The UK government has published its FinTech State of the Nation report, hailing the sector’s significant role in driving innovation and change across the economy.
Despite the political uncertainty over Europe, the government’s FinTech Sector Strategy – quoted in the document – aims to maintain the UK’s position as “the best place to start and grow a FinTech business”, it explains.
According to the report, eight technologies are driving the current wave of disruption in finance and related sectors: blockchain, which has roles in identity management, smart contracting, peer-to-peer transactions, trade finance, and smart supply chains; drones, which have unexpected roles in insurance claim validation, among more obvious applications in agriculture, safety, deliveries, and critical infrastructure maintenance; the Internet of Things; robots – both hardware and software – which have strong use cases in automation, manufacturing, hazardous environments, and the service sector; additive manufacturing (3D printing), which offers particular benefits in prototyping and customisation; virtual reality; augmented reality; and artificial intelligence (AI).
However, many business leaders are unsure how to respond to these mega-trends and so adopt a ‘fast follower’ rather than ‘early adopter’ approach, says the report, handing the advantage to bolder competitors. But as the “Essential Eight” technologies mature in the years ahead, they will increasingly be viewed as foundational building blocks for competitive business.
According to the report, three overarching themes are emerging across financial services, and these combine the technologies in different ways. First is Intelligent Automation, combining AI, robotic process automation (RPA) and the Internet of Things (IoT).
“Intelligent Automation enables human-like interactions to create a ‘virtual workforce’ of automated bots that are capable of handling tasks typically performed by humans,” explains the report. “It can include machine-based decision-making without explicit programming, gathering data from unstructured sources like handwritten text or voice, or using natural language to respond to requests in a human-like way.
“By combining AI and the IoT with RPA, vast amounts of data from a range of sources (embedded sensors, smart devices, wearable technology, etc) can be collected to feed intelligent algorithms and automate processes.”
Within financial services, Intelligent Automation has the potential to yield returns beyond cost savings, including fewer errors and better customer experiences. For example, it could automate Know Your Customer (KYC) requirements by implementing RPA for customer data capture, and machine learning algorithms for the approval of associated workflows.
Second is what the report calls Automated Trust, combining AI, blockchain, and the IoT. The primary applications are often seen in the context of the manufacturing sector, but should not be underestimated in financial services, says the report. For example, the technologies could improve the trustworthiness of machine-to-machine transactions by providing a secure way to share data and coordinate decisions.
And third, Extended Reality combines VR, AR, AI, and the IoT to provide fully immersive, digital experiences and life-like simulations. In time, these will redefine how humans interact with the virtual and physical worlds, and so have impacts right across the industry in terms of how customers and employees access, consume, and share information.
However, organisations will need to balance the benefits with the risks of these disruptive innovations, warns the report. For example, a recent report by PwC revealed that 44 percent of organisations don’t have any information security strategy, while less than one-third have implemented controls for emerging technologies.
In order to build trust with customers in the future, organisations will need to be transparent on how customer data is used, managed, and protected. At the same time, they will need to be proactive in implementing robust security practices.
Relationship-based business models will be the key, concludes the report. These will need to bridge the gap between technology vendors and service providers, while organisations work with regulators to test and validate the technologies in a highly regulated market.
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