Three areas of tech innovation banks should consider in 2021
If you’re looking for inspiration, consider how much more comfortable consumers are with online banking today than they were 10 months ago, nevermind 10 years ago. There is less of a need for brick-and-mortar branch offices than ever, and this decentralization opens the door to new opportunities. Banks can now adopt technologies designed for a fully digital customer experience with confidence that consumers will adapt.
With this in mind, consider these three tech innovations that will help ensure that your bank stays competitive in the post-pandemic landscape.
Blockchain technology is here, and the benefits are real. Incorruptible ledgers bring five interlocking benefits to the banking industry that we could also use as the industry shifts deeper into digital operations and cybersecurity threats increase.
This technology may not be brand new anymore, but it remains the gold standard for sharing information between two parties that may not be familiar with each other and ensuring that unique transactions are not duplicated. Blockchain brings consensus, authentication, validity, immutability, and unique identifiers to transactions that can transform everything from mortgage servicing to transfer oversight.
The major benefit of blockchain technology for banks in 2021 is that it can reduce the cost of overhead by making expedited processing – nearly instantaneous clearing and settlement – the new norm.
#2: Robotic Process Automation
In 2021, banks can reduce human errors by automating tasks that humans tend to flub. Data entry, counting coins, and screening for fraudulent transactions can all be done by Robotic Process Automation (RPA).
RPA isn’t the solution for every task, but as banks continue to transition to digital models in 2021, there are more opportunities to automate rote tasks than in the past, which is good news for the people in your organization who are more interested in building relationships than data entry. It’s time to free up your staff for higher-impact work and relationship building. Customer service is still best done by real people who can connect across channels.
#3: Quantum Computing
Quantum computing is a rapidly advancing and fundamental leap in computing that can solve exponential problems (like those found in finance) in ways that a traditional computer cannot.
Theoretically, with quantum computing technology, we will be able to predict what will happen in the market when the next crisis or when the next pandemic hits.
This power can also be applied to financial institutions. Banks can leverage this technology today and into the future to improve portfolio management through rebalancing and allocations,
cash management, arbitrage, and capital allocations. Quantum computers have a decided advantage in analyzing scenarios that include nonconvex discontinuous values, such as interest-rate yield curves, transaction costs, trade size and quantity restrictions.
Quantum computing is still in its infancy and is advancing very rapidly. Banks that get out in front and figure out how to get advantage from it will be at a decided advantage.
COVID-19 accelerated tech investment with a focus on security
The ongoing pandemic has accelerated investment in technology across industries, as much of the world’s workforce was pushed to go fully remote overnight. But the regulatory compliance and digital security needs of financial institutions did not change as fast (nor should they).
The good news is that the world’s focus on a remote workforce has come with a renewed focus on digital security, and indeed that is much of what interest in blockchain adoption is all about.
As these priorities align, 2021 will present opportunities for banks to find ways to apply innovative technology to old problems, improving digital banking services and the bottom line.
is the Vice President of process and delivery at Saggezza, a global technology solutions provider and consulting firm.
AI and the future of global trade
Artificial intelligence (AI) is becoming entrenched in our daily lives, but the technology is still surrounded by misconceptions and skepticism. Ask the public and they may jump to dystopian scenarios where robots have taken over the world.
While this makes for a good sci-fi blockbuster plot, the reality is different and more benign. Those products that Amazon suggested you buy? AI. That TV series you were recommended to watch on Netflix? AI. That self-driving Tesla car you crave to take for a spin? You guessed it: AI.
There is no single industry that is not being re-shaped by technology. Until recently, however, there was one noteworthy exception: global trade. Fortunately, that is slowly changing.
The mechanism that underpins global trade – trade finance – is an industry that remains largely paper-based and reliant on manual processes. This US$18tn a year industry is now being influenced by a new wave of technological innovation, including AI.
Exploring the potential of AI in Trade Finance
AI refers to the use of computer-aided systems to help people make decisions or make decisions for them. It relies on large volumes of data and models to make sense of information and draw intelligence.
In trade finance, AI is helpful in analysing quantitative data, and the repetitive nature of trade finance means that there is a lot of non-traditional data at our disposal.
This means that when trade finance providers need to assess the risks of funding a transaction, AI models can be a very efficient tool for data analysis and reveal intelligence and risks relating to small companies.
AI helps the industry move beyond traditional credit scoring processes, which are often outdated and remain reliant on historical accounting entries – a barrier that prevents small companies from accessing trade finance and has resulted in a $1.5tn global shortfall.
Overcoming the barriers
AI can tackle this shortfall by creating accurate credit scoring models. This can include a company’s payment history, measure the risks of funding a transaction, identify supply chain risks, and benchmark them against their peer group.
Trade finance providers can use this information to communicate effectively with their SME clients, ultimately helping establish better business relationships.
Towards a technological utopia?
The adoption of AI has the potential to do a lot of good in the industry, and the industry is in the early stages of radical transformation.
Advances are driven by fintechs as well as a willingness to change. The industry is working together to create new infrastructure for distributing trade finance assets to other investors in a transparent, standardised format.
The creation of infrastructure is possible due to improvements in technology and integrated across the trade ecosystem in cooperation with banks, insurers, and other industry participants.
It’s collaboration at its best: together, the industry is using technology to re-shape global trade as we know it.