Artificial Intelligence or AI has transformed the financial services industry worldwide. In just a few years, the industry has become more dependent on technology supporting data aggregation, security, products and services. The initial launch of AI technology primarily focused on deriving insights. Since then, the adoption of AI has progressed to other areas of the finance industry, including fraud detection, customer identity and other authentication techniques.

The finance industry is continuing to automate and improve various areas of business with robotics and AI. We are likely to continue seeing a shift towards accelerated machine learning in enhancing human impact across the business. AI and ML have already established a better understanding of customer behaviours and preferences, enabling the finance industry to create a more personalised approach at scale and improve the overall customer experience. Moving forward, this element of AI will become even more important in the finance industry. The ability to provide a more custom and personal customer experience is valuable in finance. AI sits at the core of delivering these features. It can be in the form of personal loan offerings based on a range of parameters. Customers no longer need to select off the shelf products. Instead, individuals have access to unique offerings designed especially for them. AI-powered lending plans is another emerging trend. Portfolio management and retirement planning with the support of AI can deliver intelligent investment plans tailored to each individual.

As the finance landscape continues evolving, we will likely see emerging regulations beyond protecting bank data and other personal information. Having the power to detect trends in large data sets, AI can determine unique information based on data, such as online purchases or website visitors. 

The finance industry has the opportunity to select from a wide range of use cases to determine how they can apply AI to their advantage. They also have the data available to leverage the insights and deliver value for their customers and clients. Incumbent businesses will need to adapt and explore their operations, shift away from legacy processes and harness the real benefits of AI. With AI still evolving, early adopters of this industry will likely gain a significant advantage and the necessary experience to succeed. Businesses that fail to adopt these measures until established will risk falling behind their competitors in the future.

In terms of fintech, AI offers several disruptive opportunities. While these may present a threat to the incumbent banks, there are also many opportunities for traditional banks to partner with fintech. Banks have the added advantage of having an existing large customer base, while fintech has access to new technology and AI features. With the right plan in place, there is a chance to deliver a win-win situation for banks, fintech and the customer. Over the next few years, we will likely see a rise in automated technology interacting with the end-user. With the pandemic showing the importance of remote services, bots and other similar technology will become even more familiar in the finance world. A recent survey by EY discovered that 64% of financial businesses plan to significantly increase the use of AI technology within the next two years. Analysts believe AI will become a vital part of the finance industry, generating new revenue channels and automating processes to enhance the customer experience. No area of the finance sector is likely to remain disconnected from AI in the future. 

The UK financial services industry is experiencing a significant shortage of talent, intensified by the rising demand as a result of the pandemic. 

According to a study by the Association of Professional Staffing Companies (APSCo), job vacancies within the industry increased by nearly 38% between Q1 and Q2 of this year. The findings follow on from the report from the Professional & Business Services Council and the Financial Services Skills Commission discovered that on average, 32% of UK businesses were facing shortages within financial, professional and business services.

According to the APSCo findings delivered by BI specialists Vacancysoft, hiring levels within the financial services industry had already exceeded last year’s by the end of July by nearly 7%. Ann Swain, the CEO of APSCo, explains that the data indicates that despite the many challenges, the recovery from the pandemic is well underway, reflected within the financial services industry, where reports suggest a considerable demand for these skilled services.

Swain highlights that this trend is likely to continue throughout this year but, employers will continue to face talent shortages, which have been intensified further by the rise in hiring levels. As a result, recruitment agencies will play a significant role in supporting employers to find the talent needed to ensure an efficient recovery from the pandemic.

Research suggests that IT professionals continue to be the most in-demand skillset, with over 15,000 new jobs advertised this year, a figure that already exceeds the job count for last year. APSCo discovered that leading business JP Morgan has over 2,200 vacancies this year, equating to an 18.3% increase on the previous year. Global investment and financial services business Citi announced over 1,550 vacancies, recording a 39% increase last year.

