The financial services industry was well on its way to a digital-first future before the pandemic upended industry and commerce across the globe. The fallout from the pandemic, however – particularly the growing demand for digital only services – has pushed financial services transformation into overdrive.
Consumers, whether venturing out or staying at home, are still spending money, showing that marketplaces can survive without the need for a physical location. Much like restaurants, hotels, and entertainment vendors, financial firms have embraced a significant shift in the way their business models run to meet the ever-increasing consumer demands for digital options. With the diminished number of in-person interactions, businesses are relying more heavily than ever on digital tools to survive and adapt. In many cases, in order to remain operational, businesses must embrace digital transformation as they’ve never done before.
This means big challenges for the financial services industry, as firms are quickly adapting to accommodate the way consumers are now choosing to work with them to manage their finances and pay their bills.
Over the last year, we’ve seen the proliferation of several realities that financial services business and technology leaders must face:
The pandemic forced consumers and service providers in the U.S. to leverage technology that’s been available but perhaps not considered a must-have until now. For instance, biometric technology such as fingerprints identification, facial recognition, and ocular scans are becoming standard ways to exchange credit card information during transactions. Mobile payment options from personal devices offer the security of pre-screened information so consumers don’t need to enter credit card information or security codes at POS sites.
“We’re already seeing some acceleration in the ways that consumers interact in the payment flow,” said Ian Stuttard, Head of Product and Innovation, North America, Elavon, Inc., during a Comcast Business webinar. “Rather than interacting with a device they are not familiar with, there will be an increasing push to create payment experiences on devices that belong to them.”
Online shopping has exploded, and not just for the traditional players like Amazon, WalMart, and Apple. The transition to an almost exclusively online experience exposed the fact that there still are many populations in rural America—and even some urban areas—without the infrastructure to support an exclusively online marketplace.
“Bandwidth is critical,” said Larry K. Williams, President and CEO of the Technology Association of Georgia (TAG). “There are a lot of efforts to make sure there are plenty of pipes, and fast fibers to make sure people and merchants have the connectivity they need for smooth transactions.”
As the need for more bandwidth, better security, and reliability increases, technologies such as SD-WAN (Software-Defined Wide Area Network) that allow networks to work faster and more autonomously are proliferating. A technology that is already projected to grow by 30% annually, SD-WAN is gradually replacing or supplementing slower MPLS networks as organizations look to improve networks, enhance employee productivity, improve customer experiences, automate and streamline network management, and cut costs.
Consumers have long relied on the financial services industry to ensure the safety and security of their information. Still, some experts say there needs to be more responsibility at all levels to minimize and mitigate threats. Financial services organizations must educate customers to take a bigger individual role in the security of their online presence by learning the importance of strong passwords, updating the software on personal devices regularly, and making sure they trust those using their personal networks.
Technology will in many ways replace the human element in a contactless world where pens are no longer handed out to sign a receipt and face-to-face consultations are no longer needed to open a checking account. For financial service organizations, that means increasingly turning to technology to help boost engagement and verify customer identification, while also advocating for policies that make it easier to adopt emerging technologies.
The adoption of digital financial technology has been inhibited by policies that require human intervention. Gone may be the days of the handwritten signature, replaced by biometric sensors in smartphones or facial recognition technologies. On a global scale, transactions such as car buying and real estate purchases are becoming more digital and less reliant on human interaction, recognizing e-notary processes to confirm identities.
Artificial intelligence (AI) and machine learning technologies were taking root in financial services well ahead of the pandemic. Just before the pandemic, 60% of financial services professionals said they had embedded at least one AI capability, with technologies spanning the front off to the back office. By 2035, AI will add more than $1.2 trillion in value to the financial industry.
As financial transactions shift online, technologies such as blockchain will make transactions more secure. AI applications such as chatbots will become more self-aware and able to take on more tasks. As it evolves, AI will be used to secure e-commerce transactions by identifying unusual spending patterns, using multiple data points, or reducing the number of times a transaction is declined before it is red-flagged.
Service providers are under pressure to make transactions as “frictionless” as possible, requiring far fewer touch points to complete a transaction. One-click transactions will become more widespread, perhaps even when buying a car or home, and sensitive transactions will leverage biometrics to confirm customer identity and reduce fraud.
As the world continues to adapt to a new paradigm, financial services firms must be prepared to serve a cautious consumer base that is ready to execute more transactions but unsure of how to do so safely. Consumers have gotten used to methods of shopping and bill paying that don’t require them to reach for their plastic or physically confirm their identity.
This digital business reality has been on the horizon for some time — the pandemic has merely quickened the pace of change. The technology is in place to meet this demand—it’s now up to the financial services industry to implement it. Learn how Comcast Business can help guide you develop your digital-centric strategy.
Key insights and strategies to consider as financial services pivots to digital business.
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