The pace of vibrant and swift technological paradigm shift in the most recent years is, without doubt, the most disruptive force in the financial services ecosystem today – a change that looks set only to continue and accelerate.
As a result, Financial Services firms globally are in pursuit of amassing huge investment in latest and innovative digital capabilities. They are embracing the very digitalisation that has disrupted their industry, to support an array of functions from regulatory compliance to customer experience and product development.
David Clee, CEO and Founder of MirrorWeb, here explores the key technology trends set to shape financial services in 2020. This includes increasingly intelligent use of customer data, adoption of digitalisation by regulators and greater uptake of technologies to address ever-evolving compliance obligations.
More intelligent optimum utilization of customer data through tech: –
In the current digital world, we provide more information about ourselves, our behaviours, preferences and needs than ever before. Spectators argue that data has overtaken oil as the world’s most valuable resource. Indeed, data collection and analysis has emerged as a major enabler for financial services.
As the capability of technology expands, we can expect to see more businesses in the sector capitalise on the opportunity to learn more about their customers and improve their offerings.
Recent regulatory changes have helped to drive this for smaller entities. One example includes the second Payment Services Directive (PSD2). Otherwise known as ‘Open Banking’, that has taken shape in 2018. By forcing the biggest banks to release and share customer data, PSD2 has supported the FinTechs and other innovative new entrants, such as budgeting apps and robo-advisors, to tailor and customize according to their offering to consumers in terms of products and as well as sometimes backed on consumer preferences.
With analysts predicting that by 2025 an estimated 463 Exabyte’s of data will be created each day, technology will also be vital in ensuring that data is harvested, consolidated and managed effectively. As this process becomes simpler, companies must ensure that data is collected intelligently and with purpose, establishing their own processes to prevent data misuse.
Regulators beginning to embrace digitalisation: –
The overhaul of the financial services industry in the post Great Financial Crisis (GFC) era created a swathe of new rules and regulations. Financial firms must comply with these whilst they also contend with the rapid evolution of technology.
While such changes have presented financial firms with significant compliance challenges, transforming how they operate and behave on a day-to-day basis, it has coincided with another notable overhaul: regulators embracing new technologies.
There are already clear signs of regulators adopting increasingly sophisticated technology. One such example is The Consumer Financial Protection Bureau (CFPB). It focuses on consumer protection in the US, and has invested heavily in analytics and digital technology. It has also created an E-Regulations online tool to help users find, research, and understand regulations.
The increasing adoption of new digital capabilities by the regulator is incredibly positive for the financial services sector. Indeed, a more collaborative approach involving the regulator and financial firms will not only help the regulator do its job more effectively but will also make it more straightforward for financial firms to keep up and manage their compliance obligations.
The same is true for Europe. In the UK, for example, the FCA evaluates how insurance firms use their own large data collections by using web analytics and social media data. It is also in the second pilot phase of its digital regulatory reporting (DRR) initiative.
Tech solutions for fast-evolving regulation in a digital world: –
Technology is emerging as an important part of the solution to these challenges. Financial institutions, both large and small, should be looking to regulatory technologies that help them satisfy these compliance requirements and reduce the burden of record-keeping.
At MirrorWeb, for an Illustrative purpose: – We allow end-to-end website and social media archiving. A process in which digital content is captured and archived, providing firms with accurate records of their online communications
Global Businesses now recognize the significance of online communications and social media, primarily as marketing and sales channels. With this in mind, the Financial Services Industry, with the emergence of FinTech, RegTech and RPA in particular is projecting significantly high returns on its investment in an array of fast-growing web-based and social media channels, with annual revenue growth related to this area averaging 31%.
However, the opportunities that come with social media present new and unique challenges. The emergence of fresh channels of communications for financial institutions to promote products and entice new investors has naturally elicited a strong regulatory response, with extensive record-keeping requirements becoming a significant burden for compliance teams.
Conclusion: – By harnessing the opportunity of tech, financial firms have the power to tailor what they offer their customers and better manage their compliance obligations. Meanwhile regulators look set to enhance the regulatory landscape through the adoption of new technologies. With the rate of technological innovation due only to accelerate, 2020 looks set to be a year of considerable opportunities for digitalisation in financial services.