Fintech is simply the combination of Finance and Technology. The Fintech industry is full of large corporations and fast-growing start-ups that produce innovative financial technologies that are adopted to enhance or automate financial processes or services. This has a relatively broad reach as traditional banks tend to invest in and adopt financial technologies. Banks partner with Fintech companies to stay relevant in the industry and remain competitive to their customers.
As our society adopts technology into every aspect of our lives, Fintech is one of the fastest growing technology sectors with innovation in nearly every area of finance. Financial technologies such as AI, data science, and blockchain are integrated for faster and safer financial processes. As financial technologies grow, so does cybercrime. As a result, Fintech is being challenged to provide secure solutions as regulations ensure standards for customer security.
Primarily, financial technologies seek to reshape the structure of financial services and adhere to customer needs and expectations. With applications in banking, insurance, investment, security and more, Fintech is transforming finances from business to customer.
This isn’t a new phenomenon; Fintech has been evolving for centuries. As technology advances, new financial and payment technologies are created. Since computers, the internet and mobile devices entered the mainstream, Fintech has been a global industry. After the 2008 fiscal crisis, a ‘Fintech revolution’ to offer industry solutions, rather than just advancements.
How is Fintech using financial technologies? Some of the newest trends include applying machine learning algorithms and data science, streamline payments, integrate billing, advance mobile payments, and improve security. Here is a breakdown of the 5 main applications from financial technologies that are shaping the future of Fintech.
Digitalisation continues to expand in the financial services and offer many benefits. This includes;
Mobile banking is revolutionary for personal finance and allows customers easy digital access to their bank accounts. With the rise in neobanks around the globe, this also allows technology to make banking more accessible. The majority of banks already offer global payments and virtual payment transfers with the use of digital banking, and any that don’t likely soon will.
Not only are digital financial technologies helping customers, but they’re also improving processes for businesses. For example, this has applications for retail banking, insurance, wealth management, and migrating to commercial banking. There has even been a rise in investing and savings apps in recent years, which decentralises the role of banks for financial management.
Bitcoin, a cryptocurrency that uses Blockchain, already has a wealth of opportunities in the world of Fintech. In fact, in a survey, 77% of financial service incumbents were preparing to adopt blockchain into their processes. We expect blockchain ‘public ledger’ will integrate into the Fintech industry long term, with applications for anti-money laundering efforts and creating new financial services.
New financial technologies have been disrupting the typical Fintech business model, as a result there has been a lot of experimentation with how to structure a fintech company. Some speculate that the Fintech industry will soon be a ‘sharing economy‘, and have numerous microservices that are managed concurrently. This decentralised asset ownership tends to utilise information technology such as cloud-based software-as-a-service (SaaS) applications to manage bespoke financial solutions beyond the services of banks.
Enhancing transaction accuracy for smarter and faster responses with machine-accessible data, machine learning, big data and AI is the main initiatives for algorithmic trading. This shift from Internet finance to data finance is a key trend in recent years, and AI has been named the “future of financial data computation”.
AI in the context of financial technologies focuses on deep learning, intelligent analysis, and intelligent decision-making. This has a range of applications, according to Narrative Science, AI adoption grew by 60% in 2017. Many financial service providers have utilised AI technologies such as;
This is because AI has the ability to run large amounts of data through algorithms designed to spot trends and risks, so financial technologies are able to adapt this for a multitude of applications.
With innovations in AI and machine learning, blockchain, cryptography, and quantum computing, also come a lot of potential fraud risks. Strengthening data security policies needs to be a primary concern for Fintech, and due to a rise in new technologies we have also seen a rise in regulation. Regulatory technology has been an answer to this, named ‘RegTech’ which aims to help companies navigate regulatory complexities. 88% of UK companies suffered a data breach between 2019-2020. With the use of third party vendors, rapidly evolving financial technologies, cross-border data exchanges, and increased mobile technologies, cybercrime is a growing problem. Intelligent solutions that securely store and manage payments is the future of Fintech, and its applications.
Fintech aims to streamline the segmented structure and core financial technologies used in the industry to ensure a secure, competitive, and user-friendly financial services. Imburse offers bespoke payment solutions for your business. To help manage your payments in an innovative, complaint, and safer way, get in touch with our team today.