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Some of the biggest financial institutions in the world have been around since the days of stagecoaches. They've clearly come a long way since then, but like any other industry, finance and banking is due for an upgrade.
The banking and finance industries are enjoying greater productivity and profitability than ever, not to mention finding new ways to serve customers and protect their interests. Some of these innovations are visible and obvious while others work quietly behind the scenes. In both cases, we can expect a better experience for clients and shareholders alike as new technologies come of age. Let's look at a few of the ways this revolution is coming about.
Advance Detection of Fraud and 'Financial Fitness'
The detection of fraud among banking customers was once a task relegated to teams of human beings who looked for transaction types and frequencies and flagged accounts as necessary when they found warning signs. These days, however, we can expect advances in artificial intelligence to perform an ever-larger share of the administrative footwork.
Artificial intelligence algorithms can now monitor the entire financial history of a customer, up to the minute, and help pinpoint the likelihood of banking fraud based on usage patterns and behaviors. The obvious advantage is that the process is faster, not to mention stands a far better chance of catching problems before they become huge headaches.
Another way we can expect AI to make a splash in finance is making it easier to separate credit-worthy customers from the less-credit-worthy. The awarding of risky mortgages is a big part of the reason why housing bubbles and market collapses seem to happen on a recurring schedule. But AI could make it substantially easier to determine — using so-called "unstructured" and "semi-structured" indicators — whether a customer is a fit enough borrower for a mortgage, business loan or other financial product.
Better Identity Verification and Protection
There's a part two for the detection of fraud, and it involves the proliferation of advanced identity verification technologies. The AI solutions described above are great for adding peace of mind to some types of financial transactions and banking products. But for everything else, it's getting harder to "spoof" a financial customer's identity long enough to swindle them.
Consider how common fingerprint scanners have become. A billion pockets across the world house smartphones with robust identity protection, including fingerprint detection, retina and face scans and much more. And since our smartphones are more frequently becoming the hubs of our financial lives, and facilitating contactless payments at our favorite restaurants and retailers, we rightly feel more and more confident in using financial services on the go.
It's even becoming common for ATMs to use biometric technology. The benefit is clear: Even if a thief had access to somebody else's bank card as well as their PIN number, they'd still have to contend with fingerprint or face scan verification to complete their transaction.
Apps and Algorithms Facilitate Better Savings Habits
"App culture" is another reason why smartphones have emerged as a favorite tool among financial and banking customers. It's very likely that your national bank or credit union has a dedicated mobile app that lets you find branches and ATMs, move money from one account to another and keep an eye on your money as it comes and goes.
Email and push alerts can tell you when one of your cards is being used — in real-time. Sometimes, you can have a chat with customer service without even leaving your favorite messaging app. In other cases, depositing earnings from a physical check into your account is as easy as opening your bank's app and snapping a photo of the check. Just be sure you're familiar with regulations as they apply to the mobile deposit process, including signing the check and writing "for mobile deposit at X bank" on it.
Smartphone and tablet culture is bringing us an entirely new class of app too — one that blurs the line between traditional banking and something far leaner and more convenient. Apps like Acorns, Chime, Digit, and Qapital offer users a way to round off their purchases and then save or invest the difference in short- or long-term growth accounts. Some even offer fully featured and FDIC-backed retirement accounts that can be paid into at a personalized pace.
The result is that banking customers have fewer excuses than ever not to invest in their own futures or at least enjoy a new way of saving for a long-coveted big-ticket purchase.
Blockchain and Decentralized Currencies
No discussion of emerging technologies in banking is complete without a mention of the blockchain. Even some of the major voices in world banking and finance seem uncertain about the ultimate direction this technology will take and what kind of lasting effect it will have. But if we judge blockchain technology on its merits rather than taking the current commentary at face value, we see a technology that's potentially more transformative than anything on this list.
We're headed for a far more global and connected economy replete with more "gig"-based jobs and non-traditional employment than ever before. In such a world, it's clear that we need a far more robust "trust mechanism" than anything currently available. That's where the blockchain — and offshoot technologies like cryptocurrencies — comes in. Blockchain tech represents a way to maintain a shareable and immutable public ledger of every kind of transaction. Blockchain is already being used by the NASDAQ to facilitate securities transactions, which means the concept has traction at the highest levels of finance.
What's the benefit? It first of all renders many other trust mechanisms and paid intermediaries obsolete. Second, it greatly speeds up transactions of all kinds, including the issuing of shares to investors. In one application of blockchain technology, the settlement phase for the issuance of shares fell from three days to just 10 minutes. For some kinds of high-stakes transactions, the time saved could make a huge difference in how favorably an investment transaction plays out.
More Innovations to Come
We've barely scratched the surface of what's to come as intermediate and high finance becomes more entwined with modern technologies. As a financial customer yourself, downloading the smartphone or even smartwatch app from your primary financial institution is just the first step. Don't be surprised if, in the near future, banks bear little resemblance to their present-day counterparts as algorithms grow more intelligent, currencies become less centralized and banks become more "digital platforms" than physical locations.