The digitization of the financial services industry is inevitable. And the race to get to the front of the pack—by traditional financial services companies and fintechs—depends on how well they leverage next-gen technologies like AI, VR, omnichannel, and more.
Consumers are starting to wake up to the fact that there’s a better way to conduct financial transactions. Namely, that there are technologically advanced solutions that provide faster, easier, smarter, and more convenient ways to manage their money.
For those of you building fintech solutions, it’s your responsibility to account for this consumer sentiment. Because not only do they expect financial services to be available to them online, they want the kinds of experiences that next-gen technologies afford them.
It’s not just consumers that want or will benefit from next-gen tech either. There’s a huge push within the industry for more digital transformation.
A Broadridge survey of financial services C-suite executives found that they’re planning to make big investments in next-gen tech in the coming years. In the following post, I’m going to share some insights from this survey and shed some light on which of these technologies you should be focused on.
1. Artificial Intelligence
54% of financial services execs plan to spend more money on AI.
Artificial intelligence is a blanket term for technologies like machine learning algorithms, natural language processing, and deep learning that help machines handle processes, data, and user interactions in a more human-like and rational manner while being much more efficient than humans are on their own.
There are a vast number of ways that financial services companies can use AI technologies to create better experiences for their customers. Here are some examples of what AI can do:
- Perform risk management assessments
- Prevent fraud by detecting anomalies in user behavior and habits
- Provide personalized customer assistance through bots
- Make unbiased credit decisions
- Conduct intelligent trading predictions
- Personalize and update a customer’s investment portfolio
- Automate processes internally as well as for end users
What’s interesting to note, however, is that AI adoption hasn’t been as profitable for traditional financial services companies as it has been for fintechs. According to the Transforming Paradigms survey from the World Economic Forum and the University of Cambridge:
“A higher share of FinTechs tends to create AI-based products and services, employ autonomous decision-making systems, and rely on cloud-based offerings. Incumbents predominantly focus on harnessing AI to improve existing products. This might explain why AI appears to have a higher positive impact on FinTechs’ profitability, with 30% indicating a significant AI-induced increase in profitability compared to 7% of Incumbents.”
Keep this in mind when discussing the addition of AI into your clients’ solutions. If your financial services clients are dragging their feet on this, point them to this proof and introduce them to real world examples of AI done right (as a solution as opposed to a supplement).
2. Augmented and Virtual Reality
58% of financial services execs plan on spending more money on interactive tech.
When you think about augmented and virtual realities, it’s only natural to envision Pokémon GO players flooding public parks or Instagram users taking filtered selfies of themselves.
But AR and VR have so many more use cases than just creating immersive gaming experiences or giving online users a way to try on different looks or products. The only thing is, these interactive realities are mostly just speculation for the financial services industry at this point.
Julia Carreon, who works for Wells Fargo as the managing director of digital and fiduciary operations, believes that traditional banking services will fall by the wayside in favor of more interactive digital experiences thanks to tech-friendly Gen Z. In particular, she sees video and virtual reality as two of the technologies that will transform the face of the industry.
Some of the major players in the industry have tried building out VR technologies, though it was mostly around 2016 and 2017 when we saw a surge in this activity. Fidelity Investments, for example, built Cora, a virtual host. It was an avatar in a virtual chat room that enabled various parties (like investment brokers, customers, and their family) to meet without having to go anywhere in person or to deal with the informality of a Zoom chat or phone call.
As Adam Schouela of FCAT explained:
“We realized that—by using voice control and data visualization and putting everyone in the same virtual room—we could facilitate a really robust conversation where participants would be able to simply turn to each other and ask questions.”
While it doesn’t appear that VR or AR are really being used much these days, the potential is there. Virtual meetings. Data visualization. Virtual customer service interactions. Employee training. Virtual banking.
Once customers become more acquainted with this tech and enough of the leading financial services companies (or groundbreaking fintechs) make use of them, we’ll start to see AR and VR really pick up speed.
3. Omnichannel Big Data
49% of financial services execs plan on investing in better ways to gather, manage, and analyze their data.
