The Impact of Technology on the Financial Landscape
Technology As banks are adopting new technologies, the industry is being disrupted and causing a shift towards a more digital retail banking experience for all.
Financial services are undergoing a momentous transformation, largely due to ever-evolving technology pervading the industry. If there's any certainty in this line of business, it's that change is omnipresent and being quick to adapt is critical.
The changing state of banking
Retail banking is facing significant disruption from several directions — largely because individuals are turning to digital channels for their banking needs. This effectively eliminates the need for physical banks, as the trend toward branchless banking becomes increasingly mainstream. "This inclination for digital has led banks to reinvent and redesign their bank branches to provide an omni-channel experience,” says Vijay Anand, Global Practice Head, Cards and Payments at Infosys Limited. In addition to the digital benefits associated with going branchless, the expense of operating physical branches is another point of pressure. With new competitors in the financial space that only communicate with their customers online, traditional banks are being forced to rethink their operational capabilities.
Increasing uptake of mobile payments, faster payments, wearables, the Internet of Things (IoT), and connected commerce are transforming the payment industry. Digital technologies are offering new revenue streams (new markets and value-added services), enabling cost reduction (straight through processing and automation) and provide volume growth opportunities (i.e. move from cash/paper to digital payment methods).
As part of the payments infrastructure modernization initiatives, banks are focusing on breaking down silos, embracing electronic payment methods, building digital platforms that enable straight through processing, automating business processes, and building efficient data gathering capabilities.
Customer service reimagined
In a time where convenience, speed, and ease of experience are the most valued characteristics associated with financial services, banks are now experimenting with artificial intelligence by way of chatbots and robo-advisors to stay ahead of the technological curve. These innovations require banks to invest in highly complex and sophisticated technology, but have made finance simpler for customers on the whole. Customers no longer need to contact bank representatives to answer simple questions about their finances. Instead, chatbots improve everyday banking experiences as they're available at all times to offer guidance and expert advice. Anand explains that robo-advisors also “provide advisory services to customers on wealth management and investment portfolios without any human intervention.” Now, with enhanced artificial intelligence, consumers can manage and invest their money online in real-time, anytime.
Banks are adopting new technologies (such as big data analytics, machine learning, etc.) that offer new ways to understand customer needs. Open Banking APIs enable banks/non-traditional players to explore how data can be used to help people transact, save, borrow, lend, and invest their money.
The calculation for success
In the race to embrace technology, every financial institution needs to decide if it wants to excel in adapting to emerging technology or if it prefers to lead innovation in the sphere. Both paths have advantages and challenges, but focusing on one route may accelerate success. In any event, Anand suggests that financial players take a three-pronged approach to staying progressive — invest, collaborate, and innovate. “A key differentiator would be a culture of learning,” he proposes, “and a complete and collaborative approach to working with other players in the industry."