Modern economies require a thriving financial sector that offers them tremendous support and reliance on future sustainability and growth. In the US alone, around 20% of the entire Gross Domestic Product is contributed by the FIRE sector (finance, insurance, and real estate).
According to the World Bank, there was nearly $970 million worth of projects and operations approved for the Fiscal Year of 2018. It shows how impactful the financial industry has become over the years.
Through the years, the industry has always come across some challenges. Currently though, digital technology is infiltrating our private and professional lives.
Let’s look at what challenges new technologies and current times pose towards one of the most primary industries that help make communities and nations grow.
1. Cybercrimes
The biggest challenge that has persistently caused troubles for the financial sector during this technological age is undoubtedly criminal activity using advanced software and hardware. From 2017 to 2018 alone, data breaches from major corporations across the globe have increased 480%.Internet security and safety has become a primary cause for every organization to keep their information from being leaked to individuals who can cause much damage. Some of the biggest cybercrimes recorded in recent times include:
- The Epsilon Breach in 2010 which resulted in $4 billion in losses
- $650 million stolen from banks around the world in 2015 as reported by Kaspersky Lab
- WannaCry Virus of 2017 infected over 230,000 computers across 150 countries
2. Conflicts Regarding Regulatory Compliances
As things are progressing nowadays, there is another challenge that the financial industry must face. Since regulations governing the safety of transactions and the entirety of financial service operations are observed to be consistently adapting to new technology, there are certain limitations attached to it.The advancement creates delays since policies and procedures frequently change. Hence many corporations find themselves at odds when facing issues regarding regulatory compliances. Service providers like Finance 27 may find them easy to get around; however, the bigger the corporation, the more problematic it is to adjust and adapt to new regulations.
3. Managing Big Data
As the world grows, the amount of data accumulated from transactions and other operations also increases at a tremendous rate. Though many consider this as an incredible opportunity since big data is what companies are looking for, nevertheless, managing all the valuable information that contains priceless insights and terrific prospects is not easy.Sorting through this gigantic assimilation of information and making sure that it doesn’t fall into the wrong hands is nothing short of a nuisance for many service providers out there.
4. The Induction of Artificial Intelligence
Taking a quick look around yourself, you will find that artificial intelligence (AI) has become a dominant part of our lives. Real-life examples include:- Amazon’s wireless Alexa assistant
- Apple’s personal assistant for all iOS devices, known as ‘Siri’
- Microsoft’s ‘Cortana’ created for Windows 10
- Tesla cars and their machine learning capabilities
- Netflix’s viewer suggestions based on predictive technology
Nevertheless, this new technology and its prowess will hardly be limited to what we have mentioned, and as things progress, we find the world is not ready to have such power nor prepared to manage it accordingly.
Customer & Employee Retention
As many privately owned services and other business units emerge around the globe, it is hard to say that companies find comfort in knowing that both their employees and customers can switch without bothering to think for a second. The competition within the industry itself has become altogether much fiercer than ever before.Brand loyalty is perhaps now a thing of the past, and it is a term that needs to be put on life support. Many institutions are working hard to capture the present market share by offering personalized service based on individual preferences.
Nowadays, it has become a cut-throat race to offer desired amenities and services to retain customers as much as possible.
Innovative Technologies
There are several challenges which the financial industry has to face in the wake of technological improvements and advancements. These include the likes of:- API Platforms capable of changing the ecosystem that governs the banking system as we know it.
- Blockchain technology and its induction into the banking sector to improve security and various other spectrums of the financial services.
- Hybrid Cloud computing to which 75% of all bankers agree it has already made a considerable impact.
- Instantaneous Payments that allow immediate transactions to take place through the infrastructure built around the offered service.
- RPA (Robotic Process Automation) allowing the execution of pre-programmed agendas to provide accelerated growth for various banks and credit unions.
Customer Experience & Digital Divide
Those who consider Customer Experience or ‘CX’ to be simply a buzzword must know that it is the most valuable portion for building a business in the present era. Old age traditions are biting the dust these days, and customers want conveniences like la carte and mobile banking.On the other hand, for any organization to reap the benefits of current technologies, they need to invest heavily in progressive technologies such as AI and big data. If they fail to do so, their digital divide would be too much to handle, and competition will eventually move ahead of them.
In a nutshell, the global financial system facilitates the flow of financial capital to help the international economy indulge in trade and investment. The above challenges can offer you some great insights regarding how the financial sector has transformed due to the introduction of digital technology in recent times. Apart from the previously mentioned challenges, there are certainly legal, political, and economic uncertainties that affect the industry at large.
