Innovation in financial technology is driven by consumer expectations and the necessity of continually providing secure and private implementation of those innovations. For example, the increased percentage of remote workers has led to an increase in remote business transactions. And managing that shift in behavior requires an increase in security measures to ensure transactions are safe, secure, and legitimate, protecting all parties’ information while accomplishing the tasks at hand.
We aim for our customers to not only keep up with their competitors, but to creatively innovate in ways that they can leverage technology to stand out (and even stand alone). By working so closely with our customers, we’re able to fill the standard break/fix help desk expectations of an IT provider, but then also go beyond that, working as a strategic partner to help businesses consider new technologies, create a security posture around the technologies, and continually train and educate the staff to use them well, staying in compliance and keeping everyone’s information secure.
As a Managed Service Provider serving financial institutions, we have a front-row seat on the challenges and solutions that regional banks and credit unions face. We see no signs of slowing down on the innovation front in 2024, so we’re bringing you the top 5 most important trends we expect to see rise to the forefront in the new year.
[ This article is part of our Guide to Proactive IT Strategy. ]
Trend 1: Enhanced Cybersecurity Measures in 2024
2023 saw the highest average costs of data breaches to date. With an estimated 2,300 daily instances of cyber theft, ransom and fraud, businesses – especially small businesses – are taking cybersecurity more seriously when planning for the future. Financial services businesses are wise to seek a MSP partner with a specific eye on cybersecurity measures. The threats and tactics are continually evolving. Your vigilance and methods of strengthening security measures must evolve faster.
New cybersecurity technologies, such as a cyber posture dashboard like the one we use at InfoSystems, can run assessments focused on specific standards such as CIS, HIPAA, etc. and get auto-generated custom policies, plans, and a list of prioritized tasks to close gaps in compliance.
The stakes that you face as a financial institution are high. There’s personal information as well as financial information at risk. And the financial industry is uniquely targeted because of these highly valuable sets of data. Countless bad actors devote their entire business to infiltrating systems like yours.
The way to combat these threats is a thoughtful combination of external security measures, designed to keep threats out of your system, internal security measures, designed to identify and eliminate threats inside your system, as well as security posture training for your staff. Staff training and internal controls are often under prioritized, but most of the time these are the break-points that will inadvertently cause an incident.
Trend 2: Adoption of Cloud Computing
As we’ve navigated the boom in remote work, we’ve also seen a shift towards more adoption of cloud infrastructure in the financial industry. This movement intends to create the infrastructure for organizations to gain more scalability and efficiency. Cloud services have been proven to benefit organizations in the main areas of cost, compliance, and collaboration.
Leaning on an MSP to assist you in adopting cloud computing will help ensure a smooth transition. An MSP will help you choose the right cloud service, given the compliance requirements you must adhere to. Your MSP partner will also help you plan for future growth, recommending a solution that can grow with you or that you can grow into.
Once you’ve determined the best cloud solution, your MSP partner will help you create a detailed migration plan that will help you migrate everything successfully and with as little down-time as possible. And importantly, the MSP will help you lay out the policies and procedures for initial and ongoing staff training.
Your IT team may have previously dismissed the idea of adopting a cloud computing approach for your organization. And it was likely dismissed because in previous years, the security and safety of the information and ability to reach compliance were unknown variables and not worth the risk.
We believe it’s worth reassessing as the technology and security has improved greatly. The cost savings and increased collaboration will greatly benefit your organization.
Trend 3: AI and Machine Learning for Personalized Services
In 2024, you’ll see financial institutions begin to adopt AI and machine learning for their personalized services such as investment, fraud detection, and customer support.
For example, if investments are handled without AI, you rely on investment experts to aggregate and interpret large volumes of data, which is often not feasible or even affordable for most investors. Leveraging AI will help investors filter stocks that meet their criteria more simply and cost-effectively than stock screeners. While this is helpful, we recommend continuing to leverage the expertise of the people involved. After all, AI is best used as a tool, not a complete solution. Use it to save time and expedite processes so that your experts can spend their time on the most valuable aspects of their work.
Fraud detection is another way AI can shine by its ability to look for anomalies without distraction or bias. It can detect and flag anomalies in real-time for bank transactions, app usage, payment methods, etc. This level and breadth of vigilance would be extremely costly for most financial institutions to deploy. But leveraging AI allows you to provide enterprise-level fraud detection at a fraction of the cost.
We know you’ve probably wanted to pull your hair out when chatting with a customer support AI bot, but hear us out. With the new large language learning models hitting the market, customer support automation is greatly improving. You can now train chatbots in ways that previously didn’t exist.
As you consider ways to implement AI and machine learning into your financial business, make sure you work closely with your MSP and compliance team to ensure that you’re using the technology safely and ethically. Create policies for your employees that help them learn how to use AI technology safely and ethically including which platforms to use, what information to feed it, and what to do with the information that it produces.
Trend 4: Blockchain for Enhanced Security and Transparency
Blockchain is changing the game when it comes to transactions and record-keeping for financial institutions. A blockchain is a digital ledger of transactions. Similar to a database, but it records information in blocks – each block linked (or chained) to the previous one, forming a line of blocks.
Maintained across multiple computers connected in a network, each computer has a copy of the blockchain, all working together to validate and record new transactions. Traditional databases are managed by a central authority such as a bank or government.
The traditional way of transferring payments from one account to another potentially leaves both accounts vulnerable to tampering, mistakes, or fraud. But once the transaction is recorded on the blockchain, it cannot be altered or deleted. The transaction is also visible to anyone who has access to the system, leading to greater transparency and security. The identities of people involved in transactions are always encrypted for privacy, but the decentralized and transparent nature of blockchain makes it secure against fraud and hacking.
One innovative way we anticipate financial organizations will utilize blockchain in 2024 is by implementing smart contracts. These self-executing contracts will have the terms of the agreement directly written into lines of code that are stored and replicated on the blockchain network and executed automatically when conditions are met. We expect this advancement to transform contract management in the financial industry.
As more institutions move to adopt blockchain in 2024, we expect the heavily regulated financial industry to add additional measures for regulatory compliance.
Trend 5: Regulatory Technology
Simply put, Regulatory Technology, RegTech, is any technology that helps organizations comply with regulatory requirements. The technology can identify the impact of regulatory provisions on different products and services, business models, and operations. It also helps control and manage financial and non-financial regulatory risks. RegTech has become essential for FinTech companies to aid in processing the constantly updating regulatory requirements. Other industries such as healthcare, AI and big data have leveraged RegTech as well, but the most common applications of RegTech in the finance industry are:
- Identity Verification and Management Using KYC/KYB Procedures
- Regulatory Compliance and Change Management
- Regulatory Reporting and Case Management
- Risk Analysis and Management
- Transaction Monitoring and Screening
- Anti-Money Laundering (AML) Compliance and Detection
- Fraud Detection and Prevention
If you’re researching a RegTech solution for your organization, make sure to rely on your MSP to help you navigate what tools and systems will be most beneficial to your operation. They’ll be able to help you prioritize appropriately.
Conclusion
As we head into the new year, navigating the complexities of our economy and the impacts on our customer base, we hope that these trends are helpful in bringing some fresh ideas and perspective. We definitely don’t recommend trying all of them in January. But carefully consider the benefits and implications of prioritizing a couple of these in the next 12 months. Your operations and your customer experience could greatly benefit by your adoption of some new technology innovations in 2024.
[ This article is part of our Guide to Proactive IT Strategy. ]
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