By Team Block697
The importance of innovation in the global banking sector is paramount to the ability of financial institutions to respond to ever-growing consumer expectations and needs, and protect market share in an increasingly competitive field. The core of the organizational business structure of financial institutions is becoming digitized, and as these technologies continue to innovate and evolve, investment can expect to flow into these innovations and enhancements.
While ICOs and crypto prices crumbled in front of the general public’s eye, the overall flow of investment into fintech surged in the past year. Many new FinTech startups have emerged, creating a power struggle to modernize the financial services industry between them and the traditional banks. Let’s take a moment to level-set expectations and identify what realistic trends we will continue to see after a historic year in 2018:
Winners and Losers -Make no mistake, what new fintech innovations are attempting is very ambitious and incredibly difficult to achieve. The existing operational ecosystem that has been sustained by incumbent providers dates back over 100 years, and the old ways represent some very iconic imagery. That said, digital transformation is afoot, and the financial service industry will not be spared.
One of the losers in the upcoming year for FinTech are startups. It will become increasingly harder for early stage fintech startups to raise funds, and for other firms to find subsequent rounds. VC’s and Angel investors, a vital wellspring of investment for early FinTech startups, entered into the space aggressively, and are likely to adopt more conservative investment strategies in the future.
We have certainly seen some early stage businesses in the space being evaluated too generously, and a cooling off period ahead is a perfectly reasonable proposition. FinTech firms that supply payments and data will continue to rise, but customers can be expected to become more cautious over whether firms that supply saving and investment options are a safe place to keep their money. Some customers may leave these innovative FinTech companies, and opt into returning back to the traditional firms, but with those returning customers will come new expectations. The traditional firms will have to scramble to accommodate these expectations
These traditional firms will see this as an opportunity and a need to quicken and boost innovation. Acquisitions of complimentary startups will help them to renew their business, and money will flow into management of existing systems - while investment into innovation will surely rise.
Technologies Expected to Trend
Mobile banking technology – Today’s banking consumer demands a seamless digital mobile banking experience. The demand for real-time satisfaction has sent banks everywhere on a hunt for quick digital solutions.
The response and growth experienced in mobile banking has been quite remarkable. Like we have seen in insurance industries, banks and financial structures are also gaining significant impact from investments in digital technologies. Customers have already appreciated the successful implementation of futuristic technologies based on machine learning and AI. Artificial intelligence, along with cognitive computing and IoT, creates huge opportunities for bankers for serving more customers with more quality. The customer experience in banking is sure to be enhanced by means of AI.
Voice-enabled services are pioneering new trends as concepts of smart homes and driverless cars have almost become a reality in 2018. IoT-connected networks have increased the use of smart gadgets, which is becoming part of mainstream technology. Tech leaders like Samsung, Amazon, and LG have come forward in their attempt to build smart fridges that will enable users to use their voice to order and pay for groceries. Even Daimler Financial services has announced the need to acquire PayCash to set in place their own online wallet to empower all automobile payments, such as ride sharing. This justifies how banking and finance have all joined the revolution of adopting innovative, mobile banking technologies that operate with user voice. In near future, the digital banking horizon will be enriched with enhanced security and evolved smart assistants with touch-free voice capability.
Due to all-time-available access to mobile phones, the adoption rate of mobile banking is high, and users seem inspired to adjust to online banking technology quicker than ever before.
AI -Financial firms have been some of the earliest pioneers in adopting new technologies since the creation of mainframe computers, and the next level of computational power may be approaching.
As was previously mentioned, AI has some noteworthy practicality and innovative opportunity in the realm of mobile banking, but the overall scope of AI in FinTech is much larger than that. Data-driven management decisions, fraud detection, and predictive analysis in AI can all enhance internal processes, operations, and help gain an upper leg in a competitive industry.
To add to high expectations, a recent survey that interviewed financial experts showed that a majority predicts that AI will be one of the leading developments in the world of new technologies in finance.
Biometric technologies - With the digital age, the financial services industry has become vulnerable to cyberattacks. So security has become a top priority for the FinTech industry. One of the ways to prevent fraud is to adopt biometric technology. However, security is not the only reason to use biometric authentication. This technology also makes logging in to an app easier and faster.
Many mobile banking customers still use the same password on several websites, making it easy for cybercriminals to steal their identity. To counteract that, institutions leverage multi-factor authentication such as one-time passwords sent over SMS or email, but consumers find the process burdensome.
In response, biometric authentication using facial, and fingerprint recognition, as well as other biometric techniques require a customer to go through a one-time process to register their fingerprint or face with the application which is fast and convenient. This approach can provide better value, greater transparency and a much more innovative banking experience.
Many factors are at play in the growth of mobile adoption and the demand for more robust and secure features in mobile apps. Chief amongst them is the client expectation to conduct their banking anywhere, anytime, in a protected, more simplified way.
Blockchain –In many ways, it’s easy to brand blockchain as a loser within fintech. Since its surge in 2017, the price of cryptocurrencies, the popular standard bearer for the technology, has collapsed, and essentially every ICO in existence has become a victim of the bear market.
If we put the mass hype and hysteria that we experienced over Bitcoin and other crypto projects aside, many of us have been patiently waiting for all the actual practical uses of the technology to manifest themselves, and as we dive deeper into the new year, you can expect to see just that.
Although Blockchain technology could be applied to many data processing functions, payments and fraud reduction are two areas with immediate traction.
Transferring money is currently time-consuming and often requires financial intermediaries, each of which takes a service charge and is subject to greater regulation and higher costs due to the prevalence of fraud. Blockchain reduces the number of middlemen while increasing security, which could reduce industry-wide transaction and processing costs by billions. But this reduction in back-office red tape comes at the cost of eroding traditional roles within the financial industry.
Blockchain could also lead to greater trust between trade partners due to their access to shared, trustworthy records and the technology’s strong security features. This, along with real-time transactions, will increase the velocity of money, and in turn, cash flow and capital investments.
Payment Technologies - Fueled by emerging technologies and a shift in consumer expectations, change is happening at an unprecedented rate within payments. There are more ways than ever for consumers to move money quickly; specifically, with the introduction of companies like Zelle, Square and Venmo.
Institutions must be committed to innovation. Consumers will continue to demand for new features and functionality, and banks and credit unions must attempt to make strategic maneuvers to regain control of the payment experience.
This makes for a perfect storm. The emerging competition, mixed with the consumer demand, is bound to create a race to the finish line. Investment and innovation will continue to flow into a space that has already seen unprecedented amounts of innovation and investment.
Budgeting Services/Apps – One of the most practical uses of FinTech is budgeting apps for consumers. Before, consumers had to create their own budgets, gather checks, or navigate excel spreadsheets to keep track of their finances. But after the fintech revolution prompted the development of financial services apps, consumers can easily and efficiently keep track of their income, expenses and other budgeting tools that have revolutionized the way consumers think about their money.
Apps like Mint allow the consumer to track their reoccurring payments, income, and much more, all done quickly and seamlessly on a mobile device. This significant increase in convenience is sure to make Mint and similar platforms rise in popularity over the course of the coming year.