The fintech industry continues to embrace new technologies to grow rapidly. Fintech startups and companies are seeing tremendous growth. Deep down, there are some technologies that are disrupting the old-age banking infrastructure, and making fintech great for better financial services.
Today, we’ll have an inside look at 7 of those important technologies and developments shaping the future of fintech. We’ll talk about what those technologies are, what their applications are, and how they are not only benefiting the industry, but also the end consumer.
So, whether you’re a B2B or B2C financial institution, (or even an end consumer) you need to see this because these technologies are eventually helping us all.
Let’s tap into it.
1. Artificial Intelligence & Fintech
AI is transforming the fintech industry for good. Financial sectors are leaning more on AI to improve their products and services.
Here’s one of the most prominent examples:
AI-based credit scores are helping enormously. AI considers a lot of ins and outs; customers’ banking history, total income, transaction analysis, work history, shopping history, and more to predict the most accurate credit scores. Credit scores help define whether the consumers will be able to repay the debt which is helping banks to fine-tune their services, says Abdul Saboor from The Stock Dork, a platform for stock investors looking for reliable stock market updates.
Besides that, AI is helping banks detect suspicious transactions, improve safety through fingerprint logins, automate customer services using AI-based chatbots, and analyze consumers’ behavior through deep AI algorithms.
The adaptation of AI is getting increasingly popular amongst financial institutions due to its powerful applications. In fact, by 2030, the AI and fintech market is expected to grow to a staggering $41.16 billion.
2. Blockchain Technology: A Disruption in the Finance World
Blockchain technology is a vessel for financial institutions to improve their user experience, reduce operational costs, increase efficiency, generate more revenue, enhance security, protect data, and all the imaginable good things.
Fintech is making a giant bite-sized share in the blockchain market — as it’s expected to reach a whopping $36.04 billion by the end of 2028.
For instance, DeFi (Decentralized Finance), was introduced back in 2018 by developers of Ethereum. It disrupts the broken old banking infrastructure by removing the exchangers, brokers, or “middlemen”.
DeFi allows users to do financial transactions without the presence of any entity in the middle (sender or receiver’s banks), through smart contracts. End users can smoothly transfer, invest, lend, or receive without any disruption. Which is simply banking beyond borders, industries, markets, and layers of society — securer and smoother, says Djon Ly, Digital Marketing Manager at STATRYS, a multi-currency business account that aims to simplify domestic or international payments.
In short, blockchain technology is helping banks to reduce errors, increase transparency, make instant transactions, enhance security through smart contracts, and minimize transactional costs. This, if we analyze it, is the disruption of the old banking infrastructures; long queues, hectic paperwork, and delays in transactions.
3. Cloud Computing: The Security and Scalability In New Ways
Fintech is one of the industries that process the most critical data. All the personal and professional data of consumers; transactions, emails, passwords, credit card information, billing, and a lot more. It’s super critical for banking institutes to stay compliant with industry-standard security regulations, and protect sensitive information at all costs, says Gerrid Smith, CMO of Joy Organics.
And this is exactly where Cloud Computing is helping fintech companies to make better secured IT infrastructures. Because of the features like data encryption, data leakage and fraudulent activities have been reduced to the minimum.
Besides that, cloud computing also aids in rapid scalability. Here’s how:
- With cloud computing, you don’t have to purchase high-standard equipment and then maintain it regularly. It saves purchasing costs of new hardware and computers for constant upgradation, along with electricity costs.
- Instant flexibility. The IT requirement for a large fintech company with 1000+ employees will obviously be higher as compared to a small startup. Cloud computing instantly allows the flexibility of upgrade and downgrade, depending upon the company or department size — saving huge resources and time.
- Today, data is money. Fintech companies can easily have a bird-eye view of their large consumer data through cloud integration to make better business decisions.
- As the technology in the banking sector advances, the rise of cyber attacks, especially data breaches, is obvious and common. But cloud computing allows better and more securer control over the sensitive data of consumers.
- Every industry is pushing the boundaries to make this planet sustainable, by recycling, reducing carbon footprints, and promoting planet-friendly buying habits. In the same way, banks can also make their fair share in protecting the environment by shifting their IT infrastructure to cloud-based computing.
4. Internet of Things (IoT): A Connected Banking Infrastructure for Better Security and Services
Banks are now harnessing the power of IoT to not only provide a better, trust-worthy experience – but also to engage new consumers. For instance, through mobile banking or banking apps, they’re tracking and collecting the consumer’s data; which means they’re using IoT to learn their consumers’ preferences so they can better meet the needs of their consumers and improve their services, says Joe Troyer, CEO & Head of Growth at Digital Triggers and ReviewGrower.
Here are more ways IoT is shaping the future of fintech for good:
- IoT devices can increase the efficiency of employees.
- IoT is allowing banks to deploy stronger data protection methods; i.e using multiple authentication steps.
