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How Fintech Will Change the Financial Services Industry
It is hard to think of major disruptions in the financial services ecosystem without thinking about fintech. Fintech is growing at an unprecedented rate, and it is bringing changes in the financial services industry just as fast.
A 2018 KPMG report indicated that global fintech investment increased by more than 100 percent from the 2017 figure to reach $11.8 billion in 2018.
Mobile development, data analytics, artificial intelligence, and blockchain are the most commonly use fintech technologies to change the financial services industry. What are the expected real-world implications of fintech on financial services?
New business models will be based on fintech
Fintech startups find it easier to break into financial services because they provide services the way consumers want. Incumbents are realizing how easy it is to lose business to the entrants. Instead of fighting these small but potentially threatening competitors, traditional financial services providers are forming alliances with them.
The only language fintech startups understand is using innovative technology in product and service design and delivery. Their alliance with older industry players means new business models will heavily rely on fintech for the alliances to work.
Total digitization in transactions
Digital will become mainstream. Financial services institutions should put digital at the heart of operations. Just as the e-business wave swept through every institution two decades ago, the digital agenda will spread to every aspect of financial transactions.
Fintech is introducing innovations that not only ensure the 24/7 availability of transactions but which attract even the most conservative consumers. Omnichannel banking is one such innovation. It enables clients to make transactions in different environments including mobile phone applications, web platforms, and social media.
Fintech has already digitized many aspects of the financial services industry, including forex. It has made it possible for anyone to engage in trading world currencies from any location using a forex trading platform. Technology continues to be at the center of the revolution of forex and all associated markets.
Blockchain will be an integral part of every financial institution
Blockchain is already shaking things up. A number of industry players have jointly commercialized technology and applied it in real financial services situations. Increased funding in blockchain and fintech will result in more institutionalization of these innovations. The blockchain “public ledger” is predicted to become a crucial part of the operational infrastructure and technology of every financial services company.
Big data and customer service
Fintechs are at the forefront of testing artificial intelligence and machine learning algorithms. They use big data analytics to build strategies for more personalized and less risky portfolio building. AI and ML techniques use users’ personal records stored in their gadgets to reveal clients’ behavioral patterns to gain insights for more superior customer service.
Financial services institutions will have to rethink security
Most fintechs rely on mobile apps to deliver services as well as improve client experience. Increased use of these apps means an increased risk of unauthorized access to clients’ personal accounts, digital wallets, and accounts. In this light, better cybersecurity is a vital consideration.
Financial services institutions have to strengthen the infrastructure of applications and increase their use of firewalls.
Another vital security consideration relates to cloud services. Firms will need robust architecture, special measures and advanced techniques to detect automated attacks.
Robotics will address key pressure points
Fintech companies will leverage advances in robotics to address major pressure points in the financial services industry, including cost reduction and risk mitigation.
In the future, robotics will bring changes beyond what everyone thinks they are here to do: replace the bank teller.
They will combine various capabilities such as logical reasoning, social and emotional intelligence, self-supervised learning, natural language processing, physical sensors identification of patterns, and mobility navigation to change operations in financial services.
Fintech is bringing the sharing economy to financial services
With financial services being one of the industries heavily impacted by technology, the sharing economy is expected to be a potential fintech-driven disruption in 2020 and beyond. In the context of financial services, the sharing economy refers to the decentralization of asset ownership. Information technology will enable the efficient matching of providers and users of capital.
Rather than turning to a bank for banking services, consumers will interact on special platforms and get the services they want. This is the basic idea behind crowdfunding.
The widespread adoption of fintech today is a sign that no financial services institution wishes to be left behind. They are competing on the most sophisticated financial services and product as demanded by the new generation of consumers.
With the pace at which fintech is growing, financial services are set to undergo transformations that will completely change financial systems all over the globe.