The Future of Financial Innovation 2023

The financial industry today is vastly different from one that existed a decade ago. The steady and unrelenting march of the machines combined with the demands of an evolved customer has brought about unprecedented changes. From artificial intelligence to cryptocurrencies backed by blockchain in finance, disruptive financial innovation comes in many forms. While many assume it is the future, AI is already here and impacting the future of innovation in financial services. 

 

It is clear that top financial leaders are aware of the new age of innovation in finance and are gearing up for it. Innovation finance is taking the industry by storm. Take a look at a few types of financial innovation to be expected in the coming year. 

Artificial Intelligence Solutions

At present, a major chunk of financial innovation revolves around AI tools and solutions. It impacts several verticals within the industry, revolutionising processes, procedures, and touchpoints. For one, it solves the fintech challenge of delivering a more personalised experience. With AI-powered tools, companies can leverage both customisability and personalisation to provide a more holistic experience. A futuristic AI solution you can expect to see more of are chatbots. 

Thanks to AI, customer service isn’t completely reliant on human resources anymore. Chatbots provide round-the-clock assistance consistently. These are powered by AI, machine learning, and natural language processing to deliver the most realistic experience. These tools are easier to maintain, cheaper to set up, and often the more preferred route for customers. They facilitate conversational engagement that may be better suited for solving more complex financial issues.

Blockchain in Finance

The perpetual cryptographic ledger that is blockchain is another big player in the financial sphere. With its inherently high security and the decentralisation it provides, it comes as no surprise that both the consumer and provider are quick to adopt it. For one, it has and will have a very active role to play in investing. Due to its immutable nature, blockchain can be trusted. Moreover, since public blockchains are open to view for all, there’s no more need for post-trade intermediaries. This reduces the cost of investing, which is a massive win as modern investors seek value. Smart contracts are another application of this technology and will soon be a standard as regulations are put into place.

Digital Banking

With smart devices and virtual platforms being better integrated into the fabric of everyday life, it isn’t a shocker that the technology would be adopted for banking purposes. Digital banking will cause visits to physical branches to drop by 36% by 2022. Entities have already started the ‘digital-only’ movement, one in which they’ve rejected the brick-and-mortar branch approach for a responsive website and mainly mobile application. These entities are known as neobanks, who take innovation in financial services to a level where customers are provided with the power to control their finances, pay bills instantly, manage outgo, and access merchandise in just a few clicks. 

Autonomous Finance 

This financial innovation rests on the shoulders of AI and ML technologies. Nowadays, customers are more involved in making decisions related to their finances and its health. But as these tools advance, the industry is on the verge of automating several core practices. For instance, with the advent of robo-advisors, investors will no longer be as involved when making sound investing decisions. Of course, this is an algorithm-based innovation, and as access to client data increases over time, it is bound to become a lot more powerful.  

Open banking and Platformisation of financial services

Modern customers expect highly personalised solutions using the technology stack currently available. Application programming interfaces or APIs, in particular, is the technology in question, and the financial sector has embraced it with open arms. The shift enabled two-way technological communication between fintech solution providers and incumbents, resulting in powerful integrated services.

Now, thanks to open banking, platformisation is a reality that has bettered the customer experience greatly. With embedded financial services, banking has already become a lot more seamless and less restricted. In the future, this convenience is sure to extend to investing and investment management, leading to the rise of digital AMCs.  

As it stands, the future of financial innovation hinges on increased transparency, decentralisation, and a more targeted customer-centric approach. Fintech will lead the charge into this unprecedented era, and financial entities would do well to adopt a proactive stance toward innovation and its adoption.