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McKinsey: Tech Trends 2023 That Every Fintech, Bank, or Financial Service Provider Must Consider

Tech Trends | Jul 30, 2023

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Here are the key takeaways that every fintech, bank, and financial service provider needs to know and consider its impact on their business in the next three years.

The first half of 2023 has seen a resurgence of enthusiasm about technology’s potential to catalyze progress in business and society.  To help executives track the latest developments, the McKinsey Technology Council has identified and interpreted the most significant technology trends unfolding today.

1. Generative AI: The Next Frontier:  Generative AI, a new entrant in the tech trends, represents the next frontier of AI. It has high potential and applicability across most industries, including finance. Generative AI is poised to add as much as $4.4 trillion in economic value from a combination of specific use cases and more diffuse uses—such as assisting with email drafts—that increase productivity. However, firms should not underestimate the economic significance and the growth potential that underlying AI technologies and industrializing machine learning can bring to various industries.

See:  Quantum computing use cases are getting real—what you need to know

2. Trust Architectures and Digital Identity:  Trust architectures and digital identity grew the most out of last year’s 14 trends, increasing by nearly 50 percent as security, privacy, and resilience become increasingly critical across industries. This trend is particularly important for fintech and banks, which handle sensitive customer data and need to ensure its protection.

3. Cloud and Edge Computing:  Despite a decline in investment, cloud and edge computing continue to be critical technologies for the finance industry. These technologies have applications in most industries, and mainstream adoption is expected to continue to grow. More than 400 edge use cases across various industries have been identified, and edge computing is projected to win double-digit growth globally over the next five years.

4. Quantum Computing:  Quantum computing continues to evolve and show significant potential for value creation. The four industries likely to see the earliest economic impact from quantum computing—automotive, chemicals, financial services, and life sciences—stand to potentially gain up to $1.3 trillion in value by 2035. For the finance industry, quantum computing could revolutionize areas like risk modeling and fraud detection.

5. Tech Talent Dynamics:  The demand for tech talent far outstrips supply, with many of the skills in greatest demand having less than half as many qualified practitioners per posting as the global average. This talent crunch is particularly pronounced for trends such as cloud computing and industrializing machine learning, which are required across most industries. For fintech, banks, and financial service providers, attracting and retaining tech talent will be a key challenge in the coming years.

See:  Navigating the End of Jobs: 2023 Human Capital Trends (From a Financial Services Perspective)

While these trends present significant opportunities, they also pose challenges. Organizations should adopt a balanced approach, focusing on a portfolio-oriented investment across the tech trends most important to their business. By doing so, they can capitalize on both established and emerging technologies to propel innovation and achieve sustainable growth.

Coupled with the following considerations that must be managed, Fintechs, Banks, and Financial Service Providers have their work cut out for them

Regulatory Compliance: The financial sector is one of the most heavily regulated industries. Fintechs, banks, and financial service providers must ensure they are compliant with all relevant regulations, including those related to data privacy, anti-money laundering (AML), and Know Your Customer (KYC) protocols. As regulations evolve, particularly in response to new technologies and cybersecurity threats, staying compliant will require ongoing attention and resources.

Cybersecurity: With the increasing digitization of financial services, cybersecurity threats are a significant concern. Financial institutions must invest in advanced security measures to protect sensitive customer data and maintain trust. This includes not only technological solutions but also employee training and the development of a strong security culture.

Customer Experience: In an increasingly competitive market, providing a superior customer experience is crucial for retaining customers and attracting new ones. This includes seamless digital experiences, personalized services, and excellent customer support. Financial institutions need to leverage data and technology to understand their customers better and meet their evolving expectations.

See:  Blakes: Cybersecurity Trends in Canada: A 2023 Perspective

Innovation and Digital Transformation: The financial sector is undergoing rapid digital transformation, driven by emerging technologies like AI, blockchain, and cloud computing. To stay competitive, financial institutions must embrace innovation, which may involve partnering with fintech startups, establishing digital innovation labs, or investing in R&D.

Sustainability and Social Responsibility: There is growing pressure on businesses to demonstrate their commitment to sustainability and social responsibility. For financial institutions, this could involve offering green finance products, investing in sustainable businesses, and ensuring their operations are environmentally friendly. Additionally, they need to consider their role in the broader community and how they can contribute positively to society.

Call to action

The call to action is clear: Embrace the technological revolution, invest in talent, prioritize customer experience, and uphold the highest standards of security and regulatory compliance. Moreover, financial institutions must recognize their role in society and strive to contribute positively through sustainable and socially responsible practices.

Sean Gerety, IT Consultant:

"The technology you use impresses no one. The experience you create with it is everything."

The future belongs to those who are prepared to adapt, innovate, and lead. Now is the time for fintechs, banks, and financial service providers to step up, seize the opportunities presented by these trends, and shape the future of the financial industry.


NCFA Jan 2018 resize - McKinsey:  Tech Trends 2023 That Every Fintech, Bank, or Financial Service Provider Must ConsiderThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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