As the world is rapidly changing, there is an underlying need for financial institutions to improve digital banking experiences and prioritize tech innovations in the finance sector. These tech innovations can also help banks stay competitive, especially in the post-pandemic era.
Although financial institutions have been upgrading their technology to navigate the pandemic, they are yet to settle down as new tech demands new ways of managing risks. Experts also reckon that financial institutions will need to be committed to improving digital banking experiences and prioritize tech innovations this year.
In September 2020, McKinsey stated that the current Covid-19 crisis has significantly accelerated the need for financial institutions to adopt innovative technologies.
“Indeed, customers had no choice during the lockdown but to migrate to a digital-only world.”
A study by PwC also indicated that nearly 81% of banking CEOs are concerned about the speed of technological change more than any other sector.
That said, the challenge to keep costs as low as possible while maintaining maximum security has also increased. Notwithstanding, some tech innovations can help ensure that banks stay competitive in the post-pandemic landscape. They include:
- Blockchain technology.
- Quantum computing.
- Robotics process automation.
Robotic Process Automation (RPA)
RPA is one of the recent tech innovations that can help banks reduce human errors by automating tasks that humans tend to flub. Robotics Process Automation can handle different things—including data entry, counting money, screening for fraudulent transactions, and more. However, RPA is not the solution for every problem. And as banks continue to adopt digital models in 2021, there will be more opportunities to automate some tasks than in the past.
Many fintech companies have also adopted Robotics Process Automation for making time-consuming banking operations more organized. Reportedly, the largest revenue share for 2019 was dominated by the BFSI segment in terms of the application of RPA.
Amongst other tech innovations, quantum computing is expected to be embraced by more banks as it can solve exponential problems in ways that a traditional computer cannot. Quantum computing technology can predict what will happen in the market and when the next crisis or even pandemic is likely to occur. Hence, banks can leverage this technology to improve portfolio management via capital allocations, cash management, and rebalancing.
FinCen also reported that:
“Quantum computers have a decided advantage in analyzing scenarios that include nonconvex discontinuous values, such as interest-rate yield curves, transaction costs, trade size, and quantity restrictions.”
This is unarguably the technology for the future. Blockchain technology has brought a new level of transparency in financial transactions that were once impossible. It has improved transaction security and has enabled customers to trust fintech companies that utilize this technology. Experts also assert that blockchain technology is almost an indispensable factor in transforming the banking sector in 2021. It can minimize the overhead cost by making expedited processing—almost instantaneous clearing and settlement —the new norm.
Additionally, blockchain technology is not just a tech innovation for the fintech space alone; it is applicable in other sectors, making it stand out amongst other tech innovations. So far, blockchain technology has seen increased adoption. And with the rate of adoption, it is safe to say that blockchain technology will take over the fintech space sooner than later.
While the list is unlimited, these tech innovations mentioned above have proven to be necessities in the fintech space. And to pioneer this change, we need both government involvement and private-public partnerships.