The skills shortages and changes in employee demands would collectively create a record change in talent strategies within the finance industry. We are experiencing massive volatility and changes in the industry. Businesses have had to adapt and change much quicker to respond to changes and demands for new talent. Despite these shortages, many are not focusing on prioritising their recruitment strategies. The finance industry must recognise the changing landscape and ensure their plans and offerings to employees match market shifts and industry competitiveness. 

Businesses are either overwhelmed by too much data, limited access to their data or being held back by the technology they use to measure their information. The influence of digital technology in finance has been ongoing for years. The capacity to automate manual tasks by applying innovative technologies has enabled the finance industry to transition from applying conventional measures to a more insightful analysis of a business. 

While more businesses are applying analytics in some shape or form, recent reports suggest that only 14% of finance-related businesses display success in assessing large amounts of data created by systems to generate valuable insights. Finance teams that have utilised tools to enhance their forecasting, improving model scenarios can explore new insights that enhance decision-making. 

Improving Analytics 

Based on responses from senior finance executives worldwide, over 80% of analytics is missing the mark. One of the main reasons for this is that many businesses are not extracting the value and insights from their data. 

The survey discovered that its data is holding many businesses back. Findings suggest that only a little over 10% of organisations consider themselves as ‘data proficient’, capable of actively managing their data and equipped with the necessary tools and resources required to deliver the insights and competitive advantage they need. 

Ignoring the value of operational data

While many businesses have focused on enhancing their analytics, most are missing the real value of insights. To have a complete overview of the business, data from other systems and processes need integration and alignment with financial data to deliver insights and support decisions that enable a competitive advantage. 

Ignoring the Information Systems Strategy 

The development of new technologies has enabled many struggling finance-related businesses to maintain pace. While these new technologies may be useful, successful organisations need a more holistic approach towards their strategy, yet many are not focusing on this. Studies indicate that over half of finance-related businesses are not capable of consistently adding new data sources to improve their understanding of their business, and under half can utilise their non-financial data. However, when businesses discuss their most important tools for analytics, most points towards AI and ML and at the bottom of the list are usually the necessary building blocks required for delivering an efficient analytics system. 

Focusing on the bigger picture The results of the latest studies are consistent with other experiences across the market. Many medium to large businesses are struggling to reach the efficiency and agility required in their processes. This is usually down to dependence on traditional spreadsheets or fragmented systems that are not adequate for the business. 

Innovative businesses continue to improve their analytical insights by unifying their processes to deliver a single version of the truth for their financial results, budgets and forecasts. 

Converting trends in data into actionable insights 

Business leaders are taking the next step by combining transactional data, processes and systems consistently into their analytics. Accessing this type of confirmation from operational systems and combining it with financial data provides these businesses with real-time views into vital trends that support decision-making that impacts future results. Efficient and unified reporting and planning systems require the necessary analytical infrastructure and the right talent. In today’s rapidly changing global economy, having information systems that generate insightful and actionable analytics is no longer a ‘nice to have’ option but a critical element for the future.

The last year came with several uncertainties, exposing vulnerabilities in society and transforming how we do business. With the disruption to face-to-face services, the finance industry was forced to explore alternative, innovative ways to reach out and connect with customers.
Shifting from face-to-face services to alternative plans isn’t easy. Apart from the potential risk of losing existing customers, there are the added worries of complying with certain procedures and ensuring the service offered works for your users. With this in mind, several key challenges are facing the financial technology industry:

The shift in finance – the traditional finance industry has shifted dramatically as a consequence of the pandemic. In 2020, over 3,300 physical banks closed their doors in the United States. At the same time, we have witnessed a surge in challenger banks. At the beginning of 2020, only 4% of millennials and Gen Zs were prepared to use a challenger bank account as a primary one. By the end of 2020, this figure increased to 15%.

For financial providers, this means they will need to adapt and be prepared for a more diverse audience. Gone are the days of providing a one-size-fits-all solution. Instead, industry demand suggests that customers require bespoke services. One area to focus on is utilising technology solutions like big data and automation to ensure the services meet customer demands.

