3 Technology Trends Shaping Financial Services

The rapid rate of technological innovation and adoption has created major disruptions within the financial services sector. This year will see a shift in industry forerunners as financial institutions adapt to the increased use of predictive analytics, explosive capabilities of mobile technologies, and the growing rate of mergers & acquisitions. Processes that were once impossible have become probable, operating at increasingly faster times with an ever-growing volume of data.

These 3 trends will act as a catalyst for stiffening competition to make major moves, offering a greater number of services in the midst of market changes and evolving customer expectations.

Realizing The Value of Data: Big Analytics

Nearly 90% of the world’s data has been created within the past two-years with 2.5 quintillion bytes of data produced daily[1]. While the concept of Big Data isn’t new, most financial institutions have to efficiently collect, process and analyze the tremendous data streams. The challenge to achieving “Big Analytics” is the lack of statistical techniques and stable data infrastructures that will help filter noise into actionable information.

The financial services sector is experiencing competitive pressures to take advantage of the opportunities presented by Big Analytics. Recent studies by Accenture and General Electric show that 87% of enterprises believe that achieving Big Analytics will transform industries by 2017[2]. The study also reports that 89% of companies believe that those who do not adopt a Big Analytics strategy are at risk of losing market share and momentum[3]. As data warehousing and extraction, transformation, and load processes improve, the market will see a greater prioritization of integrating Big Analytics into their processes.

The Power of Convenience: Growth in Mobile Services

A recent study by Carlisle & Gallagher Consulting Group found that 55% of Americans access banking services through their mobile technologies – including laptops, tablets, and smartphones[4]. As the use of mobile technologies to access financial information continues to increase, so too will customer expectations for greater access services across the entire finance services sector.

The growing market for mobile financial service options has also lowered the barriers for brand switching, placing greater importance on quality of experience. Research by Experian shows that 57% of millennials are willing to use an alternative company’s services if it better meets their needs[5]. The financial services sector will continue to offer and optimize more mobile options to remain competitive.

More Mergers & Acquisitions: Consolidation of Technology

Richard Bove, veteran financial analyst for Rafferty Capital, predicts that 2016 will be one of the biggest years on record for bank mergers & acquisitions of the past decade[6]. The current low interest rate environment and increasing government regulation on financial investments will inspire smaller banks and credit unions to merge. These mergers will allow financial institutions to pool resources for access to information technologies, making them more competitive.

However, the biggest challenge to successful mergers are aging legacy systems used by banks. Research by the Aite Group found that 20% of U.S. banks have reached high levels of urgency regarding replacing their core systems with an additional 56% seeing significant benefit after replacement[7]. Failing to do so can lead to incompatible systems and a regulatory non-compliance.

The financial services sector is seeing tremendous change as institutions utilize technology for a competitive advantage. The most dramatic change is occurring within banks and credit unions, as Big Analytics and updated infrastructures lead the way to sophisticated services for a more informed customer.

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[1] Daniel P. “Facts and Stats About The Big Data Industry”. Cloud Tweaks. http://cloudtweaks.com/2015/03/surprising-facts-and-stats-about-the-big-data-industry/

[2] Louis C. “84% of Enterprises See Big Data Analytics Changing Their Industries’ Competitive Landscapes In The Next Year”. Forbes. http://www.forbes.com/sites/louiscolumbus/2014/10/19/84-of-enterprises-see-big-data-analytics-changing-their-industries-competitive-landscapes-in-the-next-year/#30b635ad3250

[3] Ibid.

[4] Colin W. “Survey Confirms Americans’ Increasing Use of Mobile Banking”. http://www.americanbanker.com/news/bank-technology/survey-confirms-americans-increasing-use-of-mobile-banking-1072422-1.html#comments

[5] Daniel E. “Experian Millennial Credit & Finance Survey Report.” Edelman. http://www.slideshare.net/Experian_US/experian-millennial-credit-finance-survey-report-part-i-of-ii

[6] Katy B. “Why 2016 will be a record for bank mergers: Bove”. CNBC. http://www.cnbc.com/2016/01/14/why-2016-will-be-a-record-for-bank-mergers-bove.html

[7] Wayne B. “Banks Must Ditch Legacy IT”. Information Week. http://www.informationweek.com/it-leadership/banks-must-ditch-legacy-it/d/d-id/1109546?page_number=1