- IoT devices such as CCTV cameras are helping to provide a better sense of security at physical branches. Those cameras can now be accessed and monitored from anywhere in the world, as long as they’re connected to the internet. If an intrusion is suspected, immediate measures can be taken — whilst staying outside of the scene.
- With real-time data, banks are able to enhance their customer service by ratios. One of the finest examples of it would be ‘push notifications’ when customers are short on balance, running out of balance, or are at a nearby branch.
- Fraud detection and prevention: banks have now more power to detect and prevent fraudulent activities in their consumers’ bank accounts. You’ve now banking apps with fingerprint login options. Or if you’re accessing your account from their website, you’ll need to provide an authentication code sent to your mobile phone — which reduces those unwanted activities to the minimum.
- Cardless transactions: now you can connect your debit and credit cards to make online transactions seamlessly. This was especially helpful in the times of the COVID-19 outbreak.
5. Embedded Finance: A Convenient and Reliable Banking Experience
Providing a personalized and seamless banking experience is the new norm for consumer retention. This is why ‘Embedded Finance’ is seeing rage. In the most simple terms, embedded finance is for integrating banking or financial services on non-banking platforms. It has great potential to provide a convenient experience, says Kenny Kline, President & Financial Lead at BarBend.
The everyday example of embedded finance would be ‘ordering fast food online’ or ‘paying for Uber online’. Businesses can simply integrate financial services into their websites or apps — so the end consumers won’t need to manually go through the hassle of putting all the information every single time. It offers better money management and a smoother transaction experience.
Suppose you’re buying something on a non-banking platform like Instagram. You only need to click ‘buy’, and because your banking details are already integrated — payment just goes through seamlessly, and you get your product delivered.
In a way, we are experiencing this form of financing without even realizing it.
This not only helps the end consumer — but also the businesses. For instance, the issue of late invoicing. It’s surprising it can even take up to 30 days for small service-based businesses to get their invoices cleared. It’s a huge growth barrier; because the capital must move to the respective departments quickly for efficient growth. The solution? Embedded Finance.
Google Pay and Apple Pay are the finest examples of embedded finance; they allow end users to store their critical banking information and process payments smoothly whenever needed.
The market size of embedded finance has seen the rage in recent years. Due to its rapid adoption, the investment size reached $4.2 billion in 2021 — and it’s only growing. It’s a great signal for financial companies to deploy this technology to have a competitive edge.
6. No-Code Development: Development Faster than Ever Before
Technology has made developing new software, programs, or applications more accessible than ever before, says Derek Bruce, Operations Director at Skills Training Group. No-code development platforms allow users to simply use a graphical drag-and-drop interface, and make a brand-new working program – without using any programming language.
Customers now demand a seamless, smooth, and quick digital banking experience at the tap of their fingers. With the ever-changing markets and trends, banks now need to develop quick solutions on demand. Today, it’s not enough to only deliver the greatest banking app or website — now it’s even more crucial to delivering the same great app experience fast; tomorrow or next week.
This is where no-code or low-code development steps in the zone. Banking sectors now can quickly and easily make new products or apps within a matter of days — not months.
And this is also the reason why, by 2024, 64% of application development will be sourced from no-code development platforms.
For larger banks, with millions of target customers, faster and quicker solutions using no-code development will become a matter of survival.
7. Automation: Intelligent Technology to Streamline Operations
Automation is at the core: whether it’s fintech or any other industry, automation is helping every sector scale faster, reduce costs, generate revenue, and provide great customer experiences, says Shawn Malkou, Managing Broker at X2 Mortgage.
For instance, customer support AI-powered bots. They automate customer support 24/7, reducing human labor. They can easily tackle the most common questions, which can result in a more satisfactory customer experience. Some banks now even use WhatsApp, a personal communication tool, for consumers to learn about their bank details via bots.
Here are more ways automation is helping the finance sector:
- Automation removes the chances of human error, which is critical since banking transactions are sensitive.
- Automation can improve consumer retention rates. Based on the collected data, banks can set triggers to get them back to using their banking services again.
- Automation streamlines the workflow, which results in greater efficiency.
- RPA (Robotic Process Automation) automates mundane, repetitive tasks. This results in more productivity, lower operational costs, and better outcomes.
A 2019 report showed 85% of banks have already switched to smart automation technology for most of their core operations.
Consumer demands and fintech havoc is already forcing banks and financial service providers to meet the standards of the future.
Summarizing: The Fintech Future
From what it looks like, fintech is only set to grow. Technologies like blockchain, machine learning, cloud computing, IoT, and AI, are the building blocks. These technologies are helping financial firms scale faster, provide better and secured banking experience, reduce operational costs, and make smart business decisions. Companies not only need to embrace fintech solutions but put their best foot forward to innovate in this space to have an upper edge from a business point of view. The fintech ecosystem will bring immense benefits to businesses and end consumers.
