Earlier in November, Richard “Dick” Fuld, who was the final CEO and chairman of Lehman Brothers, launched his new firm and was quoted saying:
“Despite the proliferation of technology, robo-advisers, automation and algorithms in financial services, we still firmly believe in the value of relationships.”
FinTech is growing at a fast rate, as financial firms are making decisions to make large investments, expecting large returns. In fact, JPMorgan Chase, the world’s largest investment bank, has embraced FinTech over the past couple of years. In 2016, the firm spent over $9.5bn on technology to improve customer service and efficiency.
However, despite the proliferation of technology in the forms of apps and social media, customers have growing concerns regarding cybersecurity issues and privacy, including the storage of their personal information by companies.
Customer Trust with Respect to Privacy and Data
It is a thin line between convenience and risking personal information. There is significant unrest and fear of companies keeping records of personal data, especially after the Equifax security leak, which demonstrated how cybersecurity will continue to play an increasingly important role in the future of finance.
The rise in the use of cloud computing to store data and applications remotely means placing large amounts of personal information in the hands of third parties. While security is in place, the risks of data being stolen or wiped will always be a serious issue. However, as more financial institutions make the leap to the cloud for the competitive advantage, the investment and trust in cloud technology are subsequently increasing in other sectors including retail.
It is safe to say that most people are rather unaware of the growing technologies that are taking over the financial sector. People being unaware of the mechanisms that will change the way they approach banking is an issue that may resolve itself once the use of technology like blockchain and AI becomes more mainstream. With the current rate of investment and growth in the FinTech industry, the time may not be that far off.
People are largely optimistic about technological advances, especially as the internet, phones, and computers are taking over more and more aspects of their daily lives. However, customers still value the familiarity of human contact much more, especially with the handling of their finances. This is especially relevant when handling large deals and transactions between larger firms.
Customer Trust and Relationships
There is still a customer preference for face-to-face contact when it comes to advisory services, with 76% of customers believing that artificial intelligence would never be better than advice from a qualified professional. Hiring someone to handle and provide insights into something as important as money requires trust and personal contact that automatons and robots cannot seem to provide.
While the use of the technology would help with efficiency in many areas of banking, the value of face-to-face relationships will always be vital in both business and finance. Handling deals such as in M&A and other large transactions requires a show of reassurance and confidence by those responsible. How firms conduct business and compete for projects depends on communication and trust in ability.
Banks that implement relationship-based services over transactional-based ones find increased customer retention and loyalty. Data analytics can help provide suitable advice, but not to the level of face-to-face meetings with an employee. Firms who choose to go down a more tech-based banking strategy may experience a trade-off between decreasing customer trust and increased monetary costs.
The rise of technologies such as blockchain, artificial intelligence, and cloud computing is still relatively new. Like all new developments, consumers will need to take time to adjust to relying on FinTech to handle their finances. The risks of using technology to handle sensitive information require constant updating and security.
However, there are many aspects of human interaction that simply cannot be taken over by automatons or artificial intelligence. Increased efficiency through the use of FinTech is a major breakthrough in the way business and finance is conducted, but it is important to remember that the value of face-to-face interaction should not be underestimated.
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