A raft of new digital technologies are proving to have a
profound impact on the financial services industry here in 2024. In fact, the
sector is undergoing a rapid transformation, as innovation reshapes the way
that financial products and services are delivered and accessed. The concept of
decentralisation is becoming ever more integrated throughout the industry, with
big name financial institutions expanding into markets like cryptocurrency and
blockchain. Meanwhile, decentralised finance (DeFi) is emerging as a powerful
alternative to traditional banking methods, while play-to-earn gaming
introduces a radical new opportunity for consumers to monetise their leisure
time.
In this article, we’ll dive into the advanced tech
reshaping the financial service industry for the 21st century.
The Impact of Crypto and Blockchain
You might already have heard of the booming crypto trend by
now. Decentralised tokens like Bitcoin (BTC) and Ethereum (ETH) have been
causing quite a stir amongst consumers and investors alike for close to a
decade. While cryptocurrencies are now widely regarded as being a viable
digital asset class in an
investment portfolio, and are offering up improved and more transparent
processes in financial transactions, perhaps the most dramatic impact they’ve
had is the emergence of the play-to-earn (P2E) sector.
AKA GameFi, P2E gaming is creating new economic
opportunities for players to earn rewards with real-world financial value,
which aren’t limited to country or jurisdiction legislations like most
traditional banking systems are. While we’re used to gaming and real money
normally being associated with sectors like online poker, itself a booming
market in which players can both compete and learn the rules of the game at regulated platforms such
as PokerStars. All in all, GameFi enables gamers to monetise their
in-game activities.
Meanwhile, the sector is an attractive investment
opportunity for both individual and institutional investors. In backing new
crypto gaming projects, native currencies, or even in-game assets, investors can
gain exposure to the strongest crypto markets with long-term potential.
Decentralised Finance Takes Hold
Alongside the rise of GameFi, blockchain innovation is also
fuelling the rise of Decentralised Finance (DeFi). This is a concept that
democratises financial services for the consumer, doing away with the need for
traditional intermediaries like banks, and offering solutions to the global
unbanked in the process.
The key components of DeFi, like many consumer-facing
financial products, revolve around lending and borrowing. DeFi platforms allow
users to lend and borrow assets in a peer-to-peer model, often with much more
favourable terms than traditional banks. Decentralised exchanges (DEXs) enable
users to trade cryptocurrencies directly, providing greater privacy and
reducing the risk of hacks, and the sector even allows for passive income
generation via yield farming and staking mechanisms. Not only do such processes
allow users to earn rewards by providing liquidity to DeFi protocols, but they also
foster a more participatory financial ecosystem.
An AI Revolution?
It seems that Artificial Intelligence is being integrated
across a whole spectrum of industries, and the financial
services markets are no exception. The tech is becoming an increasingly
popular way for organisations and financial institutions to take advantage of
process automation and generate deep insights that can impact customer
relations.
A fundamental application of AI in existing financial
entities, for instance, can be seen in automated customer services offerings,
where AI-powered chatbots and virtual assistants provide personalised customer
support.
A more sophisticated version, the Robo-advisor, is underpinned
by AI-driven platforms to provide tailored investment advice and portfolio
management, making wealth management accessible to a broader audience in the
process. Meanwhile, AI algorithms have the ability to analyse massive datasets
to identify and predict market trends and risks, aiding in more informed and
accurate decision-making across the board.
Looking to the Future
Several finance and banking incumbents have already begun
to leverage AI and DeFi to transform their operators. JP Morgan Chase uses AI
to automate document review processes, for example, while HSBC has implemented
AI-powered systems to support anti-money laundering (AML) and fraud detection
processes. Just this year, the leading lights in the finance sector began
trading crypto ETFs, with Blackrock’s Bitcoin ETF becoming
the largest fund in the world.