Tech buzz: 6 tech trends influencing banking and fintech
- It's time to look back at 2022 and find out which tech advancements made the biggest waves in the financial industry last year.
- From gamification to enabling digital equality, last year was home to both peril and promise. What does that tell us about technological progress in 2023?
Lately it seems every year is a good year for tech, and the last one was no different. While products tend to get all the hype, it is often technological processes that are truly making the biggest waves.
Let’s review the biggest movers and shakers from last year that are likely to influence the banking and fintech industry in 2023.
Big Tech making big moves
Big Tech made some big moves in financial services last year, and the distinction between well-known social media giants and financial institutions is eroding rapidly. Research shows that Google was the most active tech giant in fintech services in 2022.
Not to forget that earlier that year, Google also announced the release of its digital wallet enabling P2P payments, granular privacy controls, and virtual cards on the platform.
Source: CB Insights
But other tech giants aren’t far behind and are continuing to expand their functionalities. Meta-owned WhatsApp introduced its ‘first’ end-to-end in-app shopping experience in India, called JioMart. Similar strategies for conversational commerce were undertaken on this side of the Prime Meridian as well by Attentive. Shopify and YouTube announced a partnership that will allow merchants to sell through the platform.
Meanwhile, Apple is eyeing the digital ID space and wants to extend its mobile ID features and State ID to more regions in the country — currently 8 TSA checkpoints offer support. In these states, customers can use the digital version of their driving license or other authorization in their Apple Wallets to clear security checks through airports.
As the line between tech and finance grows thinner, one technological process that has been the focus of an enormous amount of public intrigue is gamification. While the GameStop incident raised many questions, Robinhood’s model was able to make a strong case for how sticky some gamification practices can be.
Even though the slickness of this process has especially come under scrutiny, its adoption hasn’t suffered any blowback. Recently, Robinhood announced a foray into retirement savings.
Gamification is gaining traction in other applications in financial services as well. For example, Daffy is a fintech company that offers donor-advised funds and tax-advantaged charitable accounts on its platform that make giving easy and approachable.
For more about how gamification impacts user behavior and what interface slickness can cost us, check out my article on the double-edged sword of good UX. Regardless of how one feels about gamification, it is unlikely that convenience will be allowed to grow unchecked at the cost of consumers’ financial wellbeing.
Research is already pointing towards the need for UX elements to focus on the long-term safety and interest of investors, as well as providing them chances to review and reflect on their decisions. The considerations aren't lost on the CEO and co-founder of Daffy, Adam Nash, who noted that “gamification isn't the primary driver of giving, but we know it helps. People generally give because they believe it's the right thing to do, and at Daffy, we lean into gamification to amplify the positive emotions people feel when they give and provide them with more reasons to share their giving with others. If we can gamify spending, saving, and investing, why not use gamification to motivate people to be more generous?”
Towards responsible AI
AI has improved leaps and bounds this year, with more and more financial services incorporating its capabilities in their process automation tasks or customer experiences. From generating images through a prompt to getting fully written scripts, both DALL-E 2 and ChatGPT have been at the center of what is possible for AI.
However, not all of these possibilities are good for consumers’ financial wellbeing. For example, as powerful as AI is considered to be, many privacy and security harms can emerge from its use. Plus, bias is still a reigning issue. To resolve this, financial institutions are adopting different strategies from explainability to interpretability, and the devil, as usual, is in the details.
Like customer experience, process automation AI is expected to grow in wealth management as well, with more and more financial advisors displaying an affinity for the technology. However, it's not all smooth sailing, with 55% advisors reporting that the insights generated were too complicated to use.
It is likely that as the use of AI becomes a more central part of financial institutions' digital strategies, explainable AI will hitch along for the ride. The questions going into next year are not only going to be about explainability, but also about explainability for whom.
KYC: Behavioral biometrics will continue to build up
Although advancements in tech offer companies a chance to improve on security, they also offer scammers and fraudsters a chance to run their scams through innovative channels.
In the first half of last year, fraudulent financial transfers reached $3 billion. To counter this activity, banks are partnering up with companies like BioCatch, which can avoid storing any Personally Identifiable Information and still verify your identity by analyzing how you interact with your device, tap, swipe, etc.
This novel field of behavioral biometrics has implications far and wide in the coming age of digital finance; however, it also raises questions about the nature of identification and identity in the modern age.
We may be able to buy products in chat or even smile to pay at our local stores, but we still have to crack accessible PDFs in the financial industry. Our progress in speed and options does not match our progress in issues of equal access and universal usability.
Enter Procure Access: a B2B initiative by the nonprofit Disability:IN, which has brought 20 firms like Microsoft, Fidelity Investments, and Google in a pact to prioritize accessibility in their procurement process. Moreover, companies like Deque Systems are building a slew of products to help companies fulfill accessibility standards as well as compliance requirements. Making a splash recently, Thales Group announced a voice-enabled payment card that works to protect visually impaired people from fraud, by reading out the amount of each transaction before validation.
Survey data shows that open banking is becoming increasingly important to customers, with 56% reporting it is a necessity.
Turning these expectations into reality requires meticulous work on the part of financial institutions. Data from many different institutions has to be reliably collated, and issues of compliance, regulations and security need to be resolved.
For some part of this journey towards “openness”, institutions were using the practice of screen scraping to access data that was hosted on other platforms. As the name suggests, services would log into customers' accounts using their provided credentials and “scrape” the whole webpage and store all its contents. Although the practice became abysmally common, financial services are increasingly moving away from the practice on a global scale.
Its place is being taken up by open banking, where individuals can share data with their bank using secure authorization standards like OAuth. The likelihood that screen scraping will suffer even more blows this year is high. However, it is important that we are sure of what we are replacing it with.