It may seem strange to contemplate but there has never been a time when technology has ruled people’s lives so comprehensively. The Internet has been around for over 20 years – in terms of there being general access to it, it’s actually a lot older – and has been enthusiastically adopted globally. Anyone aged under 40 is unlikely to have known a working or social life without it, but it’s the pace of change from deskbound computers through portable laptops then smartphones and tablets that have changed the nature of interaction.
This is a major challenge to established, traditional financial institutions and one that they have begun to embrace, if slowly initially.
A major concern for traditional banks contemplating moving their banking onto the Internet was security, and understandably so. Current accounts and all manner of savings accounts needed to be protected with top-level encryption so that customers would know their funds were protected.
Customers were also demanding that payments and transfers could be made in as close to real time as possible, speeding up processes to their benefit. As foreign exchange markets also became wired the financial sector entered a brave new world of instantaneous transaction but always with the possibility of human error causing a major problem.
Nevertheless, Internet banking is now a normal part of financial transactions and for many people it’s the only way they wish to access their accounts and make or receive payments.
So has the traditional over-the-counter banking been completely superseded by technological advances? Not completely. For the foreseeable future there will always be a need for businesses and individuals to pay over cash at the counter. But as the world’s major suppliers become ever more wedded to electronic transactions, cutting their costs, increasing productivity, satisfying customers and pleasing their shareholders with mighty dividends, the demand for physical bank branches may well wither on the vine.
Evolution of technology’s role
Humans will always be needed in the financial sector despite the increasing power and sophistication of technology. There will always be people who will direct the way that derivatives are bought and sold, how particular investments can be made and develop forward strategy for big financial beasts. Yet it’s the IT infrastructure that needs to work and thus IT specialists are the core of the strategic plans. Software developers, for example, don’t come cheap, so investment by the financial sector to ensure that systems operate efficiently and effectively may lead to a short term hit on the bottom line.
The key is in integrating IT systems. Big banks generally grow through acquisitions so systems are patched together and in most cases are inefficient. The duct tape – so to speak – will only hold something together for a limited amount of time. Finance needs a comprehensive set of systems that allows it to serve its clients well and make a significant contribution to profits.
Finance is now reliant on technology that leads the sector. A financial entity is really only as good as its IT teams, but the positive side is that it can be incredibly responsive to its users, both those who need basic banking but also for investors. Moving money quickly for an investor can make a big difference to ROI so rolling out new technology is crucial for financial institutions to compete in a tough marketplace.
Investing in the financial sector
Despite the 2008 collapse of Lehman Brothers and the knock-on effect that had on many other financial institutions, especially those exposed to the sub-prime market, the financial world has been working hard to get its act back together. Banks are good at making money and for investors looking to grow funds in the financial sector there are many opportunities to get involved.
Those new to this sector for investment need to take some time to study the ins and outs of the financial markets, studying the stock market outlook for major financial institutions and developing a portfolio that would be expected to provide good returns. How good these returns may be will ultimately depend on the risk appetite of the individual or organization investing.
Money markets react to a wide range of issues, for example, with currencies often rising and falling on the announcement of a political or economic policy from a major country or simply from political events that may cause money to flow into a safe currency such as the dollar.
Taking time and getting good advice from experienced financial specialists who understand the markets and the technology now used to aid them, will help develop an investment strategy in the sector that has the best chance of succeeding.
The rise of mobile technology
Financial organizations have realized that mobile technology marks an immense leap forward in terms of people’s access to their banking information. This is particularly the case with the estimated over two billion people who don’t have a bank account but only use cash. The difference now is that a vast number of these “unbanked” have mobile phones or tablets, and with telecoms companies understanding that financial services can be made available to these people there is an increasing number of financial apps either available or being developed.
The financial sector ignores this at its peril. There is a vast amount of potential new clients for services to be tapped and to feed into healthy profits.
Innovations such as the business application programming interface open up new horizons for growing volumes both from existing customers and attracting new customers, offering opportunities for consumers to assemble systems in the way they want.
Technology moves so fast that it can be hard for the more traditional mindset to keep up with what is available let alone what is possible. The consumer is demanding, and getting, the interfaces for financial dealings that it wants, and the financial sector needs to both keep up and be innovative in its own right.