The Top 5 Technologies That Have Huge Potential in the Financial Services Industry

Living in the digital era, it is not uncommon for us to be introduced to a new technology with every passing day. Mostly, each of these technologies aims to simplify our lives by offering foolproof mechanisms that are cost, time, and performance-oriented.

The financial services industry is no exception. Right from being a 100% manually driven function to then turning in the direction of computerization, the switch has been drastic. Automation has certainly played an important role here. For starters, physical ledgers had been replaced by online reports, which was one of the first impacts of introducing digital technologies.

In fact, just recently, a plethora of technologies have entered the market, which is expected to benefit the financial services sector in multiple ways. Today, we at the Indian School of Business & Finance, ranked among the best UG colleges for finance, will shed light on the top five emerging technologies that are expected to be revolutionary for the financial sector as a whole. We will also discuss the many benefits associated with these introductions. So, let’s read on.

Top 5 technologies that will be life-changing for the financial services industry:

• Hybrid Clouds:

One thing that we at the Indian School of Business & Finance have minutely observed is the fact that the financial sector is a rapidly evolving industry. This is primarily because the financial dynamics depend upon a mix of multiple internal and external factors, which collectively determine the direction in which the financial services providers are headed. Owing to the same, it has become crucial to place data as the starting point for every decision, big and small, that needs to be taken.

With this understanding playing in the backdrop, one of the first technologies that is seen making its move in this sector is hybrid clouds. At a very basic level, hybrid clouds involve an alloy of computing, storage, and services provisions, which combine the best of on-premises infrastructure, a public cloud, and a private cloud.

Some of the major benefits of this technology include a real-time integration of crucial data, a ready outlet for customization, and backing to opt for in-depth analysis of data, which eventually helps with functional structuring and gap filling.

It is important to mention that hybrid clouds contribute to a financial institute’s scalability goal as well. Scalability, yet again, depends on multiple factors to proceed with which creating apt long and short-term strategies become important, which is where hybrid clouds come to the rescue of financial services providers.

• Artificial Intelligence:

If you were to sit down and list out industries in which artificial intelligence has created a breakthrough, you will definitely be held up for many hours to complete the task. That is how widely artificial intelligence associates itself with different industries. The same holds true in the case of financial services as well, where AI is expected to boost the industry dynamics as a whole.

Speaking about the immediate areas where artificial intelligence impacts the financial industry include the likes of back-office management, assessment of risks, managing logistics, ensuring optimum customer service, and staying true to compliance norms.

Not to forget, many decisions that are taken by financial services providers in the present and in the future are influenced by the huge quantum of data that was derived by this sector in the past. Artificial intelligence makes it possible to put this same data to use to an extent wherein important financial decisions can be taken while relying on this data.

The best part about artificial intelligence is that it is time driven. This only means that all derivations are made in a specific time span, which eventually helps the financial sector with optimizing results and returns.

Another point worth mentioning here is the fact that artificial intelligence is future-driven. For instance, money laundering has been one of the major problems faced by the financial services industry. This is where artificial intelligence comes to the rescue of the necessary departments by bringing anti-money laundering solutions to the table.

To a great extent, artificial intelligence makes it possible for financial institutes to focus on their core activities, more specifically, ones that generate revenue. This becomes possible because AI makes use of bots that simplify the process of client onboarding while easing out the procedure of carrying out a risk analysis of borrowers before initiating any form of lending.

Additionally, like most sectors, the financial sector too has been prone to process inefficiencies, which is where AI contributes yet again by taking support from computer vision, pattern matching, and deep learning.

• Blockchain:

We at the Indian School of Business & Finance, one of the best UG colleges for finance in the country, have come to understand that the volume of transactions that the financial sector associates itself with is huge in quantum. That said, it becomes necessary to keep track of these transactions so as to ensure that there is no compromise of data or invasion by unreliable sources. This brings us to the next big breakthrough in the world of financial services technology, which is none other than blockchain.

One of the first functions that determine the safety and security of financial transactions is time-bound and on-point reporting. This is an important area where blockchain makes its contribution. This is particularly true because blockchain aids with the automation of compliance, which weaves every piece of information, irrespective of how big or small it is, within a set framework.

The introduction of blockchain technology had a lot to do with making product and service delivery possible while keeping safety and responsibility as the starting point. The positive impact of blockchain technology has led to this mechanism being recognized as an indispensable part of modern world technology. For instance, blockchain technology contributes extensively to the scanning of transactions. The best part here is that this form of scanning is carried out in the most reliable, verified, and cost-driven manner.