I wouldn’t call big data in and of itself a next-gen technology as it’s something we’ve been using across most industries for years. However, it’s the gathering of data from an omnichannel approach that’s going to set financial companies apart in the future.
For traditional financial services companies, this is going to require a major digital transformation whereby the organization branches out from in-person financial solutions to channels like:
- A website or PWA
- A mobile app
- A web app or portal
- Social media (at least in terms of marketing and customer service)
- Integrations with related apps (for budgeting, investing, etc.)
And for fintech, it’ll mean forming partnerships with major financial services (like customers’ banks and credit card companies) to enhance the digital experience already offered.
There are a number of things that financial companies can accomplish by developing an omnichannel approach:
- Being available to customers 24/7
- Giving customers anywhere, everywhere access to their financial data
- Providing a seamless transition from channel to channel
- Offering personalized recommendations and solutions to each customer
- Enabling customers to make better money decisions
Overall, it makes it much easier for users to carry out financial management tasks when you give them the freedom to choose the channel for the occasion and you pull from a cloud-based and centralized repository of their data.
4. Advanced Cybersecurity
63% of financial services executives plan on investing in tighter cybersecurity and risk management techniques.
Cybersecurity is a major concern for the financial services industry. Because it handles some of the most private and sensitive user data, these companies have to be extra careful about securing their digital solutions.
Now, much of this is going to be done at the company level, securing their servers as well as the apps themselves from external threats. However, customers can’t always be expected to take security seriously from their end unless you require them to do so. Even if they do, that doesn’t stop a nasty brute force attack from eventually unlocking their “difficult” password combo.
Asking users to create strong passwords at the login stage will help, but it’s not a bulletproof solution.
As Michelle Moore, the head of digital banking for Bank of America, says:
“If you think about all the breaches and everything going on in the world, passwords need to go away. No. 1, people forget them. No. 2, they’re not safe.”
This is why designers should be working with their financial services clients to implement smarter security strategies that use next-gen tech like blockchain and biometrics to secure the point of entry.
Bank of America is one such company that’s begun using biometrics for security. Currently, its mobile app allows users to authenticate the login with their fingerprint. But Bank of America has other biometrics in the works, like desktop fingerprint verification, iris-scanning technology, and facial recognition software. Voice recognition was previously explored, but proved too unreliable for getting a user into their app.
Blockchain authentication (referred to as “digital identity”) is another option, though it may be difficult to get as much user buy-in as biometrics has. That said, it would be greatly beneficial to experiment with digital identities as they not only secure the login, but also protect all of the transactions that take place within the app.
53% of financial services executives plan on investing in tech that improves the customer experience.
This isn’t something that designers need to concern themselves with in terms of adding these technologies to clients’ existing solutions. Rather, I think this presents a big opportunity for designers working in the financial services space.
While contactless payment apps were starting to catch on before, I believe that COVID-19 will send all kinds of contactless business-to-customer engagements into overdrive. So, if you’re looking for a new market to tap into, this is the one to get in tight with now.
You could build solutions like:
- Mobile wallet apps
- Digital invoicing software
- Online payment processing apps
- Electronic checking and savings solutions
- Robo advisor and investor apps
Basically, if it reduces the need for customers to go into a financial services location, to interact with a human representative in person, or to touch a card reader, paper check, etc. … this is the space to be in.
It’s not that society is going to completely do away with in-person engagements altogether, but it’s similar to the omnichannel approach. For those who feel that virtually engaging with a financial company is more convenient or safe, you need to accommodate by building out those desired experiences.
The financial services industry is undergoing some serious disruption thanks to fintech. It would be a huge mistake to discount this disruption as trivial or something these companies can outlast. That said, fintech solutions as they stand today aren’t flawless either.
It’s just that their innovative use of technology has set the bar much higher and now has us looking toward the future and how next-gen technologies will reshape the entire industry.
As you can see, some of these technologies are already in place and making significant improvements to the customer experience while helping to reduce costs and increase profits for the companies. Others, however, have yet to catch on, though many companies have plans to invest in them in the next year. If you’re working with a client wanting to future-proof their financial services company, this is the conversation you need to be having with them.