Small business lending isn't the only thing in the financial services world that's changing. In addition to the way many small businesses are financing their capital needs, you can expect to see other financial sector trends in 2018:
- Artificial intelligence will improve customer service efficiency
- External APIs will become critical to online banking infrastructure
- Mobile and online banking will push banks to improve customer experience
- Digital cryptocurrency growth will prompt security and regulatory measures
Bacon said, "Knowlege is power." The more you know about the financial end of your business, the more powerful your business will be and the better you'll be able to make good business financial decisions.
Technology will disrupt the financial sector in 2018, the World Economic Forum predicts. The industry’s landscape is increasingly shaped by large technology companies that are supplying key infrastructure technology and competing with traditional banks and insurers, according to the forum’s report Beyond Fintech. Tech giants such as Amazon are now supplying services to finance companies, even as financial providers are becoming increasingly reliant on the services of large technology players, forcing financial companies to walk a fine line between capitalizing on tech companies’ services and becoming dependent on them. This trend could be even more disruptive than FinTech to the financial sector, the report predicts.
The entry of tech giants into the financial sector illustrates how deeply the influence of technology is reshaping the industry. Here are four other predictions about how technology will impact the financial sector in 2018.
Artificial Intelligence Will Improve Customer Service Efficiency
Artificial intelligence is revolutionizing technology throughout society, and the financial sector is no exception. Artificial intelligence takes priority among new technologies reshaping the financial sector in the minds of many industry leaders. AI and machine learning will empower banks to streamline their operations and improve customer service, says KPMG financial services strategy leader Mitch Siegel.
Artificial intelligence is empowering financial institutions to provide more customized service by using customer data to tailor assistance to individuals. Data that was previously trapped in different applications is now being coordinated and analyzed and put to use to serve customers better.
AI services that can interpret natural language are also enabling institutions to provide efficient automated chatbot and phone support, as well as delivering service through voice-activated channels such as Alexa. This is speeding up response time and improving customer satisfaction, while simultaneously reducing workloads on human representatives and improving efficiency.
External APIs Will Become Critical to Online Banking Service Infrastructure
In order for AI to analyze and apply customer data from different databases within an organization, different FinTech applications need to be able to communicate with each other. This is spurring the development of application programming interfaces that can connect data from financial software, mobile apps and back-end office IT software.
In order to develop suitable APIs, banks and financial institutions are increasingly partnering with third-party tech companies who possess the requisite expertise. By the end of the year, half of global Tier 1 and Tier 2 banks will offer at least five externally-developed APIs, International Data Corporation projects.
Using third parties to develop APIs enables financial institutions to be more agile in expanding new services. At the same time, banks seek to maintain a competitive edge against potential rivals, so it is likely institutions will develop strategies to limit exposure even as they open up their back-end operations to APIs.
Mobile and Online Banking Will Push Banks to Improve Customer Experience
Mobile and online banking are becoming preferred customer service options, posing a challenge to traditional location-based banking. Nowadays, 4 in 10 Americans do most of their banking online, while 1 in 4 rank mobile banking as their primary banking method. Online banking is most popular among consumers 65 and over, while mobile is the most popular method among consumers 18 to 29 and 30 to 44.
Some industry watchers see the rise of mobile and online banking as destined to drive location-based banking out of business. Others argue that it will spur traditional banks to improve the functionality of their mobile apps in order to compete more effectively. It’s not enough for banks to have just a mediocre app anymore, says NYMBUS senior vice president of client strategy Chris George. Banks must develop apps and an online presence that provides more compelling value than their mobile and online competitors.
As a result of this competition, financial apps will become easier to use. Services consumers will be able to access more easily through apps include consumer-to-business digital banking, consumer-to-consumer one-click payment transfers, password-free biometrics, conversational service interactions and location-based services and offers.
Digital Cryptocurrency Growth Will Prompt Security and Regulatory Measures
Cryptocurrency is another service that will gain momentum among online and mobile bankers, with effects that will ripple throughout the financial industry. 2018 already looks to be a volatile year for cryptocurrency, with January seeing currencies such as Bitcoin, Ethereum, Ripple and Litecoin plunging in value, reversing Bitcoin’s climb to a record high of $19,783 in December. Meanwhile BitConnect collapsed amidst accusations of running a Ponzi scheme.
Cryptocurrency’s sudden downturn followed in response to tightened regulatory actions by the U.S. and other nations. In December, the SEC’s new Cyber Unit pressed charges against PlexCorps for a suspicious initial coin offering, and SEC chairman Jay Clayton subsequently issued a warning that his commission would be monitoring the cryptocurrency market more closely for violations of securities regulations. China and South Korea are also among the nations cracking down on cryptocurrency.
This type of volatility has financial industry experts concerned that bitcoin is a bubble, says BT Americas chief technology officer for security consulting practice Konstantinos Karagiannis. Additionally, experts are concerned about the risk of not only fraud, but also hacking and digital theft. In response to these trends, regulatory measures are expected to become tighter, and use of blockchain for security will become more prominent. Blockchain security techniques will become more sophisticated as industry leaders and regulatory authorities look to rein cryptocurrency in so it can become more legitimate.