An astonishing 52% of business decision makers at US and UK financial services organizations feel their leadership teams do not appreciate the significant impact of technological disruption could have on the industry in the next five years, according to a recent report from Vuealta, The Future of Financial Services: Planning for Every Eventuality. Additionally, only 11% of respondents ranked emerging startups a top concern. Yet, the US market alone saw 659 investments in financial startups in 2018, worth $11.89B – a new annual record – according to a CB insights report, “Fintech Trends To Watch In 2019.” Ultimately, the financial services industry will face countless challenges and disruptors over the next five years and being unprepared or unconcerned when it comes to technology disruption in today’s environment is a damning indictment of the world’s two biggest financial centers.
This past decade has been one of huge disruption for the financial services industry and it doesn’t look to be slowing down one bit. Emerging technologies from artificial intelligence (AI) and machine learning (ML), to blockchain, big data and digital payments are disrupting traditional processes. The Fintech industry saw a global investment of $57.9bn in the first half of 2018 alone – more than the total investment for the whole of the previous year. To make matters more complex, it hasn’t only been technology disrupting the industry. A host of new local and international regulatory frameworks such as GDPR, PSD2, MiFID II, IFRS9/15/16/17 and the California Privacy Act have focused on creating greater transparency and data protection – forcing enterprises to change how business is done.
The good news is that although technology will continue to shift and re-shape long standing ways of doing business, this presents enormous opportunities for the companies that are prepared to lead the industry’s evolution. If financial service providers are able to embrace relevant technologies and effectively plan for the future, they may quickly find themselves ahead of competitors and thriving in an always changing market.
Technologies transforming financial services
So, which technologies are expected to prove most disruptive to businesses over the next five years, while offering the greatest opportunity? Automation has already been transformative when it comes to streamlining back office processes. Now, the implementation of AI will propel this transformation to greater heights – freeing up human workers from mundane tasks and reducing costs. With nearly a third (30%) of financial services leaders in the Future of Financial Services report identifying AI as a major disruptor for the next five years, it is clearly at the forefront of industry leaders’ minds.
Payments technology also continues to be one of the most promising areas of FinTech. The focus of new solutions, such as digital and cardless payments, in addition to mobile deposits, is all about consumer convenience – innovation that financial services firms must embrace over the next few years if they’re going to keep customers happy and loyal.
In the short term, cryptocurrencies (25%) and blockchain (18%) were not seen as top disruptors by financial services decision makers when compared to regulation and compliance (45%) and cybersecurity (43%). However, early adopters of these technologies are already reaping the rewards from practical applications, with HSBC and ING having completed the world’s first commercially viable blockchain trade-finance transaction. This area is expected to ramp up quickly, so only those organizations with the right plan in place will be ready to respond quickly as opportunities arise while also being careful to not expose themselves to threats with hasty adoption.
How companies can thrive
When faced with all of these regulatory challenges, emerging technologies and ever-growing threats how do companies make any decisions with confidence? The truth is, companies are better positioned to succeed than they often realize. Words previously reserved to describe the vastness of space are now being applied to the amounts of data even a single enterprise generates. If companies are able to take advantage of the latest technologies to tap into this wealth of data – especially when tackling high-profile disruptors like regulation and compliance – they will find their way ahead far less uncertain.
It’s survival of the fittest and businesses must be able to make informed decisions at the speed of the digital age. The way to achieve this is through connected planning, which bring teams closer to plans and data; allowing them to make informed decisions at the speed of modern business.
However, a large proportion of organizations, are still trying to run their businesses without adequate planning tools and processes in place, with only half of US and UK business decision makers in our research reporting that “all departments work from one planning tool that’s updated in real time”. For an industry that’s constantly disrupted by rapidly evolving technology, this approach can never work effectively.