Fintech is disrupting the way banks and other financial institutions are conducting their business operations. It will eventually capture the market from traditional banking. Truth to be told, most of the banks have now become the customers of the fintech companies. For a long time, the banks have neglected serving clients and sales channels with niche products that are now rendered by fintech companies along with help of financial software development solutions providers. With the growth of the fintech industry, the disruption caused by it to conventional banking would also increase. Such disruption is caused by leveraging the major financial technology trends.
Top Technology Trends That are Transforming the Financial Services Industry
The experts in the marketing field claim that personalization can not only attract customers but can also keep improving customer engagements with the brand. To promote its benefits, financial institutions are using artificial intelligence and Big Data to store, process, and extract valuable insights from huge chunks of data. It will enable you to offer personalization on a scale never experienced before.
Banks collect their customer’s data including their social and browsing history to know about their behavior. Fintech companies offer one to one personalized marketing experiences to their customers. It is possible because of the multi-channel integration of artificial intelligence technology. This is done when the provided information is very useful and relevant to the business, i.e. credit card or a car loan.
But to be able to undertake such services, companies need to have powerful data analytics technology that can help them get valuable insights through the sorting process of tons of unstructured data.
The common people tend to believe that the banks will keep their money safe so they secure it by depositing it in the banks whereas the people with high financial literacy spend their money on assets and other investments. But when it comes to high-income generating investments, the results of banks are better than any third-party financial institution. This is the benefit of open banking available to the customers. Therefore the banks allow the third-party financial services providers to use APIs (Application Programming Interface) to access the banking data of the customers. They use this data for the investment approved by the customers.
With the growth of the financial sector, the stakes have also increased. It is the responsibility of the banks, financial institutions, and fintech companies to secure the data from cyber threats and customers from fraud. The scale of the damage done by the data branches also increases due to the incredibly high technology speed. That is the reason why cyber security start-ups don’t have any problems in raising funds because they appeal to the clients in both fintech companies as well as traditional banks. Both the sectors would engage with the technology partner, seeing the merits of getting top-notch solutions at an affordable rate.
Cloud and Big Data Analytics
Cloud computing is used by banks to store, manage and access information but more importantly, they leverage it to eliminate all the repetitive tasks. Fintech companies use cloud-based technologies to offer unique solutions to traditional