Technology continues to revolutionize industries. From the way we consume digital content to how we perform routine financial activities, technology has transformed everything. With increasing digitalization in the modern world, regular business communications are beginning to be more streamlined.
Banks and financial institutions have been employing the same age-old and relatively static business models in the past. However, the latest technologies have begun to improve the delivery and applications of financial and banking services. FinTech, a portmanteau of Financial Technology, is gaining immense popularity in modern times. It is flourishing to become an enormous finance industry itself.
Modern tech giants like Google, Apple, Amazon, and Facebook are entering into financial services. It is a stepping stone towards the contemporary fintech revolution.
“As per Fintech Global Market Opportunities and Strategies, a fintech report by The Business Research Company, the global fintech market is set to attain a value of $158 billion by 2023, growing at a compound annual growth rate (CAGR) of 9.2 percent. The market was valued at around $111.24 billion in 2019.”
There are many factors behind the extraordinary growth of the financial technology market. Listed below are some of the key characteristics governing the market:
- Cost-efficiency – Fintech is inexpensive compared to retail and corporate banking institutions
- Universal Access – The ubiquity of the internet and smartphones make financial technology services easily accessible to users across the world
- Improved Security – Fintech is more secure compared to traditional banking due to the sophisticated security measures it incorporates
- Empowers Businesses – It brings great benefits for all businesses, helping them attain higher profitability
- Creates Economic Growth – The growing financial technology market boosts the economy
- Creates Financial Inclusion – Fintech benefits countries that lack traditional banking infrastructure
Financial technology has reinitiated the global competitive landscape of the modern finance industry. As fintech continues to grow, it is interesting to understand the major technologies behind its success. Let’s look at some of the top technology trends that promise to govern contemporary financial and banking applications in the future.
Blockchain
Blockchain is a transparent, unchangeable, and decentralized register that incorporates cryptography and distributed databases to capture financial transactions. It gained popularity after the advent of cryptocurrencies. However, it is a lot more than just the technology behind cryptocurrencies. It has the ability to assist financial and banking institutions in numerous ways. It can help them improve efficiency, suppress excess outlay, and become more secure and protected against modern cybersecurity threats.
“The Harvard Business Review believes blockchain has the potential to disrupt the banking and financial services in the identical fashion the internet had disrupted the media. Their report also claims that blockchain is going to save approximately 15 to 20 billion US dollars of solely infrastructural costs by 2022.”
Recognizing blockchain as one of the most disruptive modern-day technologies, a few financial institutions have begun testing it for the following purposes:
- Bank-to-bank transfers
- Payments
- KYC
- Loan processing
- Threat detection and prevention
The listed applications are not the end. What makes blockchain a technology to keep an eye on in the coming years is its future potential. We may expect it to power trade finance platforms, transborder transactions, clearance and settlements, digital identity verification, and credit reporting, etcetera.
Cloud Computing
Modern banking and financial institutions are looking for technologies that can help them access their financial data and resources quickly. Cloud computing is the solution to their requirement. It offers instant, on-demand access to all the financial information via the internet, from any geographical location. It also unlocks superior computing capabilities for its users. The following are some of the other benefits that cloud technology offers to the banking and financial industry:
- Improved agility
- Quick client servicing
- Enhanced scalability
- Reduced expenses
- Better efficiency
- Security of digital wallets and online payments
- Strong business-client relationships
- Attaining global compliance
Modern cloud-based accounting applications are already in vogue for the flexibility and operational ease they offer. Some of the potential benefits of the cloud have already been realized, while others are being worked upon. The cloud technology, already robust and beneficial, is continuously evolving. It would be interesting to see what it brings to the fore in 2021 and beyond.
Internet of Things (IoT)
IoT has been the talk of the town for quite some time now. Experts believe its integration with financial technology will enhance data collection and processing. IoT, powered by artificial intelligence, goes a long way in helping banking and financial institutions understand consumer habits and preferences. This will help businesses serve their consumers well.
