We all know the time-worn phrase: “The 21st century is the age of high technologies”. Technologies may be high, but not all of them are in demand in the key sectors of the economy. In this article, experts from Boosty Labs, a company that focuses on fintech (https://boostylabs.com/fintech) and neobanking application development, discuss technologies that are bringing new breath to the financial sector.
Cloud technology or “cloud” is a virtual storage where anyone can place files, use computing power or computer programs. In the life of a modern person, the cloud is used to store various data: photos, videos, documents, and more. Considering what cameras are now installed on smartphones, their own memory is often not enough, which is why people resort to cloud storage services.
If we look back a little, then, about 10 years ago, the financial sector did not use cloud technology. There was a good reason for that – the threat to the security of personal data and customer funds. Billions of people around the world use banking services, so the fears of representatives of the financial sector are understandable.
The situation is different today. The banking sector is an avid user of cloud technologies. An example of this known to everyone is contactless payments via a smartphone. The person enters the bank card data in a special software on the phone, after which he or she can pay with it, simply by bringing it close to the terminal. All data is loaded into a special host system in the cloud storage, and then an emulated physical card is created. The data is not saved on the smartphone: with each payment, it is transferred from the cloud, in encrypted form.
Cloud technologies are used by the banking sector because they have proven to be safe. It is simply not profitable for banks to develop their own cloud storage – this will result in a completely different type of activity, with colossal costs.
Artificial Intelligence And Machine Learning
«Artificial intelligence» and «Machine learning» are definitions that in 2010 we often heard only in movies, and in 2021 they are discussed in the news and scientific materials. The use of artificial intelligence and machine learning in the financial sector began around 2013-2014. Shortly before this, the British Financial Conduct Authority (FCA) banned fees for the services of financial advisers. This example was followed by many other regulators around the world. Banks and financial institutions had to fire financial advisors because their activities could no longer be monetized. However, their clients needed consultations and something had to be done about it.
Artificial intelligence (AI) and machine learning (ML) came to the rescue. As a matter of fact, the chatbots and the voice you hear when you call the bank are AI and ML. It is worth noting that sooner or later, financial consultants would be replaced by chatbots, because they have a number of advantages:
- Banks do not have to pay a salary to a chatbot, it is enough to create and configure it once. Then, it is only necessary to supplement a number of its possible functions, but this is not so expensive.
- The chatbot operates 24/7, without breaks and weekends.
- Using the available information about the client, the bot can easily form an individual proposal, which can take a lot of time for the financial consultant.
- A bot can serve dozens or hundreds of clients at the same time, excluding the human factor.
Also, artificial intelligence is used in the analysis of financial markets, predicting many possible scenarios for the development of events. Wealth management, security systems, audit – AI and ML are used everywhere.
PRA (Probabilistic Risk Assessment)
PRA solutions is automation of work processes using robots. As practice shows, robotization is applicable in many economic sectors, but the financial sector needs it most of all, because the amount of routine work here is simply off scale.
According to statistics, in 2020, more than half of the processes in the financial sector were performed by robots. Take a mortgage specialist, for example. He devotes about 90% of his working time to filling out applications from clients, if done manually. And if a robot is connected to this process, then this figure drops to 60%, which allows the specialist to spend time on more important work tasks.
In 2021, robots can take on the following responsibilities:
- Processing incoming data. Bank workers around the world spend more than half of their working hours on this. The use of robots in this process can reduce the workload by 60%.
- Confirmation of the accuracy of the received data. The task is not difficult, but very time consuming. If you trust this task to a robot and give access to databases, then things will go a little faster.
- Collection of information. To create an individual offer for a client, you need to understand the mood of the markets and the state of affairs in general. While the analyst is looking for all the information he needs, the proposal may already be out of date. Therefore, this task in banks is now performed by robots, because they are able to find the necessary information much faster and structure it correctly.
Just five years ago, there were only two opinions about the blockchain: the first is that it is something about cryptocurrency, and it looks like a hype; second – what is it all about?
Blockchain and cryptocurrencies have closely walked hand in hand all these years, but in 2021 it is safe to say that distributed ledger technology has separated from digital assets.
Blockchain in simple terms is a database that consists of blocks. Each block contains information that cannot be changed or deleted. In other words, if information once entered the blockchain, then it will remain there forever. In addition, the blockchain does not have centralization, that is, one data center – it is located on many servers or PCs around the world.
Within the banking industry, there is a process called reconciliation. Due to the human factor and two-way exchange of information, reconciliation takes a lot of time. Blockchain solves this problem by speeding up the entire process as a whole, as well as hastening transactions. Another plus of distributed ledger technology is the ability to abandon many intermediaries during interbank transfers. It is because of them that we pay such a large commission.
At the end of 2020, financial experts calculated that the implementation of blockchain only in banks in the United States would reduce annual costs by $8 billion, and by $30 billion, world-wide.
All of the above technologies are used by 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 pleasing: the digitization process will accelerate, and we will be charged less money.