As the conventional banking industry changes, emerging industries like cryptocurrency are transforming too. Earlier this year witnessed a significant rise in bitcoin prices and other altcoins. The crypto industry is closely affiliated with blockchain technology and it is in this area where we may witness more changes. From smart contracts to trades, blockchain can offer security to traditional financial services and alternative markets. Reports suggest that by 2030, blockchain will impact global GDP in big ways.

At the same time regulators worldwide are focusing on new legislative solutions to make the financial industry more secure and create legislation for anti-money laundering in regards to blockchain assets. For financial solutions providers, this is the time to explore how services and technologies like this impact their industry and how to work with them in the future.

The Lending industry

At the beginning of the pandemic, many people experienced a financially unstable situation due to loss of employment, furlough or health-related issues. With a continued rise in online services and restrictions easing across the world, there has been an impact on the lending market. For customers, this could involve a shift from desire-focused lending to more needs-focused lending. This shift is associated with a decline in credit card searches and an increase in purchase finance and commercial lending, indicating borrowers are becoming more cautious and selective in their choosing loans and providers.

For traditional and alternative providers, a similar lesson resonates. It is important to consider the changing needs within the consumer market. Whether this translates into creating a smarter, more customer option or transferring to a digital platform, each service will vary. Whichever service you choose, it is essential to find one that works for your clients.

Today, the finance industry is in a transformation stage. Many traditional processes have been proven not to be as efficient or as reliable as previously thought, and the concept of how finance and lending have been changed significantly. The industry is still reshaping for the future and while it still isn’t completely clear what shape the industry will take, it is likely to be focused largely on data, new technology and prioritising the needs of customers.

The role of a CFO has transformed in recent years, going well beyond its conventional function to more of a pivotal role in engaging, communicating and influencing overall value for a business.

Finance professionals today need to be capable of telling their own story, representing themselves as vital decision-makers on specific issues ranging from ESG to how to best leverage Big Data. The role of the finance professional has significantly changed, thanks partly to the automation of many standard tasks and the focus on how the finance role can influence overall business strategy. Finance is far more than just looking at numbers and has a profound impact on key decisions. Gaining support from the business is critical and so is capable of delivering effective stories defining the problem and solutions for improvements are an important element.

Finance teams are often being approached from other sides of the business, such as corporate sustainability to support collaborative teams capable of meeting the ESG demands. In today’s world, we are finally recognising how precious nature is and that our commodities are finite. Focusing on development must be partnered with understanding and measuring what these actions have on protecting our wider and future interest. Finance professionals are well-positioned to manage and provide teams with the information needed on important issues such as ESG.

In today’s data-driven world, many businesses struggle to manage their data and how to use it to make strategic decisions. Increasingly, finance professionals are being asked to collaborate with data scientists and others focusing on extracting insights from big data. There is an emerging trend of finance professionals collaborating with other teams and harnessing their skills in various ways. Finance people can play a pivotal part in the Information Age. They have experience with data and bring with this their advisory knowledge and strategic position to manage these responsibilities.

We are well into the era of big data and in every business and every finance team, people have the opportunity to work with data. Finance professionals have the power to inform, guide and lead their business. Many CFOs will have the responsibility for possibly the majority of data transformations in a business.

In previous years private equity may have held back the financial industry in terms of the uptake of new technology and automation. As more data becomes available, the requirements for reporting and transparency have increased and businesses are continuing to diversify their investment plans, and realising that having strong expertise in analytics is a necessity.

Technology has become such a significant part of every industry, including the finance sector. In regards to the growing role of data and technology, industry specialists have emphasised the shifting position of the chief financial officer (CFO) within private equity firms. Technology and innovation have become critical across the industry in general. The CFO is becoming pivotal, a highly valuable asset within a business is data. This role has more responsibility concerning how to utilise data and apply the benefits to a business.

Portfolio Analytics and technology and key functions CFOs highlighted as required to shift from standard to strategic planning. The EY 2020 survey discovered that 70% intend to increase time spent on portfolio analytics and a further 69% plan to spend more time on technology.
CFOs are leveraging technology to manage routine tasks in their business. In the future, we’re likely to see CFOs continue working strategically, focusing on analysing data across the entire business.

