This year, the financial industry is ready for big changes.
Financial institutions that have successfully expanded digital versions of their products and services to address COVID-19 are looking for ways to provide value-added personal touches that generate revenue and can scale without adding cost.
Fintech startups launched products, seeking growth over profitability, a strategy that will almost certainly change. And regulators are extending new controls over a variety of functions and jurisdictions. All of this is happening during a time of technological transition, one more reason why security and risk management are more important to banks, capital markets, insurers and every other part of our industry.
Change is opportunity, and there are a lot of great innovations out there. However, it is quite clear that artificial intelligencesecurity and resilience, and a new focus on the basics, will be the motto of the financial world this year.
Here are four critical ways you’ll see it happen.
1. AI drives growth
Established banks went digital and learned new ways to sell and new efficiencies, along with the new importance of data. Now they need to add the personalized, relationship-based engagement that is critical to their brands, but at scale.
This is where AI plays a key role in driving personalized responses and recommendations. This is important for customers looking for mortgages or financial planning, and for businesses looking for lines of credit. Money is an emotional experience for most people, and that personalization (feeling known and understood) will be key to loyalty and fueling growth.
Financial institutions will have to do more to create strong and unique permission-based digital customer profiles. The data needed to do that may already exist, but perhaps in silos. By breaking down these silos, applying a layer of AI, and seamlessly leveraging human participation, financial institutions can create experiences that address the unique needs of their customers while scaling efficiently.
2. New perimeters in regulation
As global regulatory expectations continue to rise, the historical approach of having siled data on operational, financial and cyber risks will no longer work. The increasing complexity and costs of compliance are placing significant pressure on an industry accustomed to developing or seeking point solutions for specific regulations. In fact, when comparing compliance spending to pre-financial crisis levels, Deloitte estimates that banks’ costs increased by more than 60%.
Regulators are demanding more accurate and consistent data, with greater breadth, depth, and lineage to preserve the efficiency and transparency of financial markets. In 2023, institutions will need to start breaking down silos to enable more accurate and consistent regulatory reporting that meets regional and global requirements across risk disciplines.
Like the companies they oversee, regulators will increasingly use tools that analyze various reports and spot data anomalies. That means that, for both cost and risk mitigation purposes, institutions need a single source of truth based on data, reporting the numbers in the same way. Reports It is rapidly becoming a platform, and both companies and their technology providers will need ways to modernize and optimize their data architecture using the best of cloud technology and open source tools.
3. New era of security risks
For years, financial institutions have invested in local, point security solutions, resulting in a proliferation of siled data systems and tools across their enterprise, making it difficult to compile a holistic view of the threat landscape.
As we enter a new era of heightened security risks, we will see a significant shift toward a zero-trust-backed, platform-based approach to security that enables financial institutions to take a holistic view of cybersecurity. By doing this, financial institutions will be able to unlock insights from the data, detect and remediate threats in a more timely manner, and add a layer of automated controls.
4. Refocus on the basics
In recent years, established financial institutions have moved quickly to close gaps in their digital experiences. Often this led to a shift from existing processes to digital experiences.
In 2023, organizations will need to reflect on their digitization journey and assess what is working and what new digital experiences or processes should be built from the ground up. This assessment will also prompt a reassessment of the right distribution mix across channels as more tasks are completed digitally.
Fintech companies are facing a similar “back to basics” year, but they are more squarely focused on profits. Rapid growth was fine when money was cheap. Today, a path to profit is more attractive. This dictates a greater focus on customer acquisition costs, customer maintenance cost, and cost of operations.
Accountability has never been more fashionable than in 2023, and that’s a good thing. It means testing new technologies, new products, new strategies, new customer behaviors, and new businesses that we’ve seen grow in easier times. The winners will be those who focus on optimizing their data to build high-impact experiences and processes, and deprioritize the unnecessary.
Zac Maufe is the Head of Financial Services Solutions at Google Cloudbringing more than 20 years of banking experience to the role focused on transforming financial services around the world using the power of Google.
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