Author: Chi Vo
The FinTech world is moving at incredible speeds with the major transformations of Fintech businesses. These changes are significant because they affect everything relating to payments, money, and banking.
With business in such a state of flux, there are predictions and trends for the future of Fintech in the coming years. In this post, we will forecast eight major technology trends that will drive fintech growth and alter the way finance operates.
1. Exclusively digital banks
Digital-only banks offer a variety of virtual service finance such as peer-to-peer transfers, international remittances, contactless MasterCard with no transaction fees, and the option to purchase cryptocurrencies such as Bitcoin, Ethereum, and others.
In a short amount of time, digital-only banks have achieved enormous appeal. It is crucial because it provides the most convenience to customers by removing laborious paperwork, long lines, and the need to physically visit a bank.
In 2022, there will be a significant increase in the number of digital-only banks. And this increase will result in a large decrease in the number of people visiting the bank physically. According to research, this decline will be 36% from 2017 to 2022, with the rise of digital-only banks being the primary driver.
2. The process of automation technology using robots
Robotic process automation (RPA) is a process automation technology that uses software robots or digital workers to automate operations that are typically performed by people. RPA has previously been applied in the financial services industry to reduce costs and increase overall organizational efficiencies.
Not only that, but financial institutions have used RPA digital workers to automate a variety of back-end office tasks, including security checks, customer onboarding, account management, and closing, trial balance, credit card, and mortgage processing, and many more.
The major benefit of RPA is that digital workers can complete these activities faster and more effectively, allowing financial institution personnel to focus on other important areas such as customer service.
Blockchain technology has drastically changed the way the FinTech business operates. Transactions can be completed in a safe and secure manner with this cutting-edge technology. As a result, banks and financial institutions are quickly adopting Blockchain technology in order to reap its benefits.
According to a Business Insider Intelligence report, over 48% of banking professionals believe that Blockchain technology would have the greatest impact on banking in 2022 and beyond.
One important aspect of Blockchain is that it is not just cutting-edge technology, but also a new philosophy of decentralized finance that focuses on eliminating centralized procedures. Once data is registered in the Blockchain system, it becomes incredibly impossible to modify and thus remains secure.
Blockchain ensures that the information saved is secure from beginning to end with the least amount of risk. Blockchain technology is also utilized to enable safe cross-border payments.
Blockchain technology has also spurred the development of several peer-to-peer financial platforms that allow for decentralized monetary interactions.
Banks and financial institutions are already looking to boost their investments in Blockchain technology in order to save costs while also improving internal operations.
4. The Adoption of Machine Learning and Artificial Intelligence (AI)
Banks all over the world are now attempting to incorporate artificial intelligence into their operations. According to a study, AI will cut 22% of a bank's operational expenses by 2030. In other words, banks can save up to $1 trillion by implementing AI.
Artificial intelligence can potentially be used to combat escalating cybercrime by detecting financial scams and threats. It can also be more customer-centric because AI and ML algorithms can record all interactions with extreme accuracy and precision.
AI has already demonstrated its use in customer management with cutting-edge client service solutions such as Chatbots. It's only a matter of time before banks and financial organizations use this technology for the same purpose.
5. The growth of the financial inclusion
From World Bank statistics, over 1.7 billion people do not have bank accounts because they lack access to banking services. The majority of these folks are from underdeveloped countries.
Despite this, mobile phone usage is relatively high in these regions, making it an ideal location for FinTech apps and branchless banking. And, indeed, FinTech technologies such as agency banking and mobile money are playing a critical role in improving financial inclusion in these regions.
This trend is expected to continue, as novel FinTech apps provide banking services to the unbanked, underserved, and illiterate segments of society. This trend will increase financial inclusion by making access to financial services for the unbanked simple, quick, and convenient.
6. Biometric security measures
FinTech and mobile banking services have made banking accessible to everyone. However, it is also true that it has caused many security issues, as criminality related to banking is on the rise.
This necessitates the implementation of required security measures by FinTech firms. Biometric security systems have evolved as a dependable and flawless security tool that raises the bar. It gives individuals and institutions assurance that their data is safe and secure.
The biometric sector is currently undergoing a transformation as a result of fundamental upheavals. According to reports, physical touch biometric sensors are expected to diminish. Contactless biometric technologies are expected to overtake touch-based biometric solutions in the coming years.
The COVID-19 pandemic is a primary driver for this transition. People are avoiding cash and any other forms of payment that require touch. As a result, contactless biometric identification systems are becoming more popular in the aftermath of COVID-19.
7. Banking accessibility
Another intriguing and groundbreaking technology is open banking. It connects banks and FinTech by enabling data networking across institutions. PSD2 is connected to open banking (Second Payment Services Directive).
Open banking requires banks to release data in a standardized and safe format, which facilitates information sharing among multiple authorized organizations online. Not only that, but it also allows third-party applications to govern consumers' banking and financial information through data exchange using AI and APIs.
Many industry analysts anticipate that open banking will completely disrupt the financial industry by 2022. And this is not a random guess; there are numbers to back up the estimate. Open banking earned approximately $.29 billion in 2008 and is predicted to reach $43.15 billion by 2026 at a CAGR of 24.4%.
Customers can manage their financial accounts more easily with open banking partnerships since they get a consolidated view of their accounts. This is why having access to open banking products can stimulate greater long-term wealth building, smarter financial decisions, and debt reduction.
As a result, many stakeholders will profit, including FinTech workers, banking institutions, API industry figures, consumers, and underserved communities.
Reg-Tech is an abbreviation for Regulatory Technology, which is described as the use of technology to handle the regulatory process in the financial industry. Reg-primary Tech's functions include reporting, monitoring, and compliance.
Reg-Tech provides firms with the ability to use innovative software to simplify compliance with existing regulations and legislation.
The development of digital wallet has also resulted in an increase in money laundering, fraudulent activities, cyber intrusions, and data breaches.
Reg-Tech, using Big Data and Machine Learning technologies, can provide critical data on money laundering activities, lowering the risk associated with the company's compliance department. Additionally, Reg-Tech can decrease administrative costs, assure financial stability, and protect clients.
These technological trends are becoming increasingly linked and integrated, giving the fintech and financial industry a tremendous boost. These developments will result in quicker transaction processing, enhanced customer support, and greater accessibility to financial data. Therefore, the development and dissemination of applications and tools that enhance the interaction of people with emerging financial services will increase. On the other hand, preventing the growth of technology implementation in our financial systems puts us at a huge security risk that we cannot afford. Therefore, digital transformation in the finance sector will remain a strategic priority.
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Author: Chi Vo - Content Marketing Executive