Trending Technologies in the Financial Services Industry of 2023
Several trends in the financial services industry will impact how the industry operates in the future. These include Open API banking, Blockchain technology, Generative AI, and Autonomic systems. These trends will affect how we manage our finances and make the financial services industry more efficient.
Open API banking
Open API banking is a technology set to transform the way banks do business by allowing third-party applications to integrate your banking data with theirs. This will increase the speed of financial transactions and make them more secure and convenient. However, many banks have been resistant to adopting this technology. To counter this, the EU has passed a new regulation that requires banks to provide open APIs to third-party apps.
The UK and Nordic countries are ahead of the rest of the world in open banking. According to a Mastercard report, these countries have the most open banking APIs and progressive regulators. However, Africa is lagging. For example, Nigeria has a not-for-profit industry group promoting open banking. And in South Africa, market players are stepping up to create open banking solutions.
Blockchain technology
The financial services industry is undergoing a significant transformation due to the rise of blockchain technology. The technology provides a decentralized, secure way to send payments without relying on third-party verification. It can also process payments much faster than traditional bank transfers. By 2023, Blockchain-based cross-border payments will account for 1.8B transactions annually.
As a result, banks and other financial institutions are embracing Blockchain technology to improve their processes. Blockchain-based solutions have the potential to reduce human error and fraud. Many Big Four accounting firms have already begun leveraging the technology. KPMG has invested in research into the technology, PwC has created an auditing service for cryptocurrency assets, and Deloitte has developed a Blockchain based software application. EY has also developed Blockchain Analyzer, which allows financial institutions to validate digital assets. This technology can also improve the way banks and financial institutions underwrite loans. Currently, banks rely on credit reports to assess the risk of repayment.
Blockchain-based systems can reduce transaction time and make it easier to ensure quality. For instance, Home Depot has partnered with IBM to use blockchain-based networks for their supplier relationships. As a result, the technology reduces the time it takes to resolve vendor disputes. It can also help reduce the number of unwanted drug recalls and the impact of unsafe drugs on patients.
Generative AI
Generative AI is a crucial trend positioned to impact the financial services industry hugely. This AI technology uses machine learning and AI to draw insights from data. These insights are then used to make operational decisions. For example, generative AI could detect fraud, build risk factor models, and predict trade trends.
Generative AI can improve financial decision-making processes in the financial services industry. It can help fintech companies provide more personalized services to customers. For example, an online banking app powered by AI can analyze customer spending habits and make recommendations. This AI can help customers make better decisions for their day-to-day finances and long-term financial goals.
Privacy-enhancing computation
Future-oriented banking services must use privacy-enhancing computations to protect sensitive client data. These technologies have not been fully developed, but they enable banks to exchange data more securely and targeted manner. In addition to enabling secure data exchange, these technologies will help banks meet their GDPR obligations.
Privacy-enhancing computations are a growing industry trend. They allow businesses to process data without disclosing sensitive data or algorithms to third-party service providers. Privacy-enhancing computations can be implemented in various ways, from decentralized analytics to privacy-aware machine learning. By 2023, Gartner expects more than half of large organizations to implement privacy-enhancing computations.
The current privacy environment in the financial services industry is becoming increasingly sensitive, and organizations are trying to balance the need to innovate with the need to protect sensitive data. Privacy-enhancing computations can help mitigate this risk and drive business innovation.