Fintech is advancing the way people secure, manage, interact and grow their financial wealth, be it in business or private applications. The modernization of the financial sector in the past 20 years has accelerated in the past few years as more people are confident about the security of online banking, as well as aware of the opportunities that fintech’s offer over traditional banking.
The pandemic has played a big part in the wider adoption of technologies. People have been forced to use online services as face-to-face contact has been restricted. This has meant that finding ways to conduct business online has become far more important and widespread. With this mass adoption has come the introduction of more technologies at a faster pace. Those technologies include apps, security, digital-only solutions and other advances that serve customers online.
Fintech is about the innovation of technology for efficient use by businesses and customers. The motivation is to advance the way in which people interact with technology, giving people more freedom through online access. This helps to reduce costs, improve access and overall, advance society by improving wealth acquisition opportunities and wealth distribution. One of the major accomplishments of fintech is its reach.
Technologies like blockchain, artificial intelligence, biometrics, eCommerce, and other digital services have been made highly accessible. As mobile phone ownership has increased, the technology for online services has improved. In many countries in which people cannot afford a computer, but they can afford a smartphone, people are now able to open bank accounts and secure their wealth in ways not available to them in the past.
For businesses, digital banking has improved efficiency, productivity and tracking in ways previously unimaginable. Making and tracking payments, sending alerts, receipts, or invoices, conducting credit checks, as well as trading, exchange and other high-level financial transactions can all be done online and in an instant over secure channels. It has shifted the way the international markets operate and is accelerating wealth acquisition.
Top financial services industry trends
According to a Statista report, global growth in finance app usage during 2020, the height of the pandemic, was most dramatic in Japan at 55%, while South Korea (35%), United States (20%), China (20%), Germany, and Italy (15%) also saw accelerated proliferation. In some nations, this was because the pandemic forced more people to adopt online services where they had been avoiding adoption, and in other nations more services were made available by newcomers to the market.
Fintech is the future of financial services. The ease of use, accessibility and smart management options mean that customers are more in control, be they business or private consumers. This unprecedented control of financial services has enabled startups to grow, new ideas to be incubated and globalization become a reality.
Financial literacy solutions
According to an EY survey, consumer awareness of fintech services in the five key categories is reported to be the following:
While awareness creates demand, some of the tech solutions for digital services are yet to be embraced by the general public because of a lack of publicity on how digital services work in banking operations.
Solutions to support financial literacy are a new development that is aimed at helping individuals and even businesses better understand and manage their finances. While budgeting apps have long been available, they are becoming more sophisticated, with automation functions that can help people manage bills payments, funds transfers, tracking, investment and predictions. These simple solutions help increase the wealth base as more people are able to understand how saving, investment and funds management can generate greater wealth for businesses and individuals.
Biometric security systems
Mobile banking and other financial services are widely available. However, the increased accessibility also requires increased security measures that are in line with tech advances.
The security of banks, credit cards and wallets has always been a concern. It is simply now transferred to a digital world. In fact, in many ways, your personal finances are now safer. Where in the past you could drop your wallet or physical pay packet in the street, it is far more difficult to lose your money stored online.
In the digital world, security has always been a priority. Banks and financial institutions have entire departments dedicated to hacking their systems to ensure that any patches or security upgrades are always ahead of possible outside attacks. One of the more commonly used ID security features added to smartphones, laptops and other electronic devices in recent years is biometric authentication. While these biometric sensors often require physical contact with a reader. This technology is predicted to drop off in the coming years as contactless biometric readers become more advanced, and popular.
Fears of virus and illness are likely to remain long after the pandemic is declared over in coming years. This will see more contactless payments, biometric payments and other security features developed based on eye scans, fingerprint reading and other biometric readers.
Fintech apps are the key to autonomous finance. Fintech has empowered people like never before when managing their finances, and this trend is set to continue.
Autonomous finance started with the introduction of robo-advisors; software-based financial planning and mutual funds management automated to seek the highest-yielding returns. This has evolved into automatic-saving applications and credit card debt management solutions. Fintech services harness the power of AI and machine learning to manage user’s money. By leveraging the power of technology, more people are able to elevate themselves from debt, and businesses are more able to access growth opportunities with better risk assessment.
Open banking brings fintech and banks together, enabling data networking across institutions. Directly related to the PSD2 (Second Payment Services Directive), digital access has forced banks to release their data in a secure, standardized form so that it can be shared more easily between authorized organizations online. It means that the big banks are no longer in total control, and digital banks that support customer’s interests over investors are able to compete for business.
In 2018, open banking generated about US$7.29 billion and is expected to reach US$43.15 billion by 2026. Access to open banking products and services is expected to promote better financial decision making, reduce debt, and improve long-term wealth generation. The move to digital banking benefits financial institutions, fintech workers, consumers, API industry development, innovation and underserved communities.
The technology and security that is applied in the banking industry are used in other areas online to secure digital assets and resources as well, so the advance in research and development benefits more than a single sector.
Digital-only banks are one of the fastest-growing trends in digital development. Banks that provide all their banking services online without having a physical branch or office have lower overheads and provide all services, access and products wholly online. The costs of transactions and services are greatly reduced and customers have greater ownership of their finances.
While big banks have online services and have done for many years, the online-only banks – independent fintechs that often move into banking after success providing business services such as APIs – provide many far more advanced services and products that empower account holders.
Voice technologies are improving in their sophistication, and for this reason, people are using them more frequently for everything from search options to transaction execution. The application to digital banking services means that people are able to multitask, use hands-free options and conduct business faster.
Voice assistants can be configured to provide basic data for customers, such as account balances, upcoming automated transactions, history search and other basic functions. The evolution of this has seen voice commands be developed for security purposes, such as account access, payments authorizations and transfers.
While voice recognition raises some security concerns, it is fast being adopted as a convenient choice for many consumers, and it offers greater accessibility to those who might not have the ability to use online services in more traditional ways, such as those with vision problems or mobility issues. It is a more inclusive access point that will invite more people worldwide to use banking services that are not exclusive.
Regtech in financial services
Regtech stands for regulatory technology. It is expected that the technology will improve the highly regulated financial industry by providing greater, unbiased oversight, ensure that requirements are met by customers and banks and overall, improve communications between banks, regulators and governing bodies. Regulatory oversight is critical to the financial sector, and advancements that mean greater accuracy and efficiency are important to the industry overall.
Regtech basically enables companies to leverage advanced software that will simplify the compliance process with the existing laws and regulations. Regtech solutions can be divided into:
- identity management
- regulatory reporting
- transaction monitoring
- risk management
- compliance software
Regtech is agile, fast and accurate, meaning that its application in banking will dramatically reduce administrative overhead, protect customers, and improve financial stability.
Automated regtech software solutions use AI to learn from patterns found in large pools of historical data. It is a faster and more accurate accounting that finds patterns that can easily go undetected by humans and older software.
Fintechs respond to the needs of customers more than other sectors of the financial industry, and for this reason, its growth has accelerated in recent years as people and businesses gain trust in digital services and are fast tiring of the big banks. The development of digital solutions is in response to the needs of customers wanting innovative solutions that address persistent pain points that established banks have ignored.