Like most other industries, 2021 saw the sudden acceleration in digitalisation and digital engagement in the financial services sector – brought about by the necessities of dealing with the COVID-19 pandemic.
Along with a multitude of new digital banking services, one clear upshot was the increased innovation and collaboration among financial institutions globally in trying to find solutions to common challenges within the community. We should expect a continuation of this well into 2022, particularly around the implementation of ISO 20022, APIs, and cloud technology.
As 2021 draws to a close, what could 2022 have in store for the financial industry? Here are some big ideas for the community to focus on in the coming year and beyond.
Payments are a work in progress
The world of cross-border payments has seen a steady progress over the past several years, specifically in removing cost and reducing friction. The pace of change – both in individual markets and across borders – was already brisk before COVID-19. But the pandemic has pushed many organisations to review and re-evaluate their payment strategies.
The accelerated shift from physical to digital is unlikely to be reversed. This is especially the case when digital engagement is increasing across all customer demographics, with the rapid growth of both peer-to-peer and peer-to-business real-time payments.
The outbreak of the pandemic has undoubtedly forced many employers to downsize and as a result, countless individuals joined the gig economy to survive the massive disruption to their lives and bank accounts. Innovating solutions for banks to pay out these customers in the gig economy could also potentially be a significant trend in 2022.
Data-driven technology will also play a key role in areas like cybersecurity, fraud prevention, and the ‘hyperpersonalisation’ of financial services. The ever-changing technological landscape has influenced customers to expect a highly personalised service based on their individual needs. Hence, more businesses are capitalising on smart technologies such as artificial intelligence and machine learning to meet the unique needs of their customers, including making relevant suggestions even before the first customer contact.
Data presents dilemmas
The future of the financial services ecosystem will be more digital,>The financial services industry invests huge amounts of resources to tackle financial crime. For instance, technology is now able to identify suspicious transactions and patterns that are legitimately of interest.
The way banks approach security is already beyond the capabilities of some intelligence agencies. According to SWIFT’s Chief Innovation Officer, Tom Zschach, SWIFT will leverage its new project, which consists of its In-Network Anomaly Detection system that is being built in conjunction with Red Hat, Kove, and C3.ai when addressing anti-money laundering and other financial crimes.
The human touch
Technology has vast transformative power, but it is the human angle that drives successful innovation, and this needs to be considered at the level of both the individual and the organisation. With banking being dependent on the human concept of trust, there is a need to identify solutions that ensure technology-based processes retain human engagement while enabling rapid progress.
Smart technologies such as AI and ML also bring about ethical issues. While it is effective in improving productivity, AI decisions may raise ethical concerns, especially when it comes to decision-making in sensitive areas like loan decisions, where social or racial bias can occur unless great care is taken.
According to Thomas Siebel, CEO at C3.ai, this can be avoided with systems that are thoroughly designed and always having a human in the loop to make the actual decisions.
Fortunately, the heavily regulated financial services industry has already managed to get a lot of things right and win the trust of customers. The question now is whether that hard-won confidence might be threatened by new technologies and automation, which leave less room for error correction. For example, who owns processes and responsibility? Who is answerable?
While there is no immediate answer, the very fact that technologies are encouraging us to rethink the way our systems function is one of its greatest benefits.
Making our own future
More businesses look up to “the means of digitisation” as speed becomes the new currency to unlock value. But given the constraints of time, the fundamental question boils down to the ability to direct digitisation in ways that will have a sustainable impact. There is no perfect solution now, but it has become clear that technology drives innovation and we are always thinking of enhancing processes and systems to keep up with the ever-changing technology.
SWIFT has a pivotal role to play in helping our community, partners, and the industry to benefit from a shared solution that results in a profound change to ensure that the future is as “evenly distributed” as possible.
