With the growth of loans, debt securities, derivatives, and other transactions across the globe, the finance industry is expected to grow over the next few months. A report by the Bank for International Settlements found that banks’ cross-border claims increased by $1.1 trillion (£891 billion) in Q3 2022, raising the year-on-year growth rate to 10%. Despite challenging world events such as the conflict between Russia and Ukraine, bank profitability is at an all-time high, with overall revenue growing $345 billion (£280 billion) globally.
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To accommodate growth, financial institutions of all sizes and types need to adopt new technology to improve operations. Many emerging technologies make different banking processes easier, improving efficiency and reducing errors from data management to customer service, and the UK continues to be a leader in this field. This is despite a drop in investment in 2022. With tech in the UK and around the globe becoming such a reckoning force in the finance industry, it’s essential to look at some technologies companies will benefit from.
1. Bank reporting software
Finance is a heavily regulated industry, so it’s critical for institutions to stay within standardized processes. One of these standards includes Basel IV, which was implemented in January 2023 to manage credit risk. To ensure proper compliance with this framework, it’s vital for financial institutions to rely on reporting solutions that can help them keep operating with integrity. Wolters Kluwer’s Basel reporting software covers standardized and advanced approaches across all bank sizes and risk types. Banks can develop a scalable solution that saves time through unified data, prudential consolidation and integrated Basel calculations, allowing them to become a better business and a more compliant one. Through reporting software, banks can monitor data in real-time and minimise risks like money laundering, tax evasion, and other financial risks.
2. Cloud infrastructure
According to the New York Times on cloud computing, most North American banks handle only 12% of tasks in the cloud, but experts predict that use will double in the next two years. Several financial institutions have already invested in cloud infrastructure, with the Bank of America said to save over $2 billion (£1.63 billion) a year in part by building its own cloud.
Given the significant shift to digital banking, it’s no surprise that banks are facilitating cloud migration. Adopting cloud computing enables banks to secure data better and improve operational efficiency while lowering infrastructure costs and energy consumption— opening the opportunity for financial institutions to scale their services. With more companies, including those in the finance sector, working towards environmental, social, and governance (ESG) commitments, cloud infrastructure is the right step in sustainable action.
3. Artificial intelligence and machine learning
As part of digital transformation, more banking institutions use autonomous, self-learning computer programs to support different financial services. The banking sector’s AI as described by Insider, is not just used in retail banking, but it can also involve back and middle offices of investment banking and other financial services. Some of the AI and machine learning functions are as follows:
- Front office – Chatbots are the most prominently used AI, boosting customer experience through 24/7 available interactions.
- Middle office – Meant for fraud detection and risk management, protecting critical data, especially with the risk of digital banking.
- Back office – Streamlines workflows and intercepts human error when necessary.
More banks and financial organizations are investing in the emerging field of blockchain. Through its unique encryption system, it has the potential to cut fraud while creating transparency, enabling individuals and businesses to make quicker payments and investments — significantly boosting processing capabilities. Blockchain’s relevancy only increases with the use of cryptocurrencies and the rise of the Metaverse, which expects users to be able to create and store non-traditional digital assets and virtual products. These technologies will both push efficiency and help institutions transition toward Web 3.0.
With more technological developments, only time will tell when financial institutions will fully transition to using these techs. To stay updated, visit our news section here on TechTout, which releases updates on various tech worldwide.