Emerging IT technologies in the financial sector have changed the way consumers manage their money and their demands from financial institutions, as well as the very operation of financial institutions.
The most important emerging technologies in the financial sector include:
RPA technologies are widely used by banks to automate specific repetitive processes. Unlike complex artificial intelligence technologies, automation through RPA is achieved through a series of simple IF functions that are used as rules for the implementation of repetitive processes.
These systems can automate the processes of digitizing data and managing transaction approvals as well as assisting in risk flagging processes of a customer portfolio from a database.
The benefits offered by an RPA system in the financial sector are multiple:
It increases productivity, freeing up significant time for human resources thanks to the automation of repetitive processes and the allocation of this time to more demanding processes. Research in bank departments showed that productivity after the installation of RPA systems increased by up to 50% (Polak et. Al, 2020).
It reduces labor costs, thanks to reduced times in data entry and management as well as avoiding errors in calculations and entries.
It offers the possibility of detailed reporting, collecting important data for all automated processes, thus enabling the analysis of the productivity level of the processes in relation to the past.
Reduces workload during periods of increased volume such as payroll.
A disadvantage attributed to RPA systems is the risk of data interception, especially when data is exchanged between users and/or sent by the RPA through different platforms. Of course, as these systems are increasingly evolving, such risks have been significantly reduced and now the benefits are much greater than the potential risk of interception.
AI & Chatbots
Chatbots and other artificial intelligence (AI) solutions are becoming an increasingly important part of digital transformation in the banking sector. While chatbots are the most common application of AI in the banking sector, AI solutions are also being used to manage and automate other processes such as risk management, data entry and processing, and marketing, freeing up hundreds of thousands of hours of work from employees and significantly reducing the cost of repetitive processes for large financial institutions.
The advantages that the banking industry can gain from the use of AI technologies are many:
First of all, by managing communications with chatbots, customers are served faster and more accurately, while at the same time important data is collected that helps to understand customers and their needs.
Subsequently, the automation of specific complex processes such as risk management and statistical analyses, as well as the continuous improvement of systems due to deep learning, can create significant savings in terms of money or manpower that can be allocated elsewhere, thus reducing the so-called opportunity cost.
The main disadvantage of AI systems is that they have a high purchase and installation cost, making it difficult for small and medium-sized organizations to acquire such systems.
Blockchain
Blockchain is perhaps the hottest technology for the financial industry at the moment as it is an innovative way to manage transactions, which drastically reduces the relative cost and speed of management, offers security and uniqueness in transactions (one of a kind hash) and provides the ability to create new financial products, such as smart contracts and other derivatives. However, if we exclude large organizations such as JP Morgan Chase, the adoption of this technology is currently small.
The adoption of Blockchain technology for transaction management can bring many advantages to the financial industry:
A first advantage is the increased transparency in transactions as when transactions are made under Blockchain, they occur on a Public (public) ledger, thus reducing the chances of financial fraud.
Furthermore, the use of a blockchain network drastically speeds up the execution of banking transactions. To identify and complete a transaction through today’s banking systems it may take a few days, a few hours or with the most modern technologies a few minutes. Through the blockchain network, however, banking transactions are completed in real time. In addition, this speed also increases the security of transactions as their fast execution leaves less time for hackers to find the transaction data or modify the recipient of the transaction.
Finally, the central weaknesses that one can point out for blockchain networks are their great complexity and the difficulty of extending them over time. However, given the young age of the technology, these weaknesses cannot overshadow the advantages for the financial sector.