4 Challenges for the Financial Industry and the Best Tech Solutions to Fight Them Off

the most pressing challenges in the modern financial sector


Rocky Osborn

3 years ago | 5 min read

Financial institutions (FIs) are undergoing a radical shift driven by emerging technologies. Many C-Board members look for ways to improve their IT performance, embrace new solutions, and keep on using on-premises platforms.

Customers, in turn, force FIs to deliver more trustworthy services, require smoother interaction and want more security for their assets. Apart from this, regulators come into play and fuel the situation by requiring financial enterprises to be fully compliant. In this article, I outline the most pressing challenges in the modern financial sector and suggest solutions to cope with these obstacles.

Challenge 1: Anticipating Cyber Crimes

FIs are vulnerable to malicious attacks because they operate with massive amounts of highly sensitive customer data (HSD). As one study shows, financial firms were struck much more often than companies from other sectors.

Another report reveals that banks underwent almost 26% of all cybercrimes in the past year. Compromised credit cards, leaked credentials, malicious banking applications force companies to embrace brand-new technologies to leave cyber adversaries behind since a single breach can cost a fortune.

Solution: Improve security measures by heavily investing in advanced technologies to dramatically decrease cyber-attacks and minimize associated expenses.

Since security is a top one priority for financial enterprises and there is an exponential increase in highly-professional breaches during the last few years, the latest digital solutions can help FIs keep their customers’ data secure. For example, FIs can utilize:

  • An address verification service – a unique fraud prevention system to verify the user’s billing address. This helps to avoid fraudulent activities and charge-backs.
  • E2EE or end-to-end encryption ensures that no third parties can access sensitive customers’ data. E2EE uses cryptography placed at each endpoint to lock and unlock secured messages.
  • Enhanced authentication fortifies security measures with biometric, geolocation-based, or risk-based techniques.

Challenge 2: Staying Current with Emerging Technology

The Industry 4.0 revolution drives the digitalization of modern businesses that have already started their transformation. According to a recent report, FIs need to continue investing in robotics and other automation tools to promote their effectiveness and reduce costs associated with operational activities, risk management, and compliance.

Companies must also upgrade their on-site systems and data repositories to take advantage of big data solutions like, for example, AI-based customer support assistants. Financial institutions also need to consider integrating platforms to set efficient and user-centric experience over the internet, mobile, and physical locations.

Solution: Exploiting robotics enables FIs to replace multiple manual operations with automated mechanisms and improve overall productivity, accuracy, and compliance.

To expand opportunities and outpace rivals in the market, businesses should be ready to embrace novel techs such as robotics and artificial intelligence, along with its subsets – machine learning, deep learning, and NLP. In this section, I give a more detailed look at robotics applications for improving the posture of financial companies.

Use of Robotics for Automation

RPA (robotic process automation) is a technology characterized by imitating human activities and performing simple routine tasks instead of humans. Simply put, the technology can replace specific manual employee work, offering cost-efficiency, speed, and ease of management.

RPA has proven to have good potential in firms where there are plenty of manual and repetitive tasks. Here are some examples of how RPA improves customer support service:

  • Provide services 24/7. RPA serves as the customers’ assistant by giving answers to routine and simple questions. By processing uncomplicated users’ requests, robots allow employees to focus on more valuable tasks.
  • Reduce spam activities. RPA can recognize and keep at bay robotic requests that connect customer service teams. Plus, RPA allows you to set apart minor and urgent customer requests to save valuable employees’ time.
  • Exploit data analytics. People need to search for data points manually. Still, RPA-based processes can give customers critical data insights instantly. Whether that’s the status of the order or its delivery time.
  • Ensure quality self-maintenance. Smart RPA techs provide customers with a quick and convenient way to resolve requests without the need to reach out to the company’s members.

Some other use cases of utilizing RPA include improving case management productivity in banks, enhancing employees’ performance during seasonal peaks by doing the specific type of manual work, reducing operational costs by replacing human duties, and more.

Nonetheless, robotized software is not a universal solution. Business leaders have to find out where to apply robotics to realize maximum gains and fortify their position in the ever-changing financial market.

Challenge 3: Staying Compliant

Regulations, compliance, laws are the pain for financial organizations. The challenge to be a fully authorized and compliant company is a direct result of the remarkably growing regulatory fees since the worldwide financial crisis of 2007–2008. Today hundreds of regulations push the FIs to streamline their processes. Let’s find out how they can fight off the regulatory problems.

Solution: Adopting RegTech to stay compliant can be the way out, as it offers tax data management and risk assessment tools, instant updates, and much more.

RegTech or regulatory technology is already bringing value to businesses as they strive to streamline activities related to regulatory compliance. By using brand-new tools, RegTech development companies integrate regulatory and enterprise platforms.

Solutions RegTech companies are offering:

  • Know your client (KYC) and anti-fraud services
  • Tax data management tools
  • Risk identification tools and techniques
  • Real-time reporting tools
  • Regulatory compliance monitoring tools

To find the right RegTech provider and figure out the most vulnerable areas that need to be improved, businesses need to know regulatory conditions and have a positive ongoing experience with current compliance activities.

Challenge 4: Meeting Customer Expectations

Modern customers are intelligent, tech-savvy and thus demand high-level customization out of their banking activity. The younger banking customers are, the better they understand the technology and, as a result, set higher expectations of digital experiences.

People aged 22 to 38 years, also known as millennials or Generation Y, have had the biggest effect on the digitization of financial services. When surveyed, the Gen Y representatives accounted for almost 50% of mobile banking users.

Based on this trend, banks can expect future generations, such as Gen Z – aged 23 years, to be even more engaged in digital banking and technology-driven solutions. In contrast, Baby Boomers and Gen X members (40-54 years old people) usually prefer live communication and visit physical institutions.

Solution: So that FIs can satisfy older and younger customers at the same time, they have to adopt a hybrid banking model that integrates digital experiences into traditional bank branches.

To better understand the mechanism of the hybrid bank model, imagine a financial firm with a self-service station supplied with cutting-edge AI-driven instruments for customers who can easily access their bank account without any human assistance. Those customers who prefer live communication with the bank personnel can use the digital station to arrange a meeting with the financial advisor and get the required service without waiting in a queue.

To sum up, financial institutions can succeed and have a significant advantage over their competitors if they start their digital transformation. With AI, robotics, and regulatory tech in place, they can innovate faster, effectively cope with obstacles, stay compliant, and progressive at a time.

Last but not least is customer satisfaction. To achieve the highest level of consumer loyalty, financial firms have to use a combination of traditional and digital banking. The synergy of solutions described above can help FIs accomplish their business goals.


Created by

Rocky Osborn







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