When you think about it, a lot has changed in the financial sector in the last five years. Long lines at bank branches have given way to a few clicks to open digital accounts in minutes.
This results from robust investments in technologies that have democratized the sector and made Brazil a world power in the segment. The country currently ranks 2nd in the world in terms of investment in technology, according to the FEBRABAN Banking Technology Survey 2023.
Today, you'll learn about the main technologies that have changed how Brazilians manage their finances and the main trends and challenges in the market.
Shall we?
What are the most crucial banking technologies?
In October 2023, Law 12865, which regulates payment activities and institutions, reaches its tenth anniversary. The law has enabled the growth of fintechs, which in turn have contributed significantly to the modernization of the financial market.
Fintechs have changed the landscape over the last decade, sparking a veritable boom in technological innovation and disruptive services. Their growth has shaken the market; today, these companies compete with large traditional banks.
Technology has made Brazil a benchmark in digital payment methods and financial inclusion. The digitization of services and banking products has begun.
Learn about the technologies that are essential to Brazil's evolution on the global financial stage:
Optical Character Recognition (OCR)
Based on AI and machine learning, OCR technology can read, translate, and convert information from an image into digital characters. This technology turns an image into a digital file that can be easily handled and shared.
The solution enables the automation of document digitization, saving time, reducing costs, and simplifying services.
Biometrics
Financial institutions have begun to invest in solid security mechanisms to provide their customers with a secure experience with the widespread use of digital accounts and online financial transactions. Because of its high level of privacy, biometrics is the most widely used technology in this regard.
In addition, biometrics has various means of certifying identity. The most common examples are fingerprint and facial recognition, which are used to create and access digital accounts and authenticate transactions, among other things.
Open Finance
Under the permanent supervision of the Brazilian Central Bank, Open Finance is considered a victory for consumers. This technology marks the decentralization of an individual's banking data, allowing it to be shared or transferred to different financial institutions.
The user sets permission to share information, giving customers more power and privacy over their data.
What are the benefits of integrating technology into financial institutions?
Digitizing accounts and other technology benefits are essential to meeting the needs of increasingly demanding and connected customers.
Here are some of the benefits of embracing technology in financial institutions:
- Stay ahead of the competition: investing in technology makes it possible to be safer, more up-to-date, and more efficient, guaranteeing customers more innovative products and services.
- Improve the efficiency and reduce the bureaucracy of service delivery: using technology tools optimizes a large part of the services provided. It streamlines processes, reduces bureaucracy, and personalizes products and services.
Centralizing financial operations in a single, easily accessible application is more convenient and provides a better customer experience.
- Reducing Costs: Digitizing financial services reduces the cost to institutions of meeting face-to-face demands and even reduces the fees previously charged.
Many companies have used these savings to incorporate technology solutions to attract customers and provide better service.
- Optimizing customer service: With the transition from offline to digital services, financial institutions optimize customer service through chatbots, social networks, and the institution's applications.
5 Technology Trends for the Financial Sector
Staying ahead of the curve requires planning and attention to market trends. Here are the top trends for the future of the financial sector:
Artificial Intelligence
Artificial Intelligence (AI) can process large amounts of data in seconds, enabling millions of daily transactions. It is also a valuable solution for identifying and combating fraud and alerting and monitoring suspicious activity.
According to Febraban's 2023 survey, AI continues to be one of the priority technologies for banks and fintechs. The main applications are facial biometrics to strengthen cybersecurity, chatbots, and RPA to automate and make virtual assistants more effective.
Recently, Brazilian banks have been testing generative AI, such as GPT Chat. This technology creates content such as text and images, automating and improving customer interactions.
Innovation through Data Analysis
Financial activities generate vast amounts of sensitive data, which provides important insights. Institutions can better understand their customers' needs and focus their efforts on solving potential problems. In this way, companies can follow the path of innovation and optimize the customer experience.
Cyber Security
As financial institutions become increasingly digital, users become more dependent on virtual media. This scenario requires significant investment in cybersecurity technologies, as financial data is extremely sensitive.
Brazil, for example, is one of the countries in Latin America that suffers the most from financial fraud. Research estimates that there will be 2,800 fraud attempts per minute in 2023. For this and other reasons, Brazil is one of the largest investors in cybersecurity in the world.
Companies with solid cybersecurity systems are gaining relevance by using information such as geolocation and biometrics to increase user protection.
Cloud Applications
Cloud applications, such as APIs and SDKs, are essential to keep digital financial services in the country operating completely and securely. The solution has countless functionalities, such as validating a bank transfer or using a credit card directly from a mobile phone.
According to Febraban, optimizing cloud services is a priority for financial company managers.
Expand usage of modern biometrics
Biometrics is an old ally of digital financial services. By offering confidence and convenience in the use of digital accounts, biometrics almost eliminates the use of passwords, which are easily forgotten by users and detected by fraudsters.
Palm biometrics are used as a means of identity authentication to verify that the user is who they say they are. Fingerprints are also a common form of biometrics used to access digital accounts. Financial transactions are confirmed using facial recognition.
Challenges for Financial Institutions
The benefits of technology for financial institutions are many and readily apparent during the customer journey. However, institutions must pay close attention to the security resources they will use before offering services.
According to the Cybersecurity Readiness Index, only 26% of Brazilian companies are prepared to deal with increasingly frequent and sophisticated fraud threats. Weak security systems provide fertile ground for financial fraud; without the necessary security, it becomes an opportunity for many losses.
The cost of not being prepared can be significantly higher than the cost of implementing security measures, as 32% of respondents in the survey said they had been victims of financial fraud of at least $500,000.
That is why it is necessary to choose approved and market-validated platforms that offer high levels of data protection.
What is the future of the financial market?
Technological innovation has transformed the financial industry in Brazil. In just a few years, we've seen new developments in payment methods, lending, and even Brazil's social reality. According to the Brazilian Central Bank, the country ranked third in a financial inclusion survey in developing countries.
Research shows that among the next steps for financial institutions is consolidating technology in financial services, with an investment of R$45.1 billion in Brazil alone, 29% more than in 2022.
While innovations continue to advance, banks and fintechs must remain attentive to technological impulses to remain competitive and provide essential services in a competitive and volatile market.
