds of fraud have cost the financial institutions billions of dollars. And despite the use of modern security systems, the finance industry is yet to have an anti-theft technology.
Blockchain technology could be the best solution to this problem.
Blockchain technology is more secured, convenient, and more comfortable to use.
The use of cryptocurrency can eliminate traditional ways of banking. Even today, financial institutions still use the old method when it comes to lending.
For example, when you take loans or a mortgage, you have to do quite a lot of paperwork. The level of risk is even higher if the number is higher, it could be thousands or millions. In this case, you’d lose everything if those documents were destroyed or lost.
Cryptocurrencies are resistant to hacks. So security breach is nearly out of the equation. In addition, there is always a risk involved in these situations with paper money:
- Transporting a large amount of money, as you may get robbed
- Receiving payments in terms of tens of thousands or millions, as you could be receiving counterfeit paper money
Blockchain has the potential to speed up the loan process.
Distributed ledger technology can cut short the time taken to process a loan. With this technology, there is no need to verify certain loan documents. As a result, financial institutions can speed up the entire process.
Most importantly, a lot of money can be saved since there won’t be any costs related to paperwork.
There are cheaper transactions.
Crypto-cash transactions are very reasonable. You can also do it for free at times. Traditional cash transfers, on the other hand, always come with additional charges.
There is ease of use.
If you’re used to shopping with credit cards, you probably will find it unusual and inconvenient when you have to carry cash instead of cards. Imagine how easy it would be to leave your credit or debit cards at home and go out shopping.
With the blockchain technology, all you will need is a password to your electronic wallet, and you’d be ready to go anywhere.
The Need for Financial Institutions to Put their Customers First
It’s 2020, and it’s time for the financial institutions to throw out the old business models. It is also the right time to pick up the new business strategies which will provide maximum customer satisfaction.
Today, there are hundreds and thousands of financial institutions. Consumers can leave anytime they want if they find that the services are not good enough. Additionally, customers are also becoming aware of their rights. Why pay a few extra dollars when making money transfers, or why wait for weeks when applying for a loan?
Technology has everything, and it keeps on upgrading every once in a while. Financial organizations must keep up with the ever-growing technology to stay in the game.
And this means the finance team must shoulder the responsibility of keeping themselves updated and familiar with the latest technologies and innovations.
Financial institutions evolving to meet the demands of the customers are one of the major trends which we will witness throughout the year 2020.
Today’s customers want more flexibility, more options, and more independence. The finance sector must comply with the demands of the consumers. Otherwise, they lose the game and their customers to their competitions.
The banking industry has drastically improved over the past few decades. There is no doubt about it. But why do the financial institutions need more improvement and to focus more on the customers?
Among others, there is a particular group of customers who needs to be treated with the utmost care.
We’re talking about the millennials here. Millennials are the most fickle when it comes to financial matters. Experts put it down to several factors, including access to resources and preference for everything digital.
Challenges of Banking with Millennials
According to experts, millennials are financial institutions’ most important customer base. In America, this group of people is considered the largest generation, with more than 83 million people.
A recent study has revealed that the majority of millennials don’t enjoy going to the banks. Needless to say, it’s hard for banks to attract millennial customers.
Millennials rely heavily on online banks and other services, which are much more accessible and convenient. As a result, there is fierce competition amongst non-banks and mega banks.
Since most of them are often skeptical of their life decisions, they tend to have different banking needs. Some get married at 25 or 26 with a stable income. On the other hand, some hop around from office to office in search of a better job.
About 80% of the millennials in America have a different way of interacting with brands. They connect with companies and brands on social media. If your brand or company is not on social media, you’re being left out.
New Trends in Banking Compliance
It’s no secret that the cost of compliance is increasing. It is expected to rise even higher over the next few years. This is something that the financial institutions and compliance professionals are very concerned with. Many financial institutions have poured in a lot of money on compliance ever since the global financial crisis in 2008.
Today, the financial industry has even more complicated problems to deal with. The technological innovations have been a critical instrument in solving some of those problems.
Below are some of the key trends in banking compliance.
Evolution of Operating Models
Growth is something that is supported by all. But at the same time, cost reduction is necessary. This has resulted in a rapid change of operating models. Today, the responsibility of the compliance department is not only limited to an advisory, prevention, and identification.
In the traditional operating models, the primary responsibility of the compliance department is to help the organizations identify risks and advise them on how to deal with the risks or avoid it.
New responsibilities like taking surveillance, testing, Know Your Customer (KYC) is now being taken up by this compliance department.
The Shift Towards Technology
In modern society, it’s tough to find a skilled and multi-talented person. Even if they’re available, nine out of ten people are either lazy or dishonest. This has forced firms to invest more in the latest technologies. There are already a good number of AI-powered solutions that have shown promising results.
The Need to Adapt to the Changing Times
Businesses need to transform according to customer behavior and market situations. This is no exception, even in the financial industry.
These factors have pushed the firms to go on search of new opportunities, new systems, and new technologies. Generally speaking, we can say that the finance industry is now facing a new era that’s primarily focused on growth, development, and opportunities.
There is also a need to hunt for talents who are comfortable with modern machines and gadgets. After all, even the most advanced robots need human assistance.
Protection of Consumers’ Rights
The majority of the customers today are well informed and well educated regarding any topic, finances in this case. And there are community action groups that are determined not to give up on their rights.
It is safe to say that the above mentioned financial trends are definitely worth considering. They are the key to making financial decisions and transactions a lot easier and seamless.
As we have mentioned throughout the post, technology is what you should watch out for. It is the one major factor that’s changing customer behavior. It is also dictating the way the financial industry runs.
Although some of these trends are still in their infancy, the changes they are bringing to the financial world are too good to be ignored. Of course, whether or not they are sustainable is still up for debate.