In the future, the Internet of Things promises to offer instant support, queue management, and indoor navigation, etcetera.
Artificial Intelligence (AI)
Artificial Intelligence, famously abbreviated as AI, is one of the most promising technologies of recent times. No technology has left better impressions than AI. It is an amazing tool for getting insights into the ever-growing business data, both structured as well as unstructured.
The following are the major benefits of AI in banking and finance:
- Timely and accurate decision making
- Threat recognition and management
- Automatic customer support
- Downtime reduction
- Predictive data analysis
- Insurance management
A lot of banking and finance applications are already taking advantage of artificial intelligence technology to improve business efficiency. With the help of AI, they are able to handle complex thinking tasks with ease. Many of the banks have started to further utilize AI surveillance applications to thwart financial crimes.
AI gets even more interesting and advantageous with sub-technologies like Big Data Analytics and Machine Learning. What the combination of all these technologies have in store for the banking and finance industry will be fascinating to see.
Augmented Reality & Virtual Reality
Both Augmented Reality (AR) and Virtual Reality (VR) have made an impressive impact in various other industries. Their presence in banking and finance will also bring large improvements. Experts believe that both AR and VR will empower bank consumers to have independence over at-home banking. Regular banking and financial data can be reshaped into impressive visual adventures that make the complete banking experience more interesting and personalized.
A Switzerland bank, Swissqoute has developed a virtual reality application that offers a 360-degree trading wall experience to its users. It utilizes a VR helmet that lets users monitor the market and perform trading innovatively.
With AR and VR at work, we can expect many more innovative applications in the coming years.
Embedded Finance
Embedded finance lets banks and fintech bring a better user experience for the end-users. It makes banking and financial processes such as payments work harmoniously with other end-user applications. It helps in making financial transactions quicker and easier. Further, easier transactions and superior user experience make businesses more profitable with consumers more eager to buy their services.
Embedded finance is one of the fastest-growing trends as it proves beneficial to both businesses as well as end-users. By eliminating a step or two from the user’s buying process, it creates a quicker and easier transaction phenomenon for them. The following are some of the key benefits that the end-users get to enjoy because of embedded finance:
- Swift transactions
- Increased convenience
- Easily accessible interface
Moreover, embedded finance also offers the following advantages to banking and financial institutions:
- Increased product stickiness
- Generating extra revenue streams
- The better conversion rate for a business’ products or services
- Access to more end-user data
All things considered, embedded fintech is an exciting concept to look forward to. It has huge potential going forward and promises great benefits to both consumers as well as fintech corporations.
Cardless ATMs
Even though the world is moving swiftly towards absolute digitization, we cannot ignore the requirements of hard cash just yet. Hence, ATMs are important for letting users withdraw cash to meet their needs. It is one of the reasons why banking institutes have not stopped innovating ATM processes. They are still working towards bringing more convenient and easier processes for cash withdrawals. Cardless ATMs are a step towards achieving that goal. Through them, banks are aiming for quicker and safer transactions for the end-users.
Banks are incorporating many security aspects such as multi-step authentication, biometric verification, etcetera, for tauter cardless transactions. Even if someone steals your phone, he would have to make his way through numerous security barriers to access your ATM for cash withdrawal.
The financial institutes are coming up with sophisticated techniques to safeguard cashless withdrawals. It would be exciting to see what the future brings for the otherwise-believed obsolete ATMs.
The Bottom Line
The banking and financial industry is continuously evolving. However, future evolution looks more interesting and promising compared to what it appears today. The evolution has been further accelerated by the novel coronavirus as businesses are reconsidering their business continuity plans and pandemic response strategies. It will make them more eager to embrace modern technologies for attaining greater efficiency and agility.
As banks and financial institutions aim to build more sophisticated applications by incorporating modern-day technologies, the users are assured of a better future.