The financial institutions have been facing several challenges over the past few years – many of which revolve around competing with non-traditional innovators, restoring public confidence in the industry, and working in new economic circumstances after the financial crisis. One of the main reasons why the financial sector is facing multiple challenges is that they are still using old technology and following traditional trends. But managing risk and opportunity is what the financial industry knows very well.
With the rise of Fintech in the digital world, financial institutions need to adopt new-age technologies and delight consumers with enhanced banking experiences. But before we talk more about these advanced technologies, let’s find out some of the major challenges the financial industry is facing today:
Restoring Public Trust and Improving Customer Service
Establishing consumer’s trust and confidence in financial service is essential. Several pieces of evidence advocate that most financial institutions are currently facing the unmatched public and government scrutiny which involves an uphill struggle to build customer trust and economic strength. The decision of consumers to decide which financial company to choose depends on its ability to deliver better customer service. Nowadays, most banks and financial institutions are not able to deliver the level of assistance that customers are expecting, especially regarding technology.
Regulatory Pressure & Security Compliance
Regulatory requirements are continually increasing, and financial institutions need to invest a large amount of their discretionary budget on being compliant. Moreover, they need to build advanced systems and processes to keep up with the escalating demands. Whether you are trying to raise funds or refinance existing Debt, TARP, or SBLF, you need to comply with multiple securities law requirements which involve Bank Secrecy Act, anti-money laundering, and economic sanctions rules. As the technology is evolving, BSA/AML compliance challenges are becoming remarkably consistent.
Increasing Competition from Financial Technology Companies
Several financial technology (FinTech) companies have already been introduced to the market, giving a big challenge to traditional banks. The FinTech companies are using highly-trusted software to provide reliable financial services. From advanced technology to culture, operations, and other facets, traditional banks are not capable of adjusting quickly to the changes. In this digital era, financial institutions really need to adopt the latest tools & software to stay ahead of the competition and provide the utmost convenience to the customers.
Cyber security risk is known as a considerable threat to growth. It is one of the major challenges every financial institution is facing today all around the world. As federal & state regulators continue to pepper, several banks & financial companies are struggling to keep up with the basic principles of a cyber security risk management program. Financial institutions need to conduct a risk awareness and preparedness program to prevent their confidential information against theft and misuse.
In this fast-evolving online world, financial reporting and performance management have become laborious tasks. Some other challenges faced by financial institutions in reporting and performance management are:
- Too many spreadsheets
- Key man dependency
- A lack of financial performance information
- A lack of control over daily financial reports
- Difficulty in getting users to adopt and interact
- Accuracy and timely arrival of monthly management reports
All of these difficulties continue to escalate, so traditional banks and financial institutions need to continually improve their operations and keep up with the fast pace of transformation in the banking sector today. By utilizing advanced technology, you can streamline your financial performance while reducing costs. Several financial performance software & systems are available in the market that can help you make more informed decisions.
Some of the leading countries such as the United States is also facing financial challenges. When it comes to investing in the Japan market, American companies have to deal with several obstacles. However, such companies can easily enter the Japanese market by organizing events in Japan. JTB Communication Design is a well-known event company that can help companies organizing corporate events in Japan. They handle everything from planning, execution, and verification to post-event follow-up support.
Many financial institutions & banks are still using legacy systems to manage operations. However, financial institutions must migrate their old technology architectures to advanced capabilities in order to address the challenges mentioned above. They need to consider new technology as a strategic growth investment rather than an operational expenditure.
How Blockchain Technology is Transforming Financial Industry
Trillions of dollars have already been invested in the global financial system to make it more reliable, but there are various issues with this system that cause added expense as well as make it easier for the scam to cripple it. However, Blockchain technology can remarkably transform the financial industry and make it better, safer, faster than ever. Nowadays, several financial institutions and banks are turning to this technology to reinvent themselves. Many of you must have heard about Bitcoin, but the technology behind that system most individuals are not familiar with is blockchain.
What is Blockchain?
The blockchain is basically a distributed ledger that can efficiently record transactions between two parties and allow you to send value anywhere in the world. It is achieved by using cryptography to connect the contents of the newly-added block with each block. Furthermore, any modification to the content of a previous block in the chain will invalidate the data in all blocks connected after it. Cryptography also ensures that the individuals can only access the parts of the blockchain that they “own” — by using the private keys required to write to the file.
- Trade finance is the sector which still relies on paper such as letters of credit or bills of lading, being transferred by post or fax around the world. A blockchain can turn out to be an ideal solution for various parties need access to the same information. It allows for higher trade accuracy and shorter settlement process. Blockchain technology also speeds up and simplifies cross-border payments while reducing the costs significantly.
- Most banking systems still work on a centralized database which is more vulnerable to cyber-attacks — once hackers breach the system, they can get full access. Blockchain technology improves online identity management and lessens the ability for an attacker to add transactions on the network. Central banks all around the world are moving their payments systems to blockchain technology and using it to launch digital currencies.
- Most banks fail to set up a shared digital utility to record customers’ identities, undone by opposing demands and the problem of deciding liability. With cryptographic protection, it’s safe to constantly share an updated record with multiple parties.
Financial institutions face multiple challenges in a post-crash market. Most of these challenges have fallen upon Information Technology to resolve. By adopting advanced technologies such as Blockchain, financial institutions can overcome the obstacles and eliminate some of the current crimes. With higher security, advanced technologies lower costs to process payment between organizations and banks. Financial institutions and banks must adopt new-age technologies and delight consumers with enhanced banking experience.
Gaurav Prabhakar Mali is an enthusiastic writer & filmmaker. New trends & technologies inspire him to write engaging articles and blogs.