We all know the old saying: “The 21st century is the age of high technology”. Technologies may be high, but not all of them are in demand in key sectors of the economy. In this article, experts from Boosty Labs, a company focused on fintech (https://boostylabs.com/fintech) and Neo banking application development, discuss technologies that are giving the financial industry new impetus.
Cloud technology or “cloud” is a virtual memory in which anyone can store files, use computing power or computer programs. In a modern person’s life, the cloud is used to store various types of data: photos, videos, documents, and more. If you consider which cameras are now installed on smartphones, their own memory is often insufficient, which is why cloud storage services are used.
If we look back a little, the financial sector didn’t use cloud technology about 10 years ago. There was a good reason for this – the threat to the security of personal data and customer funds. Billions of people around the world use banking services, so the fears expressed by representatives of the financial sector are understandable.
Today the situation is different. The banking sector is an avid user of cloud technologies. A well-known example of this is contactless payment via smartphone. The person on the phone enters the bank card details into special software and can use them to pay by simply bringing them close to the terminal. All data is loaded into a special host system in the cloud storage and then an emulated physical map is created. The data is not stored on the smartphone, but is encrypted and transferred from the cloud with every payment.
Cloud technologies are used in the banking sector because they have proven to be secure. It just isn’t profitable for banks to develop their own cloud storage – this leads to a completely different type of activity at a whopping cost.
Artificial intelligence and machine learning
“Artificial intelligence” and “machine learning” are definitions that we often only heard in films in 2010 and will be discussed in the news and scientific materials in 2021. The use of artificial intelligence and machine learning in the financial sector began around 2013-2014. Shortly before, the UK’s Financial Conduct Authority (FCA) banned fees for the services of financial advisors. Many other regulators around the world followed suit. Banks and financial institutions had to fire financial advisors because their activities could no longer be monetized. However, their customers needed advice and something had to be done about it.
Artificial intelligence (AI) and machine learning (ML) came to the rescue. In fact, the chatbots and the voice you hear when you call the bank are AI and ML. It’s worth noting that sooner or later, financial advisors would be replaced by chatbots, as they have a number of advantages:
- Banks do not have to pay a salary to a chatbot, it is sufficient to create and configure it once. Then only some of its possible functions have to be added, but this is not that expensive.
- The chatbot works around the clock, without breaks and weekends.
- Based on the information available about the customer, the bot can easily create a customized offer, which can take a lot of time for the financial advisor.
- A bot can serve dozens or hundreds of clients at the same time, excluding the human factor.
Artificial intelligence is also used in the analysis of financial markets, which predicts many possible scenarios for the development of events. Asset management, security systems, audit – AI and ML are used everywhere.
PRA (Probabilistic Risk Assessment)
PRA solutions is the automation of work processes by robots. As practice shows, robotization can be used in many areas of the economy, but the financial sector in particular needs it because the routine work is simply too big here.
According to statistics, in 2020 more than half of the processes in the financial sector were carried out by robots. Take a mortgage specialist, for example. He devotes around 90% of his working time to filling out customer applications when it is done manually. And when a robot is connected to this process, this value drops to 60%, so that the specialist can have time for more important work tasks.
In 2021, robots can take on the following tasks:
- Processing of incoming data. Bank employees around the world spend more than half of their working hours on this. Using robots in this process can reduce the workload by 60%.
- Confirmation of the correctness of the received data. The task is not difficult, but it is very time consuming. If you entrust this task to a robot and grant access to databases, it will be a little faster.
- Collection of information. In order to create a custom quote for a client, you need to understand the sentiment of the markets and the general situation. While the analyst is looking for all the information they need, the offering may already be out of date. This is why this task is now performed by robots in banks, as they can find the information they need much faster and structure it correctly.
Five years ago there were only two opinions about the blockchain: the first is that it is cryptocurrency, and it looks like hype; second – what is it about?
Blockchain and cryptocurrencies have gone hand in hand over the years, but by 2021 it’s safe to say that distributed ledger technology has separated from digital assets.
To put it simply, blockchain is a database that consists of blocks. Each block contains information that cannot be changed or deleted. In other words, once information gets onto the blockchain, it stays there forever. In addition, the blockchain does not have a centralization, i.e. a data center – it is located on many servers or PCs around the world.
There is a process within the banking industry called reconciliation. Due to the human factor and the mutual exchange of information, reconciliation takes a long time. Blockchain solves this problem by speeding up the whole process overall and speeding up transactions. Another plus of the distributed ledger technology is the ability to abandon many intermediaries for interbank transfers. It’s because of them that we pay such a high commission.
At the end of 2020, financial experts calculated that implementing blockchain only at banks in the US would reduce annual costs by $ 8 billion and worldwide by $ 30 billion.
All of the above technologies are used in the financial sector, but not yet on a large scale. In the next 10 years, each of them will become an integral part of financial companies, which is undoubtedly good news: the digitization process will accelerate and we will ask for less money.