There's an array of new challenges facing financial services, and there are even some who say traditional banking is either dead or dying. But it’s not all bad news - some of the biggest challenges can be viewed as opportunities for growth and positive change.
Innovation from new fintech startups
The increase in fintech startups is massively disrupting the banking industry. From challenger banks to new payments apps and other banking technologies, fintech is definitely one of the major challenges facing financial services.
However, these new startups and technologies also present a big opportunity to banks if they respond to them the right way. Many are already engaging with startups through innovation labs, allowing them to get in on the ground floor of the newest technologies in financial services, and introduce innovative new products and services faster than they would be able to internally. Fintechs aren’t all about B2C apps, either. There are also many that are introducing innovation directly into the banks themselves, to help them modernise and improve their systems and processes even under strict regulations.
Information security challenges
Cybercrime is one of the biggest challenges facing banks and other financial services firms today, but accidental data leaks are just as damaging as malicious attacks. Because all enterprises now have to handle vast amounts of confidential data every day, there needs to be a new approach to information security.
Information security now needs to be treated as a continuous process, not a one-time event. It also needs to involve every area of the business, from HR to sales to development. This presents an opportunity to get everyone on the same page when it comes to information security and help the entire business become more secure.
Financial services regulations are becoming increasingly complex and demanding, and this can create a lot of risk for firms that fail to implement the necessary changes or misinterpret what is required of them. The increasing amount of compulsory regulatory change can also be seen to take time, money and resources away from introducing new, innovative technologies.
It’s not all bad news, though. We all know the reasons behind financial regulations, to protect customers and, on a wider scale, the economy, but it can also promote positive innovation. Regtech is now a growing market, and the FCA has its own innovation team, setting up regulatory sandboxes to promote innovation in Financial Services regulation, which will benefit both firms and their customers. One advantage of this could be finding ways to reduce the regulatory cost of operating in multiple geographies with different regulatory frameworks, which is one of the big challenges facing financial services today.
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