The pace of technological change in recent years is, without doubt, the most disruptive force in the financial services ecosystem today – a change that looks set only to continue and accelerate. As a result, financial services firms globally are increasing investment in new and innovative digital capabilities. They are embracing the very digitalisation that has disrupted their industry, to support an array of functions from regulatory compliance to customer experience and product development.
David Clee, CEO and Founder of MirrorWeb, here explores the key technology trends set to shape financial services in 2020. This includes increasingly intelligent use of customer data, adoption of digitalisation by regulators and greater uptake of technologies to address ever-evolving compliance obligations.
More intelligent use of customer data through tech
In today’s digital world, we provide more information about ourselves, our behaviours, preferences and needs than ever before. Spectators argue that data has overtaken oil as the world’s most valuable resource. Indeed, data collection and analysis has emerged as a major enabler for financial services. As the capability of technology expands, we can expect to see more businesses in the sector capitalise on the opportunity to learn more about their customers and improve their offerings.
Recent regulatory changes have helped to drive this for smaller entities. One example includes the second Payment Services Directive (PSD2). Otherwise known as ‘Open Banking’, which came into force in 2018. By forcing the biggest banks to release and share customer data, PSD2 has helped fintechs and other innovative new entrants, such as budgeting apps and robo-advisers, to tailor what they offer customers in terms of products.
With analysts predicting that by 2025 an estimated 463 exabytes of data will be created each day, technology will also be vital in ensuring that data is harvested, consolidated and managed effectively. As this process becomes simpler, companies must ensure that data is collected intelligently and with purpose, establishing their own processes to prevent data misuse.
Regulators beginning to embrace digitalisation
The overhaul of the financial services industry in the post Great Financial Crisis (GFC) era created a swathe of new rules and regulations. Financial firms must comply with these whilst they also contend with the rapid evolution of technology. While such changes have presented financial firms with significant compliance challenges, transforming how they operate and behave on a day-to-day basis, it has coincided with another notable overhaul: regulators embracing new technologies.
There are already clear signs of regulators adopting increasingly sophisticated technology. One such example is The Consumer Financial Protection Bureau (CFPB). It focuses on consumer protection in the US, and has invested heavily in analytics and digital technology. It has also created an eRegulations online tool to help users find, research, and understand regulations.
The same is true for Europe. In the UK, for example, the FCA evaluates how insurance firms use their own large data collections by using web analytics and social media data. It is also in the second pilot phase of its digital regulatory reporting (DRR) initiative.
The increasing adoption of new digital capabilities by the regulator is incredibly positive for the financial services sector. Indeed, a more collaborative approach involving the regulator and financial firms will not only help the regulator do its job more effectively but will also make it more straightforward for financial firms to keep up and manage their compliance obligations.
Tech solutions for fast-evolving regulation in a digital world
Businesses now understand the importance of online communications and social media, primarily as marketing and sales channels. With this in mind, the financial services industry in particular is projecting significantly high returns on its investment in an array of fast-growing web-based and social media channels, with annual revenue growth related to this area averaging 31%.
However, the opportunities that come with social media present new and unique challenges. The emergence of fresh channels of communications for financial institutions to promote products and entice new investors has naturally elicited a strong regulatory response, with extensive record-keeping requirements becoming a significant burden for compliance teams.
Technology is emerging as an important part of the solution to these challenges. Financial institutions, both large and small, should be looking to regulatory technologies that help them satisfy these compliance requirements and reduce the burden of record-keeping. At MirrorWeb, for example, we allow for end-to-end website and social media archiving. A process in which digital content is captured and archived, providing firms with accurate records of their online communications
By harnessing the opportunity of tech, financial firms have the power to tailor what they offer their customers and better manage their compliance obligations. Meanwhile regulators look set to enhance the regulatory landscape through the adoption of new technologies. With the rate of technological innovation due only to accelerate, 2020 looks set to be a year of considerable opportunities for digitalisation in financial services.
MirrorWeb delivers web archiving and monitoring solutions for the information-driven enterprise. Trusted by financial services firms and Governments worldwide, the MirrorWeb platform helps organisations create accurate and immutable records of online communications, ensuring they meet compliance obligations and information of cultural or historical value is never lost.