Companies around the world are trying to keep pace with the rapid pace of technological development. However, in addition to the benefits that new technologies bring, the associated risks must also be taken into account. In a study, management consultants McKinsey examined the current and planned use of ten key technologies in the financial sector as well as risk management in the area of cyber security.
The ten key technologies in the financial sector
To understand how companies are approaching the use and protection of current and future technologies, management consultants McKinsey, in collaboration with the Institute of International Finance (IIF), conducted a global survey of financial institutions.
The following ten key technologies were identified that are already being used in the financial sector or are planned for introduction:
- Cloud computing and edge computing: Distributing workloads across multiple locations such as large data centers, regional centers and local nodes improves latency, data transfer costs and compliance with data sovereignty regulations, ensuring data autonomy and security.
- Applied AI (including generative AI): Machine learning models can be used to solve classification, prediction and control problems. The aim is to automate activities, expand capabilities and offerings and make better decisions.
- Next-generation software development: New software tools enable modern pipelines for code provision and automated code generation, testing, recompilation and translation. They also improve the quality of applications and development processes.
- Trust architectures and digital identity: Digital trust architectures enable organizations to build, scale and maintain the trust of their stakeholders in the use of their data and digitally supported products and services.
- Industrial machine learning: A rapidly evolving ecosystem of software and hardware solutions enables practices that accelerate the development, deployment and maintenance of machine learning solutions and minimize their risks.
- Web3: Web3 comprises platforms and applications that enable a shift towards a decentralized Internet with open standards and protocols. At the same time, they protect digital property rights. This potentially offers users more control over their data and promotes new business models.
- Advanced connectivity: Low-energy wireless networks, 5G/6G cellular, Wi-Fi 6 and 7, low-earth orbit satellites and other technologies support a variety of digital solutions that drive growth and productivity across industries today and in the future.
- Quantum technologies: They enable exponential performance increases in the calculation of certain problems. They can also transform communication networks through increased security.
- Future of mobility: Mobility technologies aim to improve the efficiency and sustainability of passenger and freight transportation by land and air through autonomous, connected, electric and shared solutions.
- Immersive reality: Immersive reality technologies use sensor technologies and spatial computing to help users see the world differently through mixed or augmented reality, or to experience a completely new world through virtual reality.
These four technologies have priority
However, the survey shows that a majority of the financial service providers surveyed prioritize the introduction of and investment in four technologies:
- Cloud and edge computing,
- Artificial intelligence (AI),
- Next-generation software development
- digital identity and trust architectures.
These technologies are expected to be adopted faster than others, such as quantum computing, machine learning or Web3, partly due to their broad applicability.
Risk management as a key factor in the introduction of new technologies
While these technologies can offer exponential benefits, they also bring with them cyber risks that companies need to mitigate. However, according to the study, current capabilities are often inadequate to counter these risks. The majority of companies surveyed already recognize the need to strengthen critical cybersecurity skills. These include third party or supply chain management and privileged access management (PAM). With the increasing reliance on new technologies, organizations need to ensure they have thought through and implemented the necessary risk management capabilities to prevent the risks outweighing the benefits.
Top managers at financial institutions are also aware of this. "Digital transformation is at the heart of our strategy. We recognize the importance of adopting and investing in new technologies such as cloud and AI. At the same time, managing the associated cyber and technology risks is of paramount importance to ensure the overall resilience of our critical services. This helps to strengthen the digital trust of our clients while protecting the safety and soundness of the bank," explains Jay Puthanveedu of BNP Paribas, global head of resilience, cyber and digital fraud.
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Technological progress and safety must go hand in hand
The McKinsey study concludes that the technology landscape in the financial services sector will develop rapidly over the next three to five years. However, as the associated risks will also increase, now is the right time to future-proof your own environment.
Financial institutions should therefore ask themselves the following four key questions if they want to introduce new technologies in their company:
- Are we setting the right priorities in terms of technology and cyber security? Are our technology priorities aligned with our security capabilities?
- Are we investing in the right technologies and cyber security capabilities?
- Do we have the right metrics and reports? Can we measure our risk profile accurately and reliably, create transparency for regulators and managers and identify strengths and weaknesses?
- Do we have the right talent to close skills gaps? Do we have enough and the right talent to not only maintain existing skills, but also to support the future maturity and expansion of technologies?
Financial service providers must therefore be proactive if their cyber security capabilities are to keep pace with technological progress. Companies that are able to exploit the opportunities while effectively managing the associated risks will have a clear competitive advantage.
Source: The cyber clock is ticking: Derisking emerging technologies in financial services
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