Financial services is an industry of large, venerable, powerful companies that have increasingly dominated the economy. They’re now experiencing rapid disruption by companies that are more capable of fast iteration. In fact, CB Insights expects Fintech investments to hit an all-time high in 2018. To stay relevant in that ever-changing landscape, it’s critical to follow the trends that have the greatest impact. We’ve compiled a short list of macro digital trends influencing financial services, including pain points being solved by solutions leveraging the trend.
With the adoption of artificial intelligence, large companies are able transform data into knowledge while cutting costs and eliminating human error. For starters, machine learning has used associative memory to help financial institutions fight against fraud. AI has managed to solve for a number of pain points related to customer support interaction; allowing for 24/7 help via chatbot features, quick response time and behavior tracking for optimized communication. As artificial intelligence continues to collect more and more data, it is expected to be a huge money and time saver but may result in some security concerns, creating a pathway for potential online scams. Another reason some companies have yet to embrace this new tool is because many consumers don’t trust it and would prefer communicate with an actual human being.
Example Solution Leveraging this Trend
Earlier this year, Bank of America introduced Erica to market. An AI-based virtual assistant, Erica is easy to use, instantaneous, and convenient for Bank of America members to have questions answered and simple tasks completed. The more consumers use Erica, the more Erica learns and is better able to serve consumers.
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How do consumers really feel about AI? Check out this article by Pegasystems.
Tech companies have caused a huge disruption in the financial services industry. Brand trust and convenience, particularly within the millennial generation have welcomed this entrance into the category, giving the somewhat unrelated category the right to play in this new space.
Amazon, Apple, Google and Facebook all recently entered the financial services industry. Platform integration makes it convenient and easy for their users to adopt new payment methods. Anymore, tech is one of the top consideration points when choosing a new financial service company. As mobile banking continues to dominate, things like user interface and ease of integration are more important to consumers. For many financial companies, large and small, the main focus right now is on customer experience.
Example Solution Leveraging this Trend
Facebook recently integrated a payment method for Messenger. You can now pay your Facebook friends any amount so long as you both have a debit card on file, you’re both at least 18 years of age, and the recipient accepts the payment. While not available in every country, it’s completely free to use and can be done from the application or a desktop.
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Check out this article by Adobe in understanding the recent transformation in the Financial Services Industry.
Blockchain and Bitcoin are all the rage! Blockchain technology enables individuals to leverage a peer-to-peer network to make transactions. This happens without having to pass payment through a proper authority because a decentralized network, with uncompromising and secure rules, polices the system.
The medium of exchange, better known as cryptocurrencies, are shaking
up the banking world by providing users with faster and cheaper ways to transact. It’s changing the way the world thinks about payments and threatening the need for a middleman, the role a bank or brokerage has been known to play. The biggest impact, however, may be the security of the systems. They are able to keep true, up-to-date records of transactions where a central repository may fall short. This capability will improve efficiency and make it easier to track suspicious behavior.
The challenge blockchain will continue to face is creating a legal framework and better notifying the public of its existence and benefits. Banks, and other financial services institutions, are our authorities, oftentimes with the backing of the U.S. Government. How these big institutions navigate the new tech and how well consumers begin to trust solutions like blockchain will be a trend to watch over the coming months and years.
Example Solution Leveraging This Trend
HashCash Consultants creates an exchange for enterprises via blockchain. As enterprises enter the exchange, they accept the rules of the blockchain, therefore passing over the need for a bank as the middleman. They can then directly interact with one another on a mutually identifiable set of books.
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PWC digs in to answer questions about blockchain and its impact.
The shared economy has expanded from transportation and lodging into the financial space. Individuals seeking capital or decentralized asset ownership can use information technology to find efficient matches between providers, rather than automatically turning to a bank as an intermediary. Although this trend primarily exists within small companies, Bigcos like JPMorgan Chase have acquired partnerships with smaller upstarts to capitalize on this industry disruption.
Alternative lenders tend to cater to riskier clients, often times the folks who otherwise would not be granted a loan elsewhere. It is assumed that those clients will eventually grow their credit history and one day become a bank borrower; a strategic move for big company partnerships.
Example Solution Leveraging This Trend:
SoLo is a mobile application that allows users to lend and borrow from one another, provided the amount is under $1,000. Users build their Social Credit Score, allowing them to borrow more money (up to $1,000), and lenders have the satisfaction of helping someone less fortunate break out of a minor financial crisis.
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Understand more about alternative lending through this article by EY.
For a long time, investing required a financial planner, a minimum dollar amount, and somewhat of a one size fits all approach. Today, many new investment platforms have emerged, all with their own market strategy. With the integration of AI, some services don’t require human interaction at all; analyzing and tweaking your online portfolio as it sees fit. Others take a hybrid approach, granting online services with the help of a financial planner, by request. These new companies are making it easier than ever before to become financially educated and plan for the future. Many have found cheaper, more efficient ways to customize the offerings and get people connected to and feeling confident about their investments.
Example Solution Leveraging this Trend:
A woman’s life cycle and income are far different from a man, and Ellevest is all about creating a solution tailored to those differences so that women have an accurate and fair way to invest their money.
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