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Driven by an explosion of data, the financial services sector is undergoing rapid transformation as it seeks to scale data management with growing demand.
Banks and other financial institutions have long struggled to balance regulatory compliance and information security with growing pressure to innovate. While online and mobile banking are now well-established, that is not to say that the pressure has eased. In fact, the financial sector continues to face widespread digital disruption as data proliferates at a pace many companies have difficulty keeping up with.
Ongoing technological and economic disruption has also driven a radical change to customer demands. People are already used to carrying out routine financial activities, such as applying for loans or checking account statements, with just a few clicks or taps and getting answers in seconds rather than hours or days. At the same time, they are becoming more vigilant in the face of a constantly evolving cyberthreat landscape and fresh concerns over privacy.
These concerns apply to employees, investors, lenders, and other stakeholders too. Financial institutions that fail to address these concerns by acting quickly on real-world data risk being left behind, their positions being taken by more agile startups. The unprecedented disruption caused by the pandemic has also driven up the adoption of new processes and technologies, further solidifying the biggest trends shaping the future of finance.
Here are the biggest trends that every financial institution needs to get on board with:
Long gone is the world where digital technology belonged to the realms of early adopters and enthusiasts. Human-centric approaches are now well-established in software development, which is precisely why innovative fintech startups have exploded in recent years. Banks and other financial institutions can no longer afford to think only about the financial services they offer, but also how the value of those services is communicated and delivered.
However, these innovations are also dramatically accelerating the growth of data, which poses opportunities and challenges alike. We have entered an age of hyper-personalization in the world of sales, marketing, and customer support, in which companies must leverage data from multiple sources to find out exactly what their clients want and need.
Many established financial firms rely heavily on traditional enterprise resource management systems, which are often hosted on in-house servers buckling under the strain of rapidly rising demand. These legacy systems are often the biggest barrier to digital transformation, even if they do provide a time-tested and dependable approach to structured data management. But data now comes from a huge variety of sources, including cloud-hosted and mobile apps and even internet-connected smart devices.
Until recently, traditional financial services companies typically saw fintech startups as a threat to their existence. Today, however, many are partnering with fintech companies to modernize their own systems and deliver more streamlined customer experiences. These partnerships are now well on the way to changing the global finance landscape, but they are also fueling new challenges in data-management. After all, these new solutions can add significantly to an organization’s data footprint, potentially increasing risk in the process.
Financial services has always been an information-heavy sector, but there is far more to their data footprint than transactional data alone. Just like companies in other sectors, they are now collecting vast amounts of data from across a growing multitude of digital interactions. These include, but are certainly not limited to, social media, mobile apps, integrated web apps, and self-service kiosks. All these systems present unique sources of data, and all that information requires governance.
Unfortunately, due to the challenges of big data management, a lot of this data continues to go largely unmonitored and ungoverned. This is the dark data, which accounts for around half of all data stored by companies today. However, companies are now starting to recognize not only the security and regulatory risks that dark data poses, but also its potential as a vast untapped resource that can drive sustainable business growth.
Dark data and big data present many exciting opportunities for businesses to deliver smarter and more targeted customer experiences. The ability to leverage data to its fullest potential will also help financial services firms adopt better-informed governance models for their supply chains and more. The challenge lies in making sense of these vast data sets, which are much too large for human comprehension.
Artificial intelligence has many use cases in the world of finance. For example, it can automate the discovery of important insights to streamline routine operations like knowing your customer (KYC) and anti-money laundering (ALM) checks. Another popular use case for AI in finance is sentiment analysis to gauge client sentiment by analyzing vast amounts of publicly available social media and other data.
These are the trends that are redefining the financial services sector in accordance with rising customer expectations and a constantly evolving regulatory and cyber threat landscape. By getting on board with these developments, banks and other financial services companies will be able to establish a strong competitive advantage and greater resilience in the years ahead.
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