10 Technologies That Will Disrupt Financial Services In The Next 5 Years

The scope and speed of evolution in regulation, customer behavior and technology – coupled with the emergence of new competitors – mean that the future of banking will not be a continuation of the past. New technologies will transform banking as we know it, providing both opportunities and challenges for financial institutions.

A decade after the financial crisis, the near-collapse of the economic system is fading from memory. But, while the banking industry has largely recovered from a financial perspective, there are storm clouds on the horizon. While capitalization has improved significantly, revenue growth has become more challenging with the strategy of cutting costs having run its course. At the same time, banks and credit unions are playing catch up from a technology perspective at a time when consumer expectations are increasing exponentially.

Making the banking business even more difficult, smaller fintech and large techfin companies are developing solutions that use insight and digital technology to improve the customer experience across product lines. These new competitors threaten legacy financial institutions of all sizes. According to various consultancies, new players could capture up to a third of incumbent banks’ revenues in the next 2-3 years. Failing to respond could lead to the demise of less agile organizations.

The good news is that many of the new technologies that are threatening the banking industry also present significant opportunities. In fact, those organizations that can leverage big data, advanced analytics and new technologies to improve the customer experience can build trust, loyalty and revenues that are the keys to success in the future. According to Dan Cohen, Senior Vice President, Global Financial Services and Insurance at Atos, “Banks are at a crossroads. Continuous finTech innovation and new technologies such as blockchain are disrupting the market. While it creates threats, it also opens multiple opportunities for financial services to reinvent themselves and thrive.”

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How to Create a Digital Transformation Strategy

There are fundamentally two avenues to creating a digital transformation strategy. The first is a bottom-up approach that relies on the initiative of individual business units to modernize the processes they have the most experience working with every day. The advantage of that approach is that it tends to achieve results quickly. The downside is that those efforts are typically uneven and may not result in a meaningful, sustainable competitive advantage because rivals can quickly replicate the same capability.

The second approach relies more on leadership from the top down. That approach typically involves the CEO, along with the board of directors, mandating the adoption of a series of digital business processes that transform how an organization operates at its very core.

Of the two strategies, the most widely employed to date has been a bottom-up approach, driven mainly by line-of-business executives. But as more organizations begin to appreciate the scope of what’s required to remain not just competitive, but also maintain their existence, more digital business initiatives are starting to be led from the top, says Juergen Lindner, senior vice president of SaaS for Oracle.

“It’s becoming a more strategic discussion,” says Linder.

Vendors Pursuing Digital Transformation Solutions from All Angles

Oracle at the Oracle OpenWorld 2018conference announced a raft of updates to a cloud application portfolio that now spans every major business function in the enterprise. Oracle is making a case for delivering those applications as a cloud service to both lower operational costs and make it simpler to employ advanced machine and deep learning algorithms to automate most business processes using, among other technologies, blockchain databases and digital assistants.

In fact, Oracle CEO Mark Hurd told conference attendees that Oracle expects 100 percent of all cloud applications will have artificial intelligence (AI) capabilities by 2025 and that 85 percent of all customer interactions will be automated.

 

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