The concept of big data is difficult to understand. At the most basic level, big data refers to a collection of statistics, figures and metrics used to streamline operations and make well-informed business decisions. In practice, big data is much more complicated — and it’s not even the only innovation that’s driving the future of finance around the world.
How Technology Will Shape the Future of Finance?
1. Blockchain Technology
Many consumers first saw the blockchain via Bitcoin or another form of all-digital cryptocurrency. A decentralized, highly transparent and ultrasecure platform for trading digital assets online, the blockchain is drawing attention from professionals in nearly every industry.
While there’s still room for improvement within the current framework, experts cite numerous benefits to the blockchain:
a. Reduce operational costs
The introduction of blockchain technology has the potential to streamline day-to-day operations, cut costs and reduce the risk of doing business in the 21st century. Organizations like JPMorgan Chase, Credit Suisse and Citigroup have all invested in blockchain technology.
Companies are already saving money thanks to the blockchain. Santander has a projected potential savings of $20 billion annually. Capgemini forecasts $16 billion in annual consumer savings via blockchain-oriented apps and services.
b. Raise startup capital
The typical startup enterprise taps into several different sources when raising the initial capital needed to run a business.
Angel investors, venture capitalists, investment bankers and even crowdfunding platforms are all popular options, but many of them are easily replaceable via the peer-to-peer investment platform of the blockchain.
This is just the start. With many benefits still left unidentified or unexplored, as well as the potential for new developments and improvements to the blockchain itself, the future is anybody’s guess.
2. Artificial Intelligence
Next-gen artificial intelligence, or AI, is making waves throughout the financial sector, too. A concept that is generally seen in advanced video games and computer software, it’s a system that is easily applied to other industries — and with great results.
Artificial intelligence has already made it possible to utilize machine learning and protocols like natural language processing to develop automated chatbots. While the concept behind automated customer service agents and robotic virtual assistants has been around for years, recent innovations in AI have made these systems more lifelike and, as a result, more useful than ever before. You’ve probably already spoken with an automated, AI-driven agent online — and you might not have even realized it.
Chatbots and automated virtual assistants are smarter than ever before. A system that was once limited to one-word responses and a pre-programmed database of answers can now search the web for solutions, provide well-informed guidance and even learn from its own mistakes as time goes on.
Financial institutions are also using AI to detect and stop fraudulent account activities. A recent example of this is Mastercard’s Decision Intelligence Technology, which compares historical shopping data and spending habits to new transactions in determination of fraud. The system isn’t perfect, but it highlights the industry’s willingness to use new innovations to address age-old problems.
3. Big Data
Every organization, from the smallest of startups to the largest mega-corporations and everything in between, can benefit from big data. Nonprofits can even utilize big data to generate metrics with greater accuracy, validity and relevance and ever before — but it’s proven to be most useful in the financial sector.
Big data has had a profound effect on the niche of high-frequency trading, or HFT. As the name suggests, firms specializing in HFT make split-second decisions — and assume a lot of risk in doing so — to close deals and turn a profit. While the acts of collecting, processing and analyzing data are counter intuitive to their very business model, experts in the field are beginning to realize the benefits of big data.
Although it may be counter intuitive, big data doesn’t make the HFT business model obsolete. Instead, industry professionals use real-time analytics to bolster their decision-making process. Algorithmic trading — which uses complex mathematical models and statistical analyses to formulate and initiate trades — is an early, rudimentary form of big data analytics.
Machine learning plays a role here, too. Without it, financial experts would have to manually update their databases and spreadsheets to reflect consumer habits, market activities and financial forecasts. Instead, recent breakthroughs in machine learning pass these responsibilities on to the system. Not only does this eliminate the potential for human error, but it also ensures your company is always up-to-date with the latest practices, standards and trends such as GDPR compliance.
Leading By Example
While breakthroughs in blockchain technology, AI and big data have significant changes in store for the financial sector, it’s not the only industry to benefit. These systems can revolutionize other jobs and professions, too, and they’ll continue to shape our world’s technological progression for years to come.
Author Bio: Nathan Sykes is a technology and business writer from Pittsburgh, PA. When he isn’t thinking about the latest technology he can be found enjoying craft beer and local eateries. To read more by Nathan, check out his blog: Finding an Outlet.