The pace of change in the financial world has never been faster. New regulations and directives are coming into effect which requires almost instant compliance.
The speed of this change has been increasingly evident over the last two years, with governments rolling out sweeping pandemic protection programs and rapidly evolving sanctions on Russia for the war in Ukraine, all requiring financial institutions to adapt quickly. In addition to these macro changes, upstart, extremely nimble fintechs are growing so fast, they’re starting to challenge the established, incumbent players, and customers are constantly raising their expectations for consistent, fast, high-quality digital service.
Navigating this new digital world is far from simple. Financial institutions need to gain agility with flexible technologies so they can scale and pivot as the market changes, but too much flexibility without some structure can become cumbersome to manage. Plus, it’s far too easy to deploy technologies that no one completely understands, which can ironically introduce more risk than they mitigate — one only need look at some of the recent market “flash” crashes, largely driven by algorithmic trading, to see how poorly this can go.
In order to stay ahead of the rapidly evolving fintech landscape, financial institutions need to be aware of the latest advancements impacting the industry. Here, we delve into how these changes are affecting the market and provide insights on how organizations can adapt today to prepare for tomorrow.
Simply put, financial institutions that still rely on paper-based processes are facing serious headwinds. Compared to automated processes, they’re inefficient and more prone to error. Further, they’re going to have a much harder time complying with new regulations and directives at the speed that is necessary. Many fintechs, for example, were able to process the pandemic paycheck protection payments within days or weeks, while larger institutions were taking months to set up the internal infrastructure to manage them. Customers notice that kind of thing, and they’re likely to jump ship to the financial institution that can get them their money faster.
AI and automation can play an important role in streamline processes and ensure that things keep moving from one phase to another. Even if human beings are still involved in making many of the key decisions, having AI prioritize and orchestrate the work so that it doesn’t get stuck in one of the many decisioning silos can significantly improve efficiency, accuracy, and the customer experience.
Once the process is digitized, manual steps in the decisioning process can be replaced with AI and other automated systems. Again, the end result is faster, more accurate decisions, but there’s an additional important advantage: objectivity. Wells Fargo, for instance, is now facing lawsuits over revelations that it rejected more than half of all mortgage applications from black customers. With automation, processes can be analyzed, tested, and corrected, and financial institutions can show exactly how decisions are made based on specific data, which can be very helpful to manage liability.
Artificial intelligence and real-time decisioning can also help with alarm fatigue. Many large institutions have literally millions of bells, whistles, and alerts pointing to possible fraud and other risks on a daily basis. It’s impossible for a human being to keep up with all of them, but that excuse isn’t going to pass regulatory scrutiny. The regulator or auditor will often look to the fact that you had the alert as proof that you “knew” about potential fraud and did not take action. An intelligent system that can triage, prioritize and even address alarms can go a long way toward truly managing risk.
These subjects only really only scratch the surface of the conversation. We go much deeper into these topics and more, including fintech and data privacy, tips for making sure you’re achieving the right balance with flexibility, and further use cases for process automation.