By Robert Turner, Senior Vice President and General Manager of U.S. Financial Services at Kyndryl
The financial services industry is undergoing a transformation driven by new technologies and changing consumer behaviors. Digitally-savvy customers are accelerating the move away from physical currency, creating a cashless economy. What’s more, they demand convenience at every step, particularly during the payment process.
For financial institutions, keeping up with the latest tech trends is essential for remaining competitive and improving customer satisfaction. It’s no secret that artificial intelligence (AI) is reshaping the financial services industry. It has the power to help organizations improve customer service, streamline back-office operations and deliver innovative solutions. At the same time, increasing regulations, rising cyber threats and a growing need to modernize core system technology must also be addressed.
Here are four important technology trends that financial services companies must be aware of — and the strategies to consider for thriving in a digital society.
Trend #1: Artificial intelligence
AI is becoming a valuable tool across financial services, enhancing fraud detection, risk management and personalized customer experiences. AI can analyze data in real time to identify fraudulent transactions and synthetic identities, improving security and customer satisfaction. It also helps streamline document management, reducing headcount needs. Additionally, AI can detect threats and help organizations recover quickly from cyberattacks
Action to take
Because of the broad opportunities AI brings and the critical need to accelerate AI innovation within the industry, strategic partnerships with IT providers and AI specialists are key for enterprises to successfully and securely scale new technologies while adopting responsible AI governance to ensure data is used ethically, transparently and securely.
Trend #2: Embedded finance
Embedded finance integrates financial services like payments or lending into non-financial apps and platforms. Think of a rideshare app with payment options or digital wallets linked to rewards programs. The embedded finance trend shifts focus from traditional banking to direct interactions with customers through apps they already use. It enables businesses to offer multiple services in one platform, increasing customer engagement, while banks and lenders benefit from more business volume, often without direct customer interaction.
Action to take
As more data flows through these integrated systems, it’s crucial for financial firms to manage data securely, comply with increasing regulations and give users control over their personal information. In addition, companies will need to adopt cybersecurity solutions, potentially powered by generative AI, to vigorously protect consumer data and ensure compliance.
Trend #3: Payments innovation
Payments are changing quickly with new technologies like real-time payments, blockchain and digital wallets. These innovations make transactions faster and more efficient, whether it’s across borders or with cryptocurrency. That means banks — and businesses of all types, for that matter — must stay fully informed about financial technology and closely watch changes in how consumers make transactions rather than just thinking about simple upgrades to their systems.
Action to take
One of the main challenges for banks is adapting their legacy systems to handle these innovations. Many back-end systems are not designed for real-time payments, creating bottlenecks in transaction processing. With the rise of cashless transactions, where individuals transfer money directly, companies must implement more robust fraud detection and monitoring.
Trend #4: Cybersecurity
Cybersecurity is crucial for the financial services industry, especially with the rise of digital banking and cross-border transactions, as well as more data breaches. The EU’s Digital Operational Resilience Act (DORA) is setting new cybersecurity standards for financial institutions. And U.S. institutions, meanwhile, are starting to prepare for similar regulations that may come to the U.S.
Action to take
Businesses that don’t keep up with software updates, hardware maintenance and application security risk being attacked. As cyber threats grow, organizations must invest in better cybersecurity to protect data, comply with regulations, focus on vulnerability management, use the NIST framework and shift spending to security to avoid costly violations.
source : https://www.kyndryl.com/in/en/about-us/news/2024/09/financial-services-tech-trends-2024