Modern economies require a thriving financial sector that offers tremendous support and reliance on future sustainability and growth. In the US alone, the FIRE sector (finance, insurance, and real estate) contributes around 20% of the gross domestic product.
According to the World Bank, nearly $970 million worth of projects and operations were approved for the Fiscal Year 2018. This shows how impactful the financial industry has become over the years.
The industry has always encountered challenges. Currently, though, digital technology is infiltrating our private and professional lives.
Let's look at the challenges new technologies and current times pose to one of the primary industries that help grow communities and nations.
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 have 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 was stolen from banks around the world in 2015, as reported by Kaspersky Lab
- The WannaCry Virus of 2017 infected over 230,000 computers across 150 countries
2. Conflicts Regarding Regulatory Compliances
As things progress nowadays, the financial industry must face another challenge. Since regulations governing the safety of transactions and the entirety of financial service operations are observed to consistently adapt to new technology, certain limitations apply.Advancements create delays since policies and procedures frequently change. Hence, many corporations find themselves at odds when facing issues regarding regulatory compliance. 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 tremendously. Though many consider this an incredible opportunity since big data is what companies are looking for, valuable information containing priceless insights and terrific prospects is not accessible.Takes work tough. This gigantic assimilation of information and ensuring it doesn't fall into the wrong hands is nothing short of a nuisance for many service providers.
4. The Induction of Artificial Intelligence
Quickly looking around yourself, you will find that artificial intelligence (AI) has become a dominant part of our lives. Real-life examples include:- Amazon'Amazon'sss Alexa assistant
- Apple's assistant for all iOS devices is known as 'Siri."
- Mic'oMicrosoft'st'na' was created for Windows 10
- Tesla cars and their machine-learning capabilities
- NetflNetflix'ser suggestions based on predictive technology
Nevertheless, this new technology and its prowess will hardly be limited to what we have mentioned. As things progress, we find the world needs more time to be ready to have such power and prepare 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 industry has become much fiercer than ever before.Brand loyalty is a thing of the past, and it needs to be put on life support. Many institutions are working hard to capture market share by offering personalized services 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 that the financial industry has to face in the wake of technological improvements and advancements. These include the likes of:- API Platforms can change 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 financial services.
- Hybrid Cloud computing, to which 75% of all bankers agree, has already made a considerable impact.
- Instantaneous Payments allow immediate transactions to occur through the infrastructure built around the offered service.
- RPA (Robotic Process Automation) allows the execution of pre-programmed agendas to accelerate growth for various banks and credit unions.
Customer Experience & Digital Divide
Those who consider Customer Experience, or 'CX,' simply a buzzword must know that it is the most valuable part of building a business today. 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, it needs to invest heavily in progressive technologies such as AI and big data. If it fails to do so, its digital divide will be too great to handle, and competition will eventually move ahead of it.
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 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, legal, political, and economic uncertainties affect the industry at large.
