Technology Trends Disrupting the Financial Services Industry

There is an inextricable link between the financial services industry and technology. The latter has notable effects on the former in a multitude of ways. For example, wealth management service providers use algorithms to choose investment portfolios for their customers. When it comes to customer intelligence, AI and robotics help businesses provide highly segmented financial services. Other remarkable technological developments include blockchain and decentralized asset ownership; and the fintech business model. 

Blockchain Technology and Decentralized Asset Ownership

For consumers, traditional access to wealth and financial services is fraught with meddlesome intermediaries. Blockchain significantly disrupts financial services with its high rewards and equally high risks. Simply put, the blockchain is the technology that allows its users to perform transactions while eliminating third party middleman. Users lodge their financial transactions on a decentralized public ledger. Operating in this fashion gives users increased security and anonymity while decreasing the potential for dishonest actions. Blockchain has great potential, but its main advantage lies in its cost savings. It could potentially reduce the overhead costs of the financial services industry. 

Decentralized asset ownership refers to decentralized finance, which utilizes blockchain for the management of financial transactions. By enacting peer-to-peer relationships that cover a broad array of financial services, decentralized finance almost supplants the offerings of incumbent financial institutions. Again, customers benefit from having more secure financial transactions, which are also more straightforward than those found in legacy institutions. 

Difficulties on the technical side make blockchain somewhat risky and contribute to the potential for deceit in its usage. The technology associated with it is not easily understood but that has not stopped 80% of financial institutions from embracing blockchain technology. A frequently asked question regarding blockchain is, is it possible to hack the list of publically available transactions? The potential for fraud is a massive problem. Additionally, decentralized finance has not been tried and tested enough to generate the same trust among users that legacy institutions have. In the case of a troublesome transaction, for example, decentralized finance users do not have the appropriate means to correct any errors. 

Despite these challenges, it is an indisputable fact that blockchain and similar digital ledger technologies will be part and parcel of the financial services industry’s future. 

Fintech Business Model

In short, the fintech business model seeks to move financial services to virtual platforms. Fintech conducts its business differently from legacy institutions. Though similar in their economic structures, new firms tend to specialize in their product offerings. In this way, fintech companies that challenge established modes of doing business can provide more unique customer interactions at significantly reduced costs. Legacy institutions, therefore, are put in a position where they have to scramble to keep pace with startups. Changing business operations in response to attackers and customer expectation requires organization-wide commitments that cannot happen overnight. The fintech disruption led to a global fintech investment of $105 billion in 2020.

Various financial arenas demonstrate the fintech business model. For example, in straightforward transactions, fintech operates on a commission. Borrowing and lending activities emphasize peer-to-peer transactions that yield higher returns for lenders and that empower users. In e-commerce, fintech keeps users in mind by allowing for payments to be easily made through aggregated applications. 

AI and Robotics

Legacy institutions do well in that they are usually at the forefront of using AI and robotics to their advantage. The adoption of AI in the financial industry has become more mainstream as 80% of financial institutions are realizing the potential benefits of AI. The financial services industry now uses AI to handle less pressing customer issues via the use of chatbots in the front office, enabling their employees to focus on more complex and intricate operations. Other uses of artificial intelligence include algorithmic customer registration and identification, and improved anti-money laundering processes to detect fraud and assess risk. The most important benefit is the cost-saving potential of artificial intelligence, it is estimated that AI will save the financial industry an estimated $477 billion by 2023.  

Customer Intelligence & User Experience

AI and robotics generate a flood of data. Customer intelligence is enhanced when this data is made sense of and translated into a usable format. The earning potential of financial services will be increasingly determined by how well customers are understood. Competitive advantage will also be determined by how well the data can contribute to decision-making processes in a company.

Innovations in data collection methods have made it possible for financial institutions to learn more about their clients’ habits and desires. Big data allows financial institutions to use what they have learned to make on-demand decisions. Rightly interpreting the data is key to a business’s success, so institutions ought to also employ progressive data analysis methods in their decision-making. 

In terms of experience, the increasing digitalization of life has altered consumer expectations of financial services. Consumers have their needs met uniquely and rapidly in the world of online shopping. E-commerce specialists have become increasingly savvy at product demonstrations that enhance the user’s experience. Simplicity is the operative word in online retail. As such, consumers have also come to expect such singular and swift service in their financial lives. 


Technology disrupts financial services in myriad – mostly progressive – ways. Decentralized finance removes power from intermediaries and puts it in the hands of regular users. Blockchain contributes positively to user experience, and therefore, to better end-products that businesses can offer their customers. 

Technological gains in cybersecurity mitigate the notoriously porous nature of financial transactions by addressing security gaps and bolstering fraud detection. Innovative anti-fraud mechanisms that shield transactions from being tampered with could radically influence the financial services industry.

Investment firms willing to couple inventiveness with emotional intelligence will have a very bright future in finance.