Deal and portfolio executives are becoming increasingly popular so CFOs are taking on more responsibility and moving beyond finance into several new areas, such as data protection, resilience, digital strategy and ESG.

In a report named Delivering Value from Data, data-driven decision making has become a critical element of business as data-focused leaders have displayed the effective use of data to leverage new opportunities, disrupt markets and generate a competitive advantage.
The increase in fund sizes and expansion of portfolios in regards to funding size and location has spurred a need to utilise technology to manage these changes. Companies that can leverage data, utilise predictions and decisions, will be positioned to create a more competitive advantage.

The desire to increase the benefits of technology is also being experienced with institutional investors. As wealth and pension funds get bigger, more complex and competitive, their capacity to use technology is paramount. The availability and quality of data are becoming crucial, assisting funds in making better investment choices in today’s rapidly transforming global market.

Anything that makes funds more efficient at selecting the best investments is a major competitive advantage, and this is where data comes into play. Being agile and responsive is key and being capable of adapting and managing the pace of data demand.

This increase in data, analytics and technology is influencing hiring strategies and developing a finance workforce that includes relevant data analytics and technology skills. The conventional workforce of private equity is accustomed to standard systems like Excel but today employees need training on new tools as the technology landscape continues to transform.

The skill sets needed for the talent pool are much more technology-focused, with higher data analytics experience. CFOs are now focusing on how, in this competitive market, you’re not just competing against other private equity firms, but actually against other industries, like technology. So with this in mind, it’s critical to remain focused on attracting and retaining the best talent. Private equity CFOs recognise the need for them to accelerate the pool of talent within the business, especially as data analytics takes on a more important role in an organisation.

David Alich, director of analytics and technology at PwC recently gave his view on the future in a panel discussion. Alich believes the investment will continue to increase in data and analytics technology solutions. He anticipates that every fund will have its analytics and data experts or data science teams who focus on high-value projects and implementing analytical solutions into portfolio businesses.

CFOs can often take a cautious approach to accept new technologies but data and analytics professionals can support them with really understanding the benefits of implementing these solutions into their business.

According to a study by Gartner, after a significantly disruptive year, CFOs seem to be prepared to invest in projects that enable the implementation of new analytics and automation technologies. There are two key reasons for this transformation:

-Looking specifically at finance, where analytics information on certain metrics is valuable, there is a demand for more innovative analytics to enhance performance.
-RPA technology is an automotive solution that eliminates manual tasks that can’t be integrated. Repetitive tasks can be a problem for finance, where a mix of various systems can be difficult to integrate.

While reports suggest that analytics and services like RPA are regarded as top priorities, there is also a level of the hesitancy of CFOs to invest in these new technologies. In the same survey by Gartner, nearly 80% of CFOs stated that they had some doubt they would reach their goals in advanced analytics and over 50% showed concern with reaching goals by implementing RPA.

These figures are a little concerning for the IT industry. The feelings in the finance department can influence other sections of a business. CFOs also hold a lot of control over which IT projects to implement and what tools to use in a business.

What are the key steps IT leaders can take to ensure that CFOs are supportive of analytics and other innovative digital projects?

Clear project success

Creating short term projects that have clear, achievable goals and returns on investment will demonstrate success and build confidence for the long-term implementation of new services.

Understand strengths and weaknesses of users

In terms of finance, the team require more analytics but it is relatively easy to get overwhelmed with all the information and lose sight of the bigger picture. For example, users can explore financial results, but yet still lack a clear understanding of key elements that influence the bottom line.

The customer service team may utilise analytics to explore which customers are satisfied. This is useful in determining customer attrition and predicting which groups are likely to be long-term customers. Similarly, manufacturing teams can use analytics to understand equipment downtime before it may happen, which maintains productivity and reduce expensive periods of downtime.

There are two examples of how analytics can influence financial health and highlight areas that may be overlooked. If IT teams can utilise these solutions with finance, CFOs would understand the real value and be more likely to accept these projects.

