The Financial Services Industry, which has long been a strange dichotomy of staid, conservative corporate cultures and risky, regulation-skirting business practices, is a study in contradictions. The one area where their thinking has been almost universally progressive, though, has been in the transition to the digital economy.
There are few industries (beyond the tech sector itself) where you can find more of a dedication to integrating the latest in leading-edge technologies. Even though this is the case, though, the Financial Services industry may be gearing up for something of a technological revolution in the coming years. Here are the four major ways that technology is disrupting the financial services industry.
The Death of the Branch
The first and the most visible way that technology is changing the way that banks do business is that it is enabling them to reduce the number of physical branches they have to keep open. Customers certainly don’t seem to mind. Surveys indicate that 40% of Americans go without visiting a bank branch for periods of six months or more. They’re turning to mobile banking options, which are available on all major platforms and include mobile deposit and bill pay features. They now complete tasks like ordering cheques and transferring funds almost exclusively online. That shift has led to a decline in physical branches in the U.S. from 11,971 to 6,270 between 1995 and 2015.
The Rebirth of the ATM
Once, the ATM heralded a new age in consumer banking. Beginning in 1967 at Barclay’s bank in London, England, consumers could withdraw cash at any time of the day or night. The concept caught on and spread across the globe. It’s been a long time, though, since the ATM was considered the pinnacle of banking technology. That may be about to change. Recent innovations like the ability to access services via Apple Pay and enhanced security through biometric scanning have brought ATMs back to the fore. These new features are expected to be the centerpiece of what the industry sees as “the bank of the future“.
The Rise of the Blockchain
When Bitcoin took over the news in 2017, the rise and fall of the cryptocurrency’s value was all the general public heard about. Beneath the surface, though, the underlying technology that makes Bitcoin work was finding its way into the financial services industry. Called the blockchain, it’s a secure encrypted digital ledger system that might have the power to change almost everything about how banks do business. Industry professionals expect massive cost savings across a variety of banking services via the blockchain, and major banks are starting to develop international payment systems using the technology.
Tech Giants Enter the Fray
Perhaps the thing with the biggest potential to alter the financial services industry is the injection of some new heavyweight competition. Apple and Google have already made inroads with their digital wallet and payment offerings, but that’s just the tip of the iceberg. Amazon has also been waiting in the wings, and analysts expect them to make a big play into financial services very soon. They already have a foot in the door, with a business arm that is already lending billions of dollars to small businesses. These technology companies haven’t yet faced the regulatory scrutiny that traditional financial firms have to face on a daily basis, and that gives them a massive advantage in their insurgent campaigns to take over the financial sector.
A New Financial Future
No matter how the latest technological innovations and competitors fare in the financial industry, their effect will be permanent. The major institutions are already preparing to adapt to the rapid advancement and encroachment of disruptive technology. The good news is that consumers should see benefits in convenience, flexibility, and utility born from the confluence of these competing forces. The coming changes, once begun, will create an industry that may be unrecognizable compared to today’s iteration.