Technological innovations are changing the way countless companies work. It is customers in various sectors who benefit from these mostly customer-oriented developments. Today there are alarm systems that can detect toxic substances, medical devices that can save lives, and computer software that operates important health tools. The use of technology has brought about many changes in the financial sector in recent years. The ‘Global FinTech Report 2017’ by consultancy organization PwC shows that 77 percent of financial institutions want to invest more in innovation. In doing so, these companies aim to embrace the disruptive characteristics of FinTech. The underlying research shows that FinTech companies are a popular alternative for customers in making payments, transferring money, and taking out loans through alternative financing. In other areas, such as insurance and asset management, FinTech companies are less popular, but growth opportunities are certainly not ruled out. Specific areas where FinTech is most likely to disrupt and improve the customer journey are customer service, online banking, and fraud detection.
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Perhaps the biggest change in the financial sector as a result of the rise of FinTech is visible in customer service. In the past, it was essential for any financial services provider to have a strong customer service team on hand. After all, this industry is all about money and as soon as mistakes are made, they have to be solved quickly. Emotions can also run high in financial matters. So it was essential to have well-trained staff. Today this is different. Chatbots are developing rapidly and are already getting along well with customers. Algorithms based on artificial intelligence are trained and then learn on their own without further human intervention. Over time, the robot gets better and better, until it becomes indistinguishable from a human. There are already several videos online from Google, among others, showing how a robot performs human actions. Like a robot ordering a pizza over the phone, while the person on the other end of the line does not realize that he is communicating with a robot. An AI algorithm may not have human characteristics such as emotions, but why pay people when robots can do the work for free?
In the past, banking was an activity that took place offline. Consumers went into town to withdraw money, make transfers and arrange financial matters at their bank. It was normal to talk to ‘real people in a ‘real’ shop. After all, it was about money. So this must be done safely, they thought. Nowadays it is still very exceptionally necessary to go to the bank branch. Most people born in this century have never been to a branch of a bank anyway. Because why would you? With an app, you can easily transfer money, view your balance, trade on the stock exchange and make bill payments. These developments could disrupt traditional banks. And if banks do not go along with this transition, they run a great risk. If you still have to go to the bank branch at bank X to open an account, but you can do this at home from the bank at FinTech start-up Y, the choice is easily made.
Investigating and identifying fraud has traditionally been a collaboration between man and machine. The computer helped identify potentially fraudulent practices, but in the end, it was a trained employee who made the decision and checked everything by hand. Artificial intelligence, however, is developing so quickly that it goes beyond the capacity of humans – and can therefore detect and prevent fraud completely independently. An AI-powered system can view a customer’s credit history and determine whether a transaction fits or not. It can then be seen as fraud and action can also be taken in the form of blocking transactions or warning the customer. This can all be done faster and more efficiently than if an employee does this, which obviously saves costs. All in all, these are just a few areas where technology can profoundly impact the financial sector. The main form of disruption is therefore also progression. This progress means that the existing people and processes are gradually becoming redundant and need to be replaced. This is a long-term development and it could be years before people really become redundant in the financial sector. But it is clear that many employees of traditional banks fear for their jobs. However, it has been clear for a long time that technology is developing towards a tipping point where technology is more efficient than the people who developed the system. This point is getting closer and closer as machines become smarter, faster, and less error-prone.