How has technology changed the financial services sector over the past decade?

Over the past decade, the financial services industry has changed considerably, and not just in terms of the disappearance of major players such as Lehman Brothers. Constantly-evolving technology has had a huge impact on the industry, creating new challenges but bringing new opportunities.

Generally speaking the main challenges facing the industry in the 21st century concern how best to deal with the huge amounts of data that the technological age has brought.

Indeed, the amount of data held by firms of all sizes has increased exponentially over recent years, meaning effective data mining (a term that would have meant nothing to the original Masters of the Universe of the 80s) is now a crucial part of a financial services firm’s operations.

This means that IT specialists are just as important, if not more so, than finance experts, with this reflected in the jobs market and, more specifically, in the levels of pay on offer to those who can manage big data to a firm’s advantage.

As well as being managed, data needs to be stored, and stored safely. In the wake of the 9/11 attacks, banks and other financial firms have come to appreciate the importance of secure back-up sites for their data, leading to the emergence of huge data centres, while more recently, growing numbers of firms have started to embrace cloud computing. Given the potential penalties for losing data, as well as devastating effect a major breach would have on an organisation’s reputation, firms have invested heavily in IT security, with this again driving the creation of new, specialist jobs.

One other major change brought about by new technology has been the increasingly globalised nature of the financial services industry. Technology means, for instance, that while not so long ago, London and New York were almost alone as the world’s only major financial hubs, these days, Dubai, Hong Kong, Sao Paolo and Sydney have all caught up, with many of the biggest players in the sector now enjoying a truly global presence, able to conduct transactions anywhere, anytime.

Notably, however, while modern technology has certainly led to the biggest financial services firms getting even bigger, over the past few years, it has also spurred the emergence of smaller, more specialist firms, with this driving innovation and helping create huge numbers of jobs worldwide.

Indeed, a new wave of so-called ‘fin-tech’ (financial technology) firms has steadily been emerging over recent years, between them revolutionising how banks interact with their customers. Gone are the days when personal or even business banking was the sole domain of suited men in office blocks of London or Paris; these days, the leading innovators in the financial sector tend to be young start-up companies, many of them breaking the established rules regarding how people are able to manage their money.

Now, with online security have improved immeasurably, the main trend is towards mobile. In fact, mobile is now the fastest-growing platform for banking transactions, not just for individual consumers, but for businesses, too. Similarly, social media has revolutionised how banks interact with their customers, bringing extra transparency to the industry.

Looking ahead, this drive towards mobile looks set to continue though the biggest revolution could still be to come as some commentators feel that digital currencies such as BitCoin could start to grow in popularity and significance. Should this turn out to be the case, the next ten years could be as eventful than the past decade, if not even more so as technology continues to shape the way the financial services sector works.