Accounting and finance specialists have been battling new obstacles for the past year. While some businesses fought to stay afloat due to declining demand, others were on the point of going bankrupt. In addition, digital services accelerated dramatically in 2020.
The finance industry in specific is ready to be equipped to implement long-term initiatives in 2021. Emerging financial trends are allowing businesses to expand their operations while maintaining profitability. Financial institutions are considering ways to strengthen their technical setup, potentially paving the way for automation. To improve operations, businesses are combining digital payment solutions and AI-powered gadgets.
Take a peek at the list below if you're not up to date on the latest technological advancements. Here are five rising financial services sector trends and observations for 2021.
Automated Accounting
Do you manually record transactions? It's time to say goodbye to old-school accounting techniques and say hello to automation in 2021. The latest automated technologies are capable of doing repeated operations with pinpoint accuracy and precision. Accounting software can automate the process of sending invoices, calculating taxes, and preparing financial statements. As a result, you'll have more time to devote to jobs that demand careful analysis. However, managing automation isn't for everyone.
To guarantee that automation is giving efficient outcomes, you need to be tech-savvy as well as have a good understanding of accounting practices. You can familiarize yourself with the accounting world by taking a few short courses. Nonetheless, it is always preferable to pursue further education. You may learn everything there is to know about accounting automation by taking an online MAcc course. Remember that automation is here to stay due to its numerous advantages. As a result, it should be a key component of any future innovation business plan.
Robotics & Artificial Intelligence (AI)
Players in the financial markets have always been on the lookout for innovative methods to cut costs, strengthen controls, and find new insights that can help them gain a competitive edge. Although many companies want to employ artificial intelligence (AI) to improve financial planning and analysis (FP&A), just a handful succeed because the technology isn't yet integrated into most FP&A software packages and hence isn't fully understood.
The meticulous analysis that can disclose insights normally hidden from humans is at the heart of an AI-driven solution. Human specialists can miss a portion of the picture or miscalculate the relevance of particular aspects when there are several characteristics to consider, however, AI is known for its ability to work with various factors and give them varied weights to achieve sometimes unexpected outcomes. Listed below are some examples of AI in action.
Transaction validation is one of the numerous routine duties performed by support teams. One proposed solution is to use machine learning algorithms to map the rules to actual cases, allowing the majority of transactions to be checked and verified. To create a reference set, a small percentage of transactions are manually checked. This type of analysis saves time and money by speeding up transaction validation and lowering service expenses.
Traders have a pattern to their activity that reveals their risk and reward mindsets. Developing a trader's profile with AI and recommending the next step based on price movement — whether to raise the position, wait, or cut it down. An AI solution like this analyzes the trader's previous transactions and generates a trading pattern to forecast the trader's next move by emulating the trader's actions. The model can also estimate the trader's opening and closing prices, as well as the amount of profit or loss in a given market scenario for a trader with a specific behavior pattern.
Developing a web platform to reduce bank risks is an example of how AI and Data Science bring all aspects of FP&A together in one solution. To detect unusual transactions and probable malefactors, the bank uploads its clients' transactions onto a web application. With the use of heuristics, graph algorithms, and transaction flow analysis, Data Science algorithms evaluate a huge number of transactions to find anomalies. Following that, a common customer model is created to forecast future consumer behavior. The system creates a report regarding potential dangers in the event of suspicious activity or anomaly.
Blockchain Technologies
Today's entrepreneurs operate on a global scale. Thanks to enhanced digitalization, they can order raw materials from other countries and engage in cross-border trade. Entrepreneurs may be able to get into new markets using these tactics, but the financial system is putting up significant barriers. They have exorbitant bank fees, taxes, and transaction costs, making trading unfeasible. Fortunately, blockchain technologies enable people to migrate to a decentralized ledger.
It is a peer-to-peer platform that allows people to receive and distribute money without the use of a financial intermediary. For the network of participants, blockchains serve as a single shared medium. Businesses find it easier to establish agreements because of their transparency and convenience. Furthermore, blockchain offers efficient data management options. It keeps track of all transactions across multiple computer networks in a digital ledger. As a result, accountants will not have to manually record anything.
Cybersecurity
Customers entrust confidential information to financial service providers such as banks, brokerage firms, and credit unions. Financial institutions have a wealth of confidence data, ranging from account details to income information to contact information. The financial sector is an appealing target for cybercriminals due to the high value of this sensitive data. The urge to strengthen security processes and implement cybersecurity measures is increasing as a result of these inherent hazards. Some of the best strategies for improving cybersecurity are included below to enable a secure digital transformation.
Data Security: Because data security is so important to businesses, companies can categorize data based on its sensitivity. It will ensure that regulatory standards are met while also reducing the risk of data breaches.
Third-Party Risk Assessments: Conducting third-party risk assessments can assist in discovering vendor security flaws. You can identify potential hazards and take the necessary steps to mitigate them.
Two-Factor Authentication: One of the most popular FinTech developments is biometric authentication. To access confidential data, employees and managers will have to scan their fingerprints, thereby barring the door to unauthorized users.
Transitioning to Digital Payments
People nowadays favor cashless purchases. Instead of looking for a change in stores, people prefer to swipe their credit and debit cards. When shopping online, customers prefer PayPal, Apple Wallet, and Venmo. For accountants, the rapid shift to digital payments is altering the financial environment. They are no longer required to create cash flow statements; instead, bank statements must be reconciled with business transactions.
Accountants must also incorporate digital payment mechanisms on eCommerce platforms. Customers must be able to pay via Wallets, Venmo, Payoneer, and other popular payment methods. Digital payments can reduce accountancy labor expenses in addition to eliminating manual invoice processing. You can even allow customers to pay with cryptocurrency. Although the coins can be exchanged for cash through a regulatory medium, this new payment method can help you outperform your competitors.
Conclusion
In today's ever-changing landscape, the financial sector continues to undergo countless developments. Manual processes are being replaced by AI-powered devices, allowing accountants to focus on core business operations. Similarly, the advancement of blockchain technologies is assisting firms in lowering costs and increasing ROI by facilitating cross-border trade. In addition, the move to digital payment options allows businesses to improve customer service. These new developments will aid business owners in increasing income and profitability.