By Catherine Hoff, Managing Director and Co-Founder of Genieology

In the banking world, the 90s feels like a distant memory. It was a time where customer experience was confined to a brick-and-mortar establishment with time-consuming processes and disjointed services. Fast forward to post 2000s and the increased use of the internet pushed the banking sector to embrace digital. The journey from then to now is a tale of innovation, disruption and financial evolution, thanks to rapid advancements in technology and changes in consumer expectations and behaviours.

Blockchain and Cryptocurrency

Blockchain technology, originally created to underpin cryptocurrencies like Bitcoin, has found applications beyond digital currencies. Blockchain’s decentralised and secure ledger system can streamline various banking processes, including cross-border payments, trade finance and identity verification. Financial institutions are exploring the use of blockchain to reduce fraud, lower transaction costs, and improve transparency in operations.

Its full impact with traditional institutions is still evolving, but blockchain features have the potential to disrupt and transform specific aspects of the financial industry. Along with the possibility of faster and cost-effective cross border payments, this tech can deliver Smart Contracts, which are self-executing agreements with the terms directly written into code.

Big Data Analytics

Big data analytics can be used to distill the vast amounts of daily data generated by the banking and finance industry into valuable, decision-driving insights. Financial institutions use data analytics to optimise operations, create personalised marketing campaigns, and better understand customer behaviour. Predictive analytics can be used to forecast market trends, identify risks, and make data-driven investment decisions. Analysing customer data leads to tailored financial solutions for customer satisfaction and retention. This shows that a ’one-size-fits-all’ solution doesn’t work, and product design plays a crucial role in ensuring optimal engagement.

Artificial Intelligence (AI), Large Language Models and Machine Learning

AI and machine learning, by which we mean automation and large language learning models (LLMs), are transforming the banking industry in numerous ways. AI-powered chatbots and virtual assistants are used to enhance customer support and streamline routine inquiries. Machine learning algorithms are employed to assess credit risk more accurately, detect fraud in real-time, and personalise financial product recommendations.

The early iterations of robo-advisors (RAs) had a bad reputation in banking resulting in the tech being rolled back or cancelled altogether. But with ChatGPT and more sophisticated LLMs, they are gaining popularity to created automated investment platforms to manage diversified portfolios, making wealth management services more accessible and cost-effective, as well.

Fertile Ground for Fintech Disruption

The rise of fintech startups has disrupted various aspects of banking, from payments and lending to wealth management and insurance. Fintech companies have introduced innovative solutions and digital-first services that challenge traditional banking models.
Open banking initiatives and regulations in several countries are providing a fertile ground for fintech to drive innovation, competition and growth.

Though still in its infancy, it will benefit the sector if they continue to widen the range of products and services available to customers within the open banking ecosystem. Also, to accelerate the adoption among customers, the industry needs to enhance awareness about the benefits of open banking. A recent survey found that only 20% of consumers in the UK are aware of open banking, which calls for more education and outreach to consumers.

The Cyber and Data Security Considerations

It’s important to note that with the growing reliance of new technologies and models in the financial industry, there’s a very real and growing threat of privacy and cyberattacks. Using large language models raises concerns of data privacy, security, and ethical considerations. Banks need to ensure that they handle customer data responsibly and adhere to relevant regulations, such as GDPR and financial data protection laws, when implementing these technologies.

Cybersecurity is another area that the banking and finance sectors need to heavily invest in to protect customer assets and maintain trust. Advanced encryption techniques, biometric and multi-factor authentication, behavioural analytics, securing APIs and continuous monitoring are becoming standard practices in the fight against cyber threats.

An Exciting Future for the Sector

New and emerging technologies have led to a profound digital transformation in the banking and financial sectors. The adoption of everything from digital currencies and artificial intelligence to open banking initiatives are democratising financial services, fostering greater inclusion, while bolstering the sector’s defences against threats. And this is just the beginning. As the banking sector evolves, institutions can continue to harness these technologies to position themselves at the forefront of a more agile, innovative and customer-focused era in finance.