5 Important Challenges Faced by Financial Institutions Today
Every industry faces new challenges to overcome with every year, and the financial industry is no exception. Here are some of the most important ones that we believe financial institutions need to tackle this year.
Money laundering
For every financial institution—especially banks—money laundering remains one of the bigger and more persistent challenges they face. Not only does being implicated in money laundering spell a PR disaster for any financial institution, but due to the many laws created to penalize the crime itself, it could also cause institutions to lose a lot in legal fees and fines. However, by employing strict and rigid security measures, as well as using anti money laundering AI solutions, banks and other financial institutions will be able to effectively predict and prevent money laundering and other financial crimes.
Regulations
Due to concerns regarding cybersecurity and customer privacy, financial institutions will have to scramble to comply with newer and stricter regulations or face massive fines. One example of this is the General Data Protection Regulation (GDPR) set to be enacted this May 25, 2018 – which features many regulations for all companies who deal with EU citizens. The GDPR, along with many other new regulations, could definitely strain financial institutions’ budgets and manpower as they strive to be compliant and not risk the stiff penalties associated with noncompliance. This is yet another challenge where AI solutions can help, especially in cases where large archives of customer information are needed to be analyzed and organized for greater customer data transparency.
Mobile Banking
Mobile banking is quickly gaining traction all over the world, especially in population-dense countries such as China. Financial institutions must scramble to adapt to this particular trend and be able to securely facilitate cashless transactions through mobile. Adopting the necessary technologies as well as solutions to secure such transactions should be a main priority in tackling this particular challenge.
Cybersecurity
Hackers and malicious cybercriminals are targeting financial institutions with all sorts of digital attacks, with data breaches and system-damaging malware at the forefront of their assault. Neglecting to safeguard financial institutions against such threats could result in a drastic loss of productivity and revenue, as well as damaged reputation for the banks or institutions involved. As such, they need to employ strict security measures, as well as security solutions in order to combat these external threats.
Competition
Competition exists everywhere and at all times, but nowadays financial institutions also have to compete with others who do not strictly fall in the same category as a legitimate financial institution, such as cryptocurrency companies. Banks and other financial outfits need to adapt quickly to these competitors and minimize the disruption they could cause.
Financial institutions nowadays are faced with more uncertainty than ever before. Not only do they have to deal with increased economic volatility due to rising tensions in geopolitical hotspots, but they also have to keep a lookout for security threats—some of which have become so threatening that new global regulations have been made just to combat them.
On top of all this, financial institutions still need to look out for growth opportunities, all while keeping up with today’s trends to attract new customers and investors.
Financial institutions therefore need to buckle down and prepare to meet these challenges head on. A solid defense strategy as well as the employment of AI solutions in order to meet the overwhelming demand of data analysis involved in many of these challenges is a good start in this endeavor.
