Artificial intelligence (AI), blockchain and cloud technologies are increasingly appearing on the horizon. This could be exactly what the doctor, or banker ordered given the legal mandates for open banking and General Data Protection Regulation for 2018. These three key technology groups can accelerate financial services industry move into the digital age:

AI is a collection of machine learning, natural language processing and cognitive computing designed for scale. It is this scalability that is exciting as it can create exponential rate of growth and complete with today’s required personalised communications. Take for example UK payments which in July 2017 processed 21 million payments per business day. If 0.5% of the daily volume was reviewed, for whatever reasons, 105,000 items would need to be checked. Often manually and with rules based, tick the box solutions. AI would significantly increase productivity, identify payment behaviour and pattern recognition and simply ask the question “does this look right”.  AI-powered chat bots can help both business users and customers on any inquiries on payments and enhance the customer experience.

Blockchain is also a mix of technologies that enable us to trust someone we do not know and protect us from cyber criminals. The block contains the vital information and the chain is the sequence of third party, verified, events that have taken place over the history of the transaction. Blockchain is fully encrypted and can be permissioned for private and public groups. Given the current manual and paper base state of any supply chain it is not surprising that many new POC (proofs of concepts) and pilots using blockchain can be seen in this area.

Cloud, gives improved security, scale and agility to response to market demands and can redefine banks’ cost bases downwards. The advances in cloud technologies permit software applications to move seamlessly between legacy, private cloud and public cloud solutions. One such technology, containers, allows the applications to flow safely across the end-to-end processes regardless of the underlying technologies.  Similar to how shipping containers transformed the inefficient, non-scalable 20th century transportation industry to the one today.

These technologies are could be the savior of financial services industry. Financial services are rapidly becoming a banking and technology sector and this is show in the increasing amount of money being spent:

• The annual spend on IT shows FSI one of the largest buyers of software
• IDC expects this figure to grow over 5% on the spend in 2016
• Worldwide IT forecast of $2.7 trillion by 2020 is being led by FSI

The future for financial services is technology.  We can either build it ourselves or work with the fintechs to do so, either way it has to be done. The eminent evolutionary biologists Charles Darwin and Stephen Jay Gould could have been discussing this new banking environment as they noted:

It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change

The new (species) emerge relatively rapidly often with little links to the past.

With this in mind one can imagine the potential impact on:

• ‘Low cost centers’ using AI to increase Straight Through Processing (STP) to 100% thus removing cost, increasing customer satisfaction and reducing liabilities when correcting payments internally for the customer

• ‘Administration of Trade Finance’ costs reduced and the certainty of the ownership increased though the process by using blockchain

• ‘Spare computer capacity’ existing at each bank to meet peak days, removed and cyber security increased by going to the cloud