Financial Services Technology Impact Trends
To stay relevant in the current consumer market, financial service organizations have to stay on-top of customer-centric technology trends. Current trends surrounding the impact of technology on consumer behavior in the financial services industry includes mobile banking, consumer privacy and security, and artificial intelligence.
- The number and location of bank branches is becoming less important than the effectiveness of banking mobile applications. Increasingly, the competition in the mobile financial services space finds third-party financial service providers competing with banks.
- Banks are encouraged to digitize their entire product line to take advantage of its cost-savings and to improve the customer experience. Consumers expect a seamless digital experience.
- Reports show that almost 40% of US consumers had problems with credit card payments, primarily due to fraud. To improve the customer experience, financial providers should provide personalized services, in real-time.
- Consumers expect seamless digital services as experienced with online ride-hailing or retail; to stay competitive in this space, traditional banks have to adopt quality, seamless services. JP Morgan Chase merged with its middle-market technology division to better service customers in the mobile market.
- Consumers want 24-hour access to their finances through easy-to-use apps. Financial services can respond by providing more "customer-centric services."
- Mobile banking is not limited to traditional banking services. More and more consumers are using smartphone applications to make purchases in retail brick and mortar stores, as well as applications to transfer money between people outside of a traditional bank apps. Recently, banks created the cash app, Zelle, to compete with Venmo, Cash, and PayPal.
Consumer Privacy and Security
- The forces of change in technology indicate transparency, together with secure, real-time interactions, which will attract consumers concerned with privacy and security. Research shows that today's consumers believe they have lost control of their personal information.
- By prioritizing consumer protection and fair lending practices, financial institutions "signal a commitment to compliance," and indicate through an understanding of the needs of the community.
- Current United States banking regulations do not protect all consumer data, driving some states (i.e., California, New York, and Vermont) to draft their own consumer protection mandates.
- Blockchain technology can make the lending process more secure, as the "digital ledger" is tamper-proof. Compliance with financial services regulations are attractive because once the "digital ledger" records a transaction, it "cannot be altered or deleted."
- Advances in blockchain technology may lead to more financial services providers to adopt this technology. "RegTech" can automate processes subject to regulatory compliance.
- Data breaches have underscored the value of personal information such as date of birth and social security number. Financial service providers must protect consumer data, in addition to protecting consumer financial information.
- Consumers expect to know how their data is protected, so every company has the responsibility to provide that protection. Financial services providers should make the relationship between AI technology and the use of data easily understood by the consumer.
Artificial Intelligence (AI)
- AI provides an opportunity for financial service providers to move from a "product-centric" model to a "customer-first" model. Researchers predict that in 2022, banks will spend half of their information technology budget on AI technology.
- Financial services consider AI applications that will save costs, improve revenue, "reduce fraud and improve the customer experience." Deep learning and predictive analysis will continue to impact the financial services industry for many years.
- AI technology can analyze large quantities of data quickly and provide chat bot technology for online transactions. Available to all customers, Bank of America features an AI assistant called Erica.
- Recently, smart wealth managers, or automated wealth mangers, utilize algorithms to provide the best financial advice. This technology, used in all areas of the wealth management sector, includes investing, retirement planning, general savings, and lending.
- Consumers expect accuracy and speed, AI, through machine-learning, manage large quantities of data quickly and accurately. AI not only provides better customer service, but it also provides cost savings from overhead to the provider.
- As AI advances, consumers will expect a more personalized experience with their technological interactions. Consumers want a unique service and not just a "cookie-cutter" approach.
To identify the current trends surrounding the impact of technology on consumer behavior in the financial services industry, we searched for news articles, press releases, blog posts from reputable organizations, and media publications on the topic. After reviewing several lists of consumer trends, we determined the most prevalent trends based on recent, repeated behaviors. From the core list of three current trends, we developed the research by continuing to research the same patterns across the financial services industry.