From the start, financial services have been all about driving progress: in antiquity, the first gold and silver coins were designed to make life easier for traders and customers, as people no longer had to rely on bartering goods. Today, financial services are during the biggest change since the invention of the coin – digitization. Faced with new challenges ranging from fintech startups to cryptocurrencies, financial institutions are under immense pressure to reinvent their business and operations. But there is more to this change than simply the need for innovative financial products and self-service platforms.
Like every disruption of the business world, the situation currently unfolding in the financial services industry is simply an evolution happening at a rapid pace. If we hit the ‘slow motion’ button to get a clearer view, it turns out that – once again – the key pillars of this evolution are people, processes, and technologies. However, discussions are often focused on technology alone: on mobile apps and always-on cloud services that provide the foundation for modern self-service banking; on investment and trading platforms such as RobinHood or Revolut that are popular with digital natives; and on blockchain technology, which provides the transaction tracking mechanism that is at the heart of every cryptocurrency. But the recent pandemic has illustrated that processes and people are just as important to future-proof the financial services industry.
In times of lockdowns and social distancing mandates, millions of people all over the world have changed their habits and switched to online shopping. Along with more e-commerce, more financial services – payment, loans, etc. – have been performed digitally. So financial institutions had to deal with a considerable increase in online banking, simultaneously they had to send their own staff to their respective home offices and enable them to continue working from the safety of their homes. This way, the pandemic gave us a glimpse of the challenges that financial services institutions will have to face in the future: they will need the agility to scale massively and instantaneously, reacting to changes in customer demand at a moment’s notice, while enabling their staff to work flexibly from anywhere to achieve resiliency and maintain – or even increase – productivity.
Both dimensions of this agility – the flexibility of scale and of geography – need to be embedded in an effective security framework. After all, the industry’s strict security and compliance regulations continue to apply, even as financial institutions use cloud technologies to massively scale at short notice, or as they deploy digital workspaces to enable flexible work-from-anywhere scenarios. This is where, once again, AI comes into play. Artificial intelligence – already employed widely in financial services to detect fraudulent transactions, identify trends in customer behavior, analyze changes in risk landscapes, etc. – will play an important role for all aspects of security. The data volumes and transaction speeds a future banking will simply be too big to leave security analysis to manual intervention. This is why continuous AI-based monitoring will be used to detect any kind of unusual behavior, from mass scale cloud-based online transactions down to the individual employee accessing a specific application while working from the office or home office.
The employees will continue to play a crucial role for the financial services industry in the future as well – as in any other industry. In spite of the trend towards automated self-service online banking processes, it won’t be possible to automate all financial services workflows. After all, there will always be situations when customers expect more than just a simple transaction that they can trigger by the click of a button. There are times when they want to consult with a human counterpart, be it for investments, loans, or advice regarding their financial affairs. Against this background, every financial services digitization strategy needs to focus on automation and disintermediation, and also people: it will be crucial for financial institutions to empower their employees to be productive wherever they are and with any endpoint device, enabling them to flexibly meet customer needs and expectations.
Hopefully, with the pandemic soon about to be overcome, the financial services industry can switch from ‘resilience mode’ back into ‘innovation mode’. In their effort to reinvent themselves, it will be important for financial institutions to highlight the product or technology side of their digital transformation, but also to include distributed processes, and to focus on the productivity and well-being of employees as a foundation for a great customer experience. Ultimately, a great customer experience – with all its technological and human aspects – is the driving force of success in the financial services industry. This was true in the age of the gold and silver coins, and it is still true and the age of bitcoins.