Over the past few years, the financial industry has been significantly influenced by scientific and technological progress. As a result, it has greatly changed from both inside and outside. First of all, innovations are introduced in the banking sector where almost all operations are based on modern technologies. So, what opportunities do digital platforms open in the banking sector?
The New Digital Reality
The digitalization of life is driving the emergence of new business models based on a diversity of data - ecosystems and digital platforms. Before the digital transformation, banks built their work around customer data and had no idea of white label products that have recently become widespread. Nowadays, regulators are getting involved in the creation of digital platforms.
Banks were among the first to adopt the platform development model. Since long before digital transformation, they adhered to a data-centric approach and have many years of experience in collecting and analyzing customer information necessary for credit scoring, interacting with partners to obtain customer data from other ecosystems. However, nowadays, banks are forced to adapt to the speed of innovation in the user interface and user experience. They build their own ecosystems to communicate with customers on a daily basis, gain insight into customers' daily lives and offer diverse and personalized services.
Global technology giants also act as drivers of innovation in the sector: Google, Apple, Facebook, Amazon, Alibaba, Tencent are actively implementing projects in the payment field. They create platforms that include traditional financial market players and indirectly determine industry development trends and technological standards.
Another driver is fintech companies and young high-tech startups. The diversity of innovators in the banking sector increases competition in the marketplace, improves user experience, and increases financial inclusion. Today, financial services can be obtained easier, clearer, faster, and remotely.
The state also takes an active part in the development of digital technologies in the financial market, provides coordinated events at the level of its participants. The development of financial technologies significantly increases the variety and speed of changes in the market and changes the requirements for management.
Regulators in many countries are introducing the concept of open banking, which implies “taking out” the bank's product factory to external partners through open APIs (application programming interfaces) into the ecosystem of fintech startups. For traditional players, open banking dramatically speeds time-to-market and lowers costs. Besides that, open banking allows fintech startups to use the big data about users accumulated by traditional market participants.
In addition, through the integration of services with partners from the IT sector, banks gain access to a new audience. The definition of data exchange rules and the unification of standards in open banking allow companies to achieve a balance between the high speed of development and stability of the banking sector. As a result, innovative products are generated faster, competition in the market is maintained, and information security and protection of customer personal data are ensured.
Central Banks & Big Data
New digital technologies are being applied by financial regulators around the world to keep pace with the complexity and speed of the market change. Regulators use big data and artificial intelligence technologies for the following purposes:
● For advanced analysis - understanding hidden relationships, potential risks in the financial market and in macroeconomics;
● For monitoring - identifying risks and market anomalies in real-time;
● For simulation - “what if?” analysis, forecasting market development and the consequences of policies, simulating crisis situations.
Thanks to the analysis of big data, central banks can rely on more complete, relevant, and detailed information when making decisions in various fields.