Is your company incorporating cutting-edge technology? Or at least keeping an eye on budding trends? 

The search for the next monumental disruptive technology is fervent and ongoing. By definition, a “disruptive” tech shakes up the status quo – it ousts existing tech and spurs industry-wide change. This is especially relevant for the financial services industry. From FinTech startups to mature commercial and investment banks, it’s a constant scramble to either stay ahead or keep up.

Here are three disruptive techs that are altering the infrastructure of the financial services industry – and that your company should consider exploring if it hasn’t already. 

Blockchain

Although the cryptocurrency surge has had its ups and downs, the technology behind the most notable cryptocurrency (Bitcoin) has arguably been the most influential technology to come about for some time: blockchain.

Blockchain is an immutable digital ledger of ongoing, secured, and bound transactions that are distributed on a decentralized network. This public ledger can be programmed to record virtually anything and everything of value. 

Blockchain was initially brought to prominence via the cryptocurrency surge in 2017/2018 – but it’s gaining staying power as various industries find ways to benefit from this disruptive technology. 

Blockchain is gaining traction at a remarkable rate – years faster than the world’s adoption of the Internet. In 2018, PwC surveyed 600 business executives and 84% of them said their companies had at least some involvement with blockchain – a clear indication that companies are at least trying to figure out a way to incorporate the tamperproof ledger into their operations. 

Financial Institutions and Tech

It’s not a mystery why financial institutions would be enthralled by this tech. In essence, blockchain can significantly reduce infrastructure costs (the price of authenticity and security is high) and expedite processes (less intermediaries). How? The public nature of blockchain’s digital ledger. On a decentralized, distributed network, transactions are verified by the community that comprises the network. 

Recording payments, effectuating transfers, reducing fraud, automating contracts – there are many practical applications for blockchain in the financial services industry. 

Several noteworthy finance and tech companies – like MasterCard, IBM, and Alibaba – are actively investing time and resources into researching and developing blockchain capabilities. For example, despite expressing caution about blockchain, Bank of America has the most blockchain-related patents of any financial services company, including a recent patent for a “real-time net settlement by distributed ledger system.”

Relatively speaking, blockchain is still in its infancy with respect to its widespread application/adoption. It still faces major regulatory hurdles, as well as structural concerns – especially for smaller decentralized networks.

Robotics

Robotics have technically been a steady presence in the financial services industry for decades.

Automated tellers date back all the way to 1967 when Barclays launched the first ATM in London. Although ATMs are a standard in the banking community, what if you walked into an actual bank branch…and no one was there? What if the financial advisor behind your investment portfolio was actually a software program that uses complex algorithms to allocate and manage your money? 

The employee-less bank experience exists. So too does the robo-advisor. 

Bank of America, the second largest bank in terms of assets, rolled out the “bank of the future” back in 2017 when it opened an initial wave of “robo-branches.” These branches are outfitted with an ATM and a secure meeting room for video conferences. As you would expect, this alternative reduces human labor requirements and associated costs. 

The robo-branch has been slow to catch on – however – the robo-advisor is widely considered a groundbreaking technology.

From both the consumer and institutional perspectives, robo-advisory is cost-effective, as this service can be provided to a broader audience at a lower price. Like their human counterparts, robo-advisors can be directed to allocate assets based on risk preferences and desired returns. 

Robotics are also impacting the financial services industry through automation and machine learning. 

Robotic Process Automation (RPA) is a business process automation technology used to streamline and standardize processes. In less words, it simplifies processes. The machine learning component of RPA enables this intelligent automation to learn and recognize data patterns in order to make calculated, autonomous decisions.

Financial institutions are implementing RPA to reduce administrative costs, improve quality, and save time. For example, RPA can compartmentalize data and keep organized compliance records – ensuring easy access in the event of an audit. 

These are just some of the ways robotics are influencing traditional financial services. As capabilities expand and costs decline, robotics will continue to drive sweeping changes across the financial services industry – and not just from a commercial perspective. Other human-dependent functions like product design and underwriting will be impacted as well. 

Will these robotic-based financial service solutions become as accepted as ATMs? Time will tell.

Hybrid Cloud

Like robotics, the cloud is far from a novelty. 

Cloud computing is an alternate form of storing, managing, and processing data that relies on the Internet rather than physical servers. Its rise to widespread adoption began in the late 1990s and early 2000s. However, cloud computing has continued to develop and take shape over the last two decades, leading to the hybrid cloud deployment model. 

The hybrid cloud is a mix between private (on-location) and public (off-location) cloud computing. This hybrid structure allows companies to tailor their approach to their needs. 

Additional benefits of the hybrid cloud include cost flexibility, business scalability, market adaptability, and ecosystem connectivity.

From a cost perspective, the hybrid cloud eases the switch from fixed to variable expenses, granting businesses the flexibility to focus on capital investments and other strategic initiatives rather than costly, outdated infrastructure.

The hybrid cloud structure also enables companies to scale operations up and down as necessary. With this infrastructure in place, companies can benefit from rapid, agile market adaptability, executing new approaches and tactics as trends develop.

Finally, this computing model fosters widespread interconnectivity by increasing communication and collaboration across all levels of the business, as well as third-parties (advisors, suppliers, distributors, customers, etc.). 

The hybrid cloud provides financial institutions with the advantages of both private and public clouds – while reducing limitations, mitigating risks, and accounting for data security.