RPA isn’t the only technique available to reduce repetitive work

RPA isn’t the only way of eliminating repetitive work but represent one of the clearest ways for finance to understand the benefits of applying automation to its workload. Automation and eliminating repetitive work can happen in multiple areas of a business by applying automation technologies that differ from RPA.

This is somewhere where IT teams can present clear defined business cases, with an explanation of the technology and the resulting ROI from applying these solutions.

Why is this important?

The ultimate goal is to ensure the CFO is connected with how big data, analytics and automation can be applied in the company to generate better results and revenue. While there is always a level of risk and uncertainty with new projects, having the CFO and other business units in support and invested in the success of the project is a big step in enabling a successful implementation.

Embedded wealth management enables customers to increase their wealth and provide fintech with a new channel to communicate and engage with their customers.

When Uber announced it was introducing a bank back in 2019, the technology and finance industry became very excited. Uber Money provided users access to their earnings in real-time and access to their card. It represented a great opportunity for the strictly regulated finance world. Uber was a blueprint and many other technology companies are exploring the move into financial services. Embedded finance has become a very popular area for both fintech and new investors.

The concept is that technology companies can provide financial services with their standard offering, whether this is payments, lending or insurance. Another embedded financial service is based around wealth management. Challenger banks are showing significant interest in wealth management, providing users with options to invest their money more freely. Challenger banks are taking the lead in providing customers with a simple service and favourable options for saving.

There is a growing need for businesses to engage with their customers in a way that provides value beyond the conventional services, while at the same time offering benefits for the challenger banks. In the previous year, businesses looking to integrate investment features were faced with several barriers to overcome. These challenges reduced the options of wealth management to larger financial institutions. Today’s embedded solutions have made wealth management more widely available.

Wealth management has benefits for both fintech and their customers. Users can increase their wealth through simple investments and this enables fintech with new ways to engage and communicate with their customers. Embedded investments provide a stable way of growing income while providing a genuine reason to communicate with clients.

The outlook for the industry is looking positive. Businesses are experiencing stronger growth and interest in all traditional fintech areas and analysts predict that more customers will actively look for user-friendly services to make their investments.

Digital transformation has accelerated in many businesses this year and as a result, the demand for finance professionals with data analytical skills has never been higher.

The Future of Jobs Report 2020 created by the World Economic Forum (WEF) investigates how automation, in collaboration with the impacts of the Covid-19 recession has generated an even more disruptive outcome. The report suggests that there is likely to be a significant change in jobs, duties and skills within the next few years, with finance, accounting and auditing being areas likely to be impacted and data analytics and data science considered the high growth markets.

The trend identified in the report is supported by recent figures in the finance and accounting industry and a shift in roles towards digital and technical duties in response to the pandemic. The demand for upskilling has become even more important, and in the case of finance, this translates into a greater focus on business planning and analysis. This change comes with a need to enhance digital skills in business, with the report suggesting that 2 in 5 business leaders are committed to accelerating digital transformation plans. A separate study by EY discovered similar findings, suggesting that nearly 60% of all respondents believed predictive and prescriptive analytical skills were critical.

With digital transformation plans accelerating, the data available to support the decision-making process is increasing. The finance industry needs to be capable of utilising this data to support its own individual decision-making plans. 

The situation, however, is that the skills currently aren’t’ there to meet the rising demand. Consultancy business McKinsey states that under 20% of businesses believe they have the necessary skills and experience to gather and utilise the insights effectively. A further 80% of respondents interviewed by McKinsey said they did not have the confidence in their data insight processes and their positive impact on business sales.

There generally tends to be a lack of knowledge surrounding the potential of data. Businesses may have more data availability than ever before, but most don’t really know what the data is or what it could actually enable them to do.

Data analytics professionals within finance can support businesses in effectively using the data. These individuals have certain skills that enable them to respond to certain information points and make informed decisions. Insights can only be delivered if there is a clear understanding of the business and what the data is telling you. Individuals need to be capable of connecting data analytics to the overall strategy and business objectives.

