Financial markets have experienced massive changes thanks to the rise of fintech. Processes that were the norm just five years ago have become obsolete or changed drastically, particularly in the banking sector.
In some cases, these new technologies have come with positives like improvement in security and greater customer satisfaction. In others, they have brought downsides, often including redundancies and loss of jobs. Regardless, these new technologies threaten to eat up big chunks of revenue previously enjoyed by traditional financial institutions. This has forced said institutions to adapt or lag in development.
Below we highlight some technologies that are disrupting and will continue to disrupt financial markets.
1. Artificial Intelligence (AI)
AI allows machines and computers to perform intelligent tasks that would normally have been done by humans. AI has become somewhat of a necessity for financial institutions both small and big. It has improved areas seemingly as simple as customer service to ones as complex as cyber security.
In the latter case, customer care agents have been steadily replaced by chatbots that cost institutions less and deliver superior customer satisfaction. For one, AI recommendations are based on a wide range of user specific data. This means that they can provide more relevant feedback than a human agent.
With AI, algorithms are replacing humans in tasks like lending and investment decisions. This eliminates human error and human bias, thus delivering better results. Cases of fraud also reduce because the AI can predict its likelihood and allow the business to plug those gaps.
It started with Bitcoin but blockchain, the technology behind Bitcoin, has proven to be very versatile with applications going beyond crypto currency.
According to Professor Clayton Christensen who introduced the idea of disruptive innovation in 1997, disruption means “any innovation that transforms a complicated, expensive product into one that is easier to use or is more affordable than the one most readily available”.
Blockchain thoroughly satisfies that definition. It has benefits like added security because it allows digital information to be dispersed and not copied, increased transparency and a reduction in costs of operation, in part due to cutting out the middlemen in financial transactions. It has changed transactions to the extent that some suspect it may make banks obsolete.
3. Cloud computing
Financial institutions favor cloud computing because it is more efficient especially as far as costs go. Expenditure on IT software and hardware can be high. Cloud computing helps reduce the amount of needed infrastructure, including space to store it. With reduced infrastructure, so comes a reduction in maintenance costs.
Furthermore, cloud computing isn’t static. Growth of a company (in terms of activity or staff) can easily be matched by increasing the cloud services at a fraction of the cost of purchasing or expanding infrastructure. Companies have the option to simply increase their cloud services should they need to. On site systems cannot provide the same level of flexibility.
4. Virtual Reality (VR) and Augmented Reality (AR)
Although still in early stages, Virtual Reality tech has the potential to revolutionize how trading is done. The premise behind it is that a virtual reality trading platform, makes trading easier because it helps traders visualize the data, especially now that financial data has increased exponentially.
Several banks are already using VR and AR in different ways. AR and VR have also enhanced the customer experience with the use of apps that help customers with information like location of the nearest bank branch or ATM.
5. The Internet of Things (IoT)
The internet of Things, or the extension of internet connectivity into physical devices stands to disrupt financial markets by the sheer amount of data it collects. Think smart watches, cars, heart monitors and so many more. They are predicted to generate 13 trillion dollars by the year 2025. With all the data provided, companies will be able to make products that are uniquely suited to their customers.
Understanding, embracing and harnessing new tech shaping financial markets is vital for the success of any financial business today.
Let the experts at ASB Resources help you find and navigate the best path for you in this new world. As one of the top IT solution providers on the East Coast, ASB can equip you with the tools and resources you need to understand and make the most of these technologies. Schedule a call with us today!