Forging relationships with financial services (FinServ) customers has traditionally relied on periodic, proactive outreach by one party or the other. Contrast that with the real-time, data-rich relationships that digital platforms powered by artificial intelligence and machine learning (AI/ML) algorithms make possible, starting with a customer’s first checking account.
In an ideal state, FinServ IT systems serve up automated financial advice and access to services that hit nearly every lifetime milestone. They manage voluminous amounts of customer transactions and offer up personalized and personalizable financial accounts and offers, spanning home mortgages, credit card, stock trades, retirement investments and more. This has all happened in recent years, as all types of financial services, including those born from non-financial institutions, bet their future on digital technologies.
“Sure banks have evolved over the past five hundred years, but banking and financial service has changed so much in recent years that it’s now in our everyday lives in many ways,” said Sean O'Dowd, global financial services strategy and solutions manager at hybrid multicloud software provider Nutanix.
These are unprecedented times for the financial industry as economies around the world endure inflation, war, bank failures and new regulations. Yet there’s a momentous renaissance manifesting across the financial world, as new competition speeds digital transformation that is changing how people and businesses manage and transact money.
“It’s an industry brimming with data and the technologies to create deeper and more lucrative relationships with customers,” said O’Dowd.
As FinServ builds their future on digital technologies, more people are relying on those services to get, give, move and invest their money. People and businesses also rely on AI-powered tools to inform them and automatically make financial transactions for them.
That wasn’t so less than a generation ago.
According to the 2023 Nutanix Financial Services Enterprise Cloud Index, the financial services industry has emerged as a frontrunner and early adopter in the use of hybrid multicloud. A fifth (20%) of the global financial organizations in the study reported using a hybrid multicloud architecture, which outpaced the average among all industries, which was 12%.
O’Dowd sees FinServ racing to find ways for technology to help it manage risk and complexity, and bring new services and ways to engage customers. He also learns from Nutanix customers, including Société Générale, Nymbus, Servus Credit Union, Penn National Insurance and many others.
“Adopting a platform approach and offering multiple services in the cloud combined with new technology options like blockchain and digital currencies will be a winning strategy in the financial services industry,” he said.
Those are some of the ingredients FinServ companies use today. Probably the most critical is the platform, where increasingly IT teams manage a mix of owned or leased data centers and public cloud services. This is the foundation and source for every digital thing a FinServ does. Rapid digital innovation in recent years is allowing financial and other industry leaders and startups to reinvent the way money moves.
Growing Financial Service Offerings
Financial institutions are growing their offerings into an amalgam of easy-to-consume services. As a whole, FinServ is expanding upon it core competencies, somewhat analogous to how Google expanded its search engine to include email, cloud services, autonomous cars, maps and more. Like Google and others, financial firms use data to find trends, personalize experiences and reach prospects. That data helps them improve services over time and build new ones. This is all powered by and runs across IT systems.
Customer demand is a big factor driving technological innovation among financial services firms. A study by Zendesk, for example, found that standalone mobile apps don't satisfy 72% of banking customers, who said they want immediate service and data-driven, personalized interactions and experiences that flow between physical and digital spaces.
To comply, 85% of financial services companies are currently using some form of AI, and 52% are currently implementing AI-enabled products and processes, according to a recent survey by the World Economic Forum and the Cambridge Centre for Alternative Finance.
Ant Group, an Alibaba affiliate, for example, operates China's ubiquitous mobile payment app Alipay and offers consumer lending and insurance products distribution, as well as bar code and QR code payments, to meet the transaction requirements of different industry sectors. The company has leveraged AI-driven data analytics to tailor wealth management, credit, and insurance products and services to both individuals and businesses in the Asia-Pacific region.
PayPal has evolved beyond its initial online payment platform to provide a suite of financial services, including peer-to-peer payments (Venmo) and financial and investment products through PayPal and PayPal-owned companies. In August, the company said it was rolling out three new AI-driven products, including a checkout feature that uses AI to keep track of all the variations of customer addresses and personal information and predict the right set of data to use with a given merchant.
“India is probably the best example of what a modern financial services infrastructure could and should look like,” said O’Dowd. He pointed to the Aadhaar Card biometric ID system, introduced by the Indian government in 2010.
“Adharr was a critical move by the government that help it create other digital advancements such as UPI,” he said, referring to the Unified Payments Interface.
The International Monetary Fund characterized the UPI as a response to the nation’s patchwork of rules and paperwork for payments. It aimed to make transfers easier and safer by allowing multiple bank accounts on the same mobile platform for individual and business use alike.
The Adharr platform assigns a unique 12-digit individual identification number to every one of the country’s 1.35 billion people, linking them to a range of services that includes mobile SIM cards, bank accounts, and social security and welfare programs. The cloud portal and biometric technology behind it are easy to use and rely on AI/ML and risk management analytics to correlate behavior and patterns, both to personalize services and to detect and reduce fraudulent activity.
Aadhaar is fully trusted by India’s huge population and has been credited with making equitable microlending available and sustainable to the masses.
Managing complexity can benefit institutions with operational efficiencies and customer access to up-to-the-minute insights and products, according to O’Dowd. He pointed to history as an example.
“Back in the 1990s, the derivatives and equity traders started using electronic trading platforms, algorithms, specialized management and compliance software, and high-frequency trading infrastructure where split-second decisions could be made,” he said. “They became the rulers of Wall Street.”
Public cloud and hybrid multicloud IT systems are becoming indispensable to financial institutions bent on innovation in products, services and customer experiences. For those relying on public cloud services, onboarding and running a diverse set of AI-powered capabilities is possible. Using something like Nutanix’s GPT-in-a-Box, IT teams are able to run new AI applications using their owned or managed data centers.
O’Dowd said hybrid multicloud systems provides FinServ companies with infrastructure options that can mitigate risks that cause IT downtime, optimize computing resource and leverage a variety of processing and data-intensive AI workloads.
“Cost and performance optimization and dynamic scalability are key reasons why IT teams choose hybrid multicloud systems, but it’s a set of platforms that reinforce resiliency, redundancy and the ability to bring new services to market,” said O’Dowd.
FinServ companies eager to adopt AI applications can choose a cloud provider based on their capabilities, ecosystem of applications and services that fit particular needs. Having a variety of cloud service providers gives access to more capabilities while giving IT teams resiliency and the ability to support data sovereignty requirements across different regions.
“AI/ML-driven analytics will likely raise the FinServ standards for effective risk management, regulatory compliance, stress testing, and real-time monitoring,” said ODowd.
Another technology that O’Dowd said is underpinning the future of FinServ is blockchain. It plays a role in simplifying and securing new digital financial services by storing financial data and transactions in blocks, linked by cryptography, that are immutable. They can’t be changed.
“While its faded from the headline, digital currencies andn blockchain are still a vibrant, maturing technology that needs to be figured out and will,” O’Dowd wrote in a LinkedIn post.
“Since the only trust needed is at the point where a user or program enters data, there is a reduced need for trusted third parties, such as auditors, which lowers deployment costs and the potential for human error and fraud,” O’Dowd said. “It has the potential to revolutionize equity trading by providing transparent and tamper-proof records of ownership and transactions.”
He said having a dynamic, adaptable multicloud or hybrid multicloud IT operation empowers FinServ companies to manage risk and harness new capabilities that brinig new, constantly improve services to life.
Gene Knauer is a contributing writer who specializes in B2B marketing for technology companies.
Ken Kaplan contributed to this story. He’s Editor in Chief for The Forecast by Nutanix. Find him @kenekaplan.
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