McKinsey describes the importance of data translators, people capable of defining data insights, drawing information from the data and converting this information into clear, actionable language that can be applied within the business. Once data is generated into insights, this information needs to be transferred into messages and offers that can be delivered into the wider business and industry.

Finance professionals have generally been responsible for gathering financial information and presenting it to other individuals in their business. The key difference today is the sheer scale and range of data available from multiple sources. This is a challenge in itself, but it also offers the opportunity to add even more value to a business.

Data analytics involves harnessing skills in both technical and non-technical fields. The collection and assessment of detailed data also create new ethical factors that finance professionals will need to consider. Aside from efficiently extracting, measuring and analysing data, finance professionals need to understand the ethical implications of this entire process.

Industry experts believe that digitisation will generate automation further into traditional finance and accountancy roles. The need for finance professionals capable of interpreting data and delivering clear decisions based on data-driven insights is likely to continue to grow. The world is evolving, business is changing and finance professionals will need to change too.

The financial industry is experiencing a significant shift driven by new technologies. Many business leaders are continuously looking for techniques to improve their performance and introduce new, efficient solutions. With the rise of new technology comes new challenges for the finance industry.

Being prepared for cyberattacks

Financial businesses are particularly vulnerable to cyber attacks due to containing large volumes of very sensitive customer information. As one report shows, financial businesses are generally liable to cyberattacks more so than other industries. Compromised credit cards, leaked information or malicious banking processes have forced businesses to utilise and embrace new technologies and protect their organisation from very expensive challenges. 

By implementing advanced technologies businesses can greatly improve their security measures and greatly reduce potential cyber-attacks and the associated expenses. Security represents a top priority for financial businesses due to the accelerated rise of professional ‘attacks’ in the last couple of years. Business can utilise new verification services, a fraud prevention system that verifies user information. End-to-end encryption enables no external group to access certain sensitive information. 

Maintaining a connection with new technology

Recent studies suggest that financial businesses need to continue investing in robotics and other automation tools to enhance their effectiveness and reduce costs linked with operational processes, risk management and compliance. Businesses need to upgrade their internal systems and data facilities to utilise the benefits of big data solutions, such as AI-focused support assistants. 

Exploring robotics can allow financial industry businesses to replace traditional, manual services with automated processes, improving productivity, accuracy and compliance. Businesses need to be prepared to embrace new technologies such as robotics and artificial intelligence, machine learning and NLP.

Keeping your business compliant

REgulations, compliance and laws are a constant challenge for the financial industry. The pressure to remain authorised and compliant relates specifically to the rising regulation fees that emerged from the global financial crisis back in 2008. Today, multiple regulations have driven financial businesses to streamline their processes.

Implementing regulatory technology to stay compliant enables businesses an efficient management and risk assessment process for organisations. RegTech is generating added value for a company seeking to streamline processes associated with regulatory compliance. RegTech businesses provide ‘know your client’ and anti-fraud services, tax data management services, real-time reporting and regulatory compliance assessment tools.

The challenge of meeting customer expectations

Today’s customer is tech-savvy and generally expects high-level custom features within their banking services. Younger customers typically have a better understanding of technology and as a consequence have higher expectations of their digital experience.

Generation Y, people that fall between the ages of 22 to 38 are responsible for nearly 50% of mobile banking users and have the biggest impact on the digitisation of financial services. To be capable of meeting the needs of both the older and younger customers simultaneously, financial organisations need to create a hybrid banking model that combines digital experiences into a traditional banking environment.

Financial businesses can continue to succeed and have a considerable advantage over their competitors if they continue to embrace digital technology. With a combination of AI, robotics and regulatory technology, businesses can continue to innovate and manage the challenges faced in finance, while continuing to remain compliant and keep progressing.

A final factor is maintaining a close consideration of customer satisfaction. To maintain the highest level of customer satisfaction, financial businesses need to incorporate a blend of traditional and digital banking methods. The combination of the solutions described will enable finance businesses to reach their future goals.