Increased use of blockchain technology in the financial services industry has lifted the transparency with which functions and transactions are carried out. Most importantly, this technology has helped reduce human error, which eventually prevents work duplication and financial losses.

In the financial sector, verbal commitment has zero value. Be it a high-value investment that a customer is looking to make or a corporate finance loan that an entrepreneur is interested to avail of, either case involves huge sums of money. In this matter, the financial service provider and the customer happen to be the two parties involved in the investment or loan transaction. Once initial approvals are received, and it is time to accept the deposit or disburse the loan, contract signing becomes important, which is where blockchain makes a valuable contribution.

• Cyber Security:

Every new introduction has a set of pros and cons. The world of financial technology is no different. Just as it offers many benefits, it does come equipped with a few limitations, which, if tackled smartly, do not impact the processes and transactions in any way.

This is exactly where it becomes important to introduce technologies that can cover up for these limitations by offering the necessary extensions, upgrades, and safeguards. This takes us to the next important technology relevant to the financial services industry, which is nothing but cyber security.

At the most basic level, cyber security has to do with keeping track of cyber-attacks and curbing them just in time to avoid a security breach.

As we all know, the financial services industry operates on the stepping-stone of information, information which is sensitive and personal in nature. The last thing the customer in question would want is for this data to go public and, in certain cases, be misused without their consent and information. With this in mind, we come to the pressing need to maintain the secrecy of this data, which is where cyber security comes to our aid.

Cyber security comes into play by using a mix of relevant technologies, procedures, and methods, which are designed in a manner that they become capable of overseeing networks, devices, and programs that are loaded with data. This form of overseeing makes it possible to safeguard data by keeping a watch on any form of malware, attacks, viruses, unlawful hacking, unauthorized access, and data theft.

If you go into the depth of this technology, you will come to understand that cyber security is further divided into five pillars, namely critical infrastructure security, application security, network security, cloud security, and the Internet of Things (IoT) security. Each of these security wings is expected to deal with different sorts of threats altogether.

In the post-Covid era, where most transactions have moved to the digital platform, the significance of cyber security has moved a notch higher. Additionally, introductions such as biometric solutions are now seen as a much-needed move in the direction of advanced cyber security. For instance, a few financial institutions have gone ahead and introduced multi-factor biometric authentication, especially for functions such as mobile banking. Cybersecurity will never cease to exist as long as the financial industry is up and running.

• Open Banking:

Yet another technology that we at the Indian School of Business & Finance, ranked among the best UG colleges for BSc Finance in Delhi NCR, have seen being used increasingly not just in India but also in the financial sector across the globe is none other than open banking. Even though there were two schools of thought divided on their opinion on open banking, finally, it has been derived that open banking has nothing to do with unlawful information sharing while putting the interests of customers at stake.

At a primary level, open banking has to do with information sharing, wherein the financial institution with which a customer transacts comes forward to share customer data with other financial institutes and start-up fintech. The goal here is to make cross-selling possible. For instance, a fellow financial institution may be offering a service provision that you, as an institution, do not provide but may be necessary for your customer. This form of information sharing allows other financial institutions to serve your customers in areas where they may be looking for assistance.

As far as this technology goes, information sharing between financial institutions takes place through programming interfaces, which makes it possible for third-party entities to access data from the parent institute’s website or application.

Yet another area where open banking technology is seen proving beneficial is with respect to creativity and innovation. Now that free data flow is possible, multiple avenues open up for the financial institutes operative in the market. To be able to optimize this data and up their sales, financial institutes have no option but to infuse creativity and innovation in their products so that their takers never dry up.

Open banking has also proved beneficial in making financial products more competitive to an extent where every customer can experience a high level of customization. All this while, if you have been averse to open banking technology, now is the time for you to revisit your misconceptions and walk towards reframing them.

Final Words:

All this while, if you have only heard about digital technologies making an entry into the financial sector but have no idea what these are and how they can take the financial industry by storm in the coming days, now we hope you know. We at the Indian School of Business & Finance, one of the top UG colleges for finance in India, have attempted to introduce you to the top 5 emerging technologies in this article today, which are expected to bring about a significant revolution in the financial sector as a whole.

You must note that each of these technologies comes complete with a set of benefits while helping to redress shortfalls such as information leaks, identity theft, delay in completion of transactions, duplication of transactions, process loopholes, and so on and so forth.

Each of these technologies has also made it easier for people working within the industry to function more effectively, as they can now focus wholeheartedly on the core functions. On the other hand, these technologies have eased life for customers, who are now free from hesitance to go all in, in the financial services industry. Hence, we can say it’s a win-win situation for all.