Risk managers try to predict the future using available data so they can prepare organizations for emerging risks and future trends. Risk management is a dynamic domain, forever evolving according to market forces and regulatory requirements. As the way customers interact with the banking and trading infrastructure changes, we will need to make sure that our risk management infrastructure is ready for upcoming challenges.

Preparing for these challenges is important because any business that is making an investment into risk technology should invest in a solution that can serve not just its current needs but also the future needs of the business in the coming years. Preparing now will also prove to be a major competitive advantage; by the time that market changes occur, prepared businesses will be ready while other businesses will be assessing their plans.

We can look at certain technologies that are currently in limited use or in development to determine upcoming developments in the banking and finance sectors.

Online banking

Most of us already use online banking and online banking solutions are becoming more adept with time. In the beginning, these alternate delivery channels offered limited functionality such as checking account balance or transferring funds. It is now possible to pay bills, trade, and do much more from your computer or smartphone. The major change that will occur in the future is the default way of banking. Online banking is still considered an alternate delivery channel; we still have to go to the bank to open an account, verify transactions, and complete many other banking or trading actions.
Optimizing risk management will be a necessity for online banking due to its instantaneous nature. Customers want their transactions to be carried out instantly. Click To Tweet We can expect there to be a paradigm shift in banking in a few years where online banking will become the main banking delivery channel. Going to a physical branch will be required only for special transactions or to resolve a problem; it would otherwise be considered outmoded. There are already born-digital banking and finance businesses that do not have a physical location. They are struggling because our regulations and laws were not designed for born-digital banks, but those laws will soon be changed to accommodate the new players in the market.

Risk management for online banking

Banks want to offer more online banking services because it is beneficial for both, the customer and the bank. Users love online banking because they can use their bank accounts without leaving their homes. Banks like online delivery channels because it allows users to deliver banking services at a minimum cost. A bank branch requires renting out or buying property, furnishing the branch, hiring people to work as bank tellers, and much more. Online banking services only require bandwidth once the infrastructure has been set up.

Optimizing risk management will be a necessity for online banking due to its instantaneous nature. Customers want their transactions to be carried out instantly. This means that risk and compliance will both have to work in real-time as well. The cushion provided by requiring customers to visit the branch and having them wait while a bank teller verifies everything will no longer exist. Risk management at fast speeds required for online transactions is only possible with the use of risk management technology.

New products, trades, and currencies

The advancement of technology doesn’t just help us make existing banking solutions faster – it also opens new possibilities in the way we manage and store funds. Banks are focusing on developing new investment opportunities and products using technology. Cryptocurrency is only a novelty right now used as an investment – as it becomes more popular and starts being used as actual currency, banks will need to create new rules and systems for them.

These solutions cannot be managed through outdated risk management because most traditional risk management practices assume that every banking transaction is associated with a document. There are files for most customers and transactions located in the servers of a bank. This assumption does not apply to digital transactions and other banking services. These transactions and processes leave audit trails and records, but they do not need to create a document with banking details at each step.

Forward thinking regulatory bodies across the world are already working on creating machine readable banking regulations and laws. The people responsible for our regulatory framework know that the future of banking will require computers to handle risk and compliance management.

A digital, interconnected banking environment requires a digital, interconnected risk management solution. Having the risk managers interact with each other through emails is no longer fast enough – there needs to be a centralized risk management platform that streamlines risk workflow and automates risk monitoring.

Wondering what risk automation can do for your bank or business? Get in touch with our risk experts to see a demo of Predict360, our cloud-based risk management solution.