Investments in financial technology, often referred to as FinTech, reached $31.4 billion in 2017. In addition, 81% of banking CEOs “are concerned about the speed of technological change”—a higher percentage than any other industry.
Recent developments, such as blockchain, cloud computing, and data analytics, will completely change the way the banks interact with their customers and plan for the future.
One way that banks have responded to the challenge of developing new technology is by working with software outsourcing companies as they bring decades of software development experience to the table. This allows them to develop new FinTech quicker and easier than otherwise possible.
Read on to learn how new FinTech is already changing the financial services industry and how outsourcing is helping to develop it.
Blockchain technology is one of the most disruptive technologies to challenge the financial services industry in recent decades. The record-keeping technology behind Bitcoin and other cryptocurrencies uses peer-to-peer networks to serve as a “distributed, decentralized, public ledger.”
While cryptocurrency advocates have been preaching the benefits of this technology for consumers, businesses are beginning to realize how blockchain can help them grow.
Deloitte’s 2019 Global Blockchain Survey noted that 83% of respondents “see compelling use cases for blockchain.” In addition, 53% of those surveyed said that “blockchain technology has become a critical priority for their organizations in 2019.”
Currently, financial institutions only operate during business hours. When a customer deposits a check, they must wait for their bank to collect funds from the issuing bank before depositing the money in the customer’s bank account. This can take several days.
Blockchain revolutionizes this process by enabling the creation of public ledger records that can be processed and read immediately. The immediate availability of banking records will enable customers to access deposited funds in minutes.
While many banks have neglected to take up this technology because of concerns about data privacy and government compliance, this reluctance is beginning to fade away.
Financial service firms that embrace cloud-based software-as-a-service (SaaS) technology will no longer have to maintain large numbers of servers. Banks can now turn to subscription services to store sensitive data offsite.
Currently, banks are turning to cloud computing for their communication, accounting, and human resources needs. One of the most popular cloud-based SaaS offerings is Microsoft Office 365.
This subscription service enables companies to store emails, calendars, and business contacts at a secure offsite location. Furthermore, collaboration tools like OneDrive for Business and Skype make office communication much smoother.
Cloud computing will also infiltrate core functions in the near future. PwC noted that financial service firms are beginning to turn to the cloud to handle credit scoring, payments, billings, and other important tasks as well.
The financial services industry has long been a leader in the data analytics field. This data helps banks understand the behavioral patterns that drive customer behavior. In addition, predictive analytics help these organizations maximize profits and offer customized services.
Banks begin collecting consumer data as soon as a customer signs up. They use a customer’s credit score, personal information, and spending habits to analyze their creditworthiness and to offer specific services.
In addition, financial services are beginning to use artificial intelligence (AI) to interact with customers and record information.
Smart chatbots help customers identify solutions without having to contact a call center. They can walk customers through common tasks like bank transfers, loan applications, and basic troubleshooting.
All of their interactions are recorded for future analysis, allowing banks to identify common consumer problems and to proactively offer solutions. These AI systems are also capable of learning from past interactions and improving their replies in the future.
Financial service firms are also using predictive analytics to improve operational efficiency. By collecting and analyzing massive amounts of consumer data, banks can properly service and fill ATMs, staff call centers, and extend banking hours based on their customer’s needs.
The financial services industry will continue to adopt data analytics over the next few years. Expect to see major advancements in algorithmic stock trading, credit score evaluations, and risk assessments as AI and data analytics become even more widespread.
The financial services industry, along with their software development services, have long been at the forefront of software security. This is a result of the huge amount of sensitive data that these companies maintain, as well as the strict regulatory oversight that governs the industry.
Recent increases in the number of annual cybersecurity attacks have underscored the importance of information security to modern financial services firms. In addition, the number of data breaches reached an all-time high in 2018. Experts expect the number of attacks to continue to grow—and the sophistication of these attacks to increase as well.
The industry is investing billions to counter this threat. Gartner reported that the global economy spent more than $85 billion on information security services in 2017 alone.
Many banks are outsourcing software development to help them develop their defensive capabilities. That’s because these firms have decades of experience in cybersecurity and access to the type of experts needed to protect sensitive consumer data.
The financial services industry will undergo dramatic changes over the next decade. The introduction of futuristic technologies like AI, cloud computing, and blockchain will completely transform the way that these companies do business.
In addition, banks are turning to software development companies to develop new Fintech and shore up their digital defenses. Recent increases in the number of data breaches have made information security a major priority in 2019 and beyond.
Expect to see financial services firms increase their recruitment of experienced software developers to keep up with market demands.