The financial services space (FS) have been lately experiencing the transformation from multiple forces including demographic and social changes to the considerable rise in the adoption of the financial technology. The shift to this new digital model will make the lives of consumers more comfortable eventually and they will be able to experience the services seamlessly.
So, let's deep dive to know further about the key technology trends that are disrupting the FinTech industry to bring you up to speed on events-
1. Increase in Cloud Adoption By Banks & Financial Institutions
The cloud adoption rate has increased significantly in recent years and has helped in elevating the scope and pace of innovation. As per International Data Corporation estimates (IDC), global spending on public cloud services and infrastructure is expected to grow at a CAGR of 23.8% over 2018 to reach USD 210 billion in 2019 and is forecasted to grow at a CAGR of 22.5% during 2017-22 to reach USD 370 billion in 2022.
Further, the banking industry is expected to spend more than USD 20 billion on public cloud services in 2019, which indicates the vital progress it has made into the industry.
The past has witnessed FS players leverage cloud-based software-as-a-service (SaaS) primarily for non-core applications such as CRM and HR. However, it’s no more same as they are now increasingly using the cloud infrastructure for delivering core applications too.
Cloud offers the following advantages-
- Improves the speed of innovation
By reducing entry barriers for FinTech innovators, who primarily operate on cloud-based platforms.
- Improves the speed to market
Enables the rapid development of applications and reduces the time and cost of setting up a new server by eliminating the need for organizations to invest in.
- To gain insights on customers’ preferences
FS players are using the cloud as an analytics platform to derive customer insights by accessing data from multiple partners through application programming interfaces and microservices, helping them to respond to customer needs swiftly.
Moving forward, as digital transformation gathers pace, the potential benefits of the cloud would be hard enough to ignore, making it critical for enterprises to promptly act on their cloud strategies.
2. Securing Up Digital Property Will Be the Top Most Priority Of the FinTech Sector
Financial services executives are already very well-versed with the long-lasting impacts that these cyber-threats leave on their industry.
The fast-paced digital transformation and elevating interconnectivity in the FS have allowed cybercriminals to target extremely sensitive financial information due to which huge operational, reputational, and financial damages have been incurred by organizations. Unfortunately, this will take some time likely to change for the better due to the following forces-
- Use of third-party vendors
- Rapidly evolving, sophisticated, and complex technologies
- Cross-border data exchanges
- Increased use of mobile technologies by customers, including the rapid growth of the Internet of Things
- Heightened cross-border information security threats
Although some organizations have started implementing the required measures to leverage advanced technologies and mitigate cyber-threats, more efforts are required to unearth and manage new risks inherent with these emerging technologies.
For example, the advancement in fields such as AI can lead to a more powerful attack as cybercriminals can corrupt ML algorithms’ training data sets easily by transferring biased data to it.
So, organizations need to catch up a lot for accurately addressing these security challenges. For consumers, security and data privacy form an integral part of FS solutions, and the onus for safeguarding the same lies with organizations.
Going forward, being cyber-resilient against cybercrimes will be the key objective of enterprises to win customers’ trust and push the adoption of digital solutions.
3. Advancements in Robotics and AI Will Target Multiple Capabilities
The alliances of leading incumbent financial services and tech companies have already been formed to implement a combination of robotics and AI to address key pressure points, like - cost reduction and risk mitigation. They are targeting a specific combination of capabilities such as social and emotional intelligence, natural language processing, logical reasoning, identification of patterns and self-supervised learning, physical sensors, mobility, navigation, and more.
There are already some robots present around which can sense the details of their environments like recognizing an object, responding to information and objects with safe & useful behaviors. The biggest example of this is self-driving cars that have been performing very well in real-world tests. Although they are facing some technological hurdles right now three to five years down the lane, we can anticipate rapid gains as new models will combine increasingly powerful and standard modular platforms with the ability to learn.
4. Blockchain in Banking and FinTech
Blockchain has already garnered a lot of attention of multiple industries, as per this report, which states that 84% of respondents are actively involved with Blockchain Technology and also financial services is the most advanced industry in implementing blockchain systems.
Distributed ledger technology (DLT) enables simultaneous confirmations of all parties on the network and thus eliminates an entire layer of intermediaries who extract fees from each transaction they execute; thus reducing the considerable cost of infrastructure. This elimination is important as there were a large number of intermediaries involved in moving money, adjudicating contracts, among other activities.
For instance, the cross-border payments became highly inefficient as transactions had to pass through multiple intermediaries for authentication before reaching the end customer; resulting in huge delays and high costs.
The Blockchain system has removed this layer to deliver payments to end customers in real-time and more securely.
Similarly, it has revamped the clearing and settlement systems by putting securities on a common, decentralized ledger, thereby eliminating the need for middlemen and delivering services hassle-free.
Another important use case is the blockchain-enabled KYC utility. This will facilitate organizations to store customers’ KYC data from multiple sources in a single decentralized, secure database, and share access to third parties after obtaining due consent, leading to a decrease in duplication and lowered cost for the industry, robust AML/CFT checks and improved customer experience.
This video can further help you understand the FinTech trends that are shaping the finance and banking sector-
5. APIs Will Foster Innovation, Speed, & Agility
Building applications by implementing APIs is now considered as the optimal way to address the business and economic challenges impacting the financial industry. FinTech startups have already revamped the landscape through the creation of mobile applications that have challenged and surpassed the banking industry. Using APIs will give an edge to dynamic small businesses by which they can innovate with speed and agility that even more significant and prominent sectors are unable to duplicate. Banks are now also joining this bandwagon by taking part in developer sandboxes and API economy. Due to the number of data banks have collected over the years, they are likely to regain dominance in this area.
6. Human Digital Interfaces
While it's crucial for banks and financial institutions to implement digital strategy carefully, they can’t ignore technology for it has a huge role to play in augmenting the human experience and thus empowerment of both customers and employees.
Mobile technology has deeply rooted in our lives. For instance, we use our voices to give commands rather than touching our screens or typing. Also, passwords are now being replaced by biometric finger, retinal, or face scans as security checks.
Consumers can use technology to get deeper insights into their financial situations. Especially when combined with AI and analytics, gamification and principles of behavioral science; the industry can sidestep their traditional role of just being the keeper of assets, and rather use trained bots to empathize, and understand regional and generational differences.
Technology should be used to evaluate the emotional state of humans based on their interactions with the devices. For the next few years, expect to see these interfaces showing up in more places and being perfected.
FinTech is an industry that will evolve continuously and stay at the forefront of innovation. Technology that would take years to design, test, and implement by large financial institutions, are now going from beta to real-world applications in a fraction of the time, by startups that are disrupting the financial industry in a big way.
They are unlocking potential which previously deemed unattainable, and also serving to demographics which was considered undesirable.
While security remains the topmost issue, it’s us, consumers, the winners, who are seeking the benefits; conveniences and functionality, in our banking and financial experiences, thanks to these trends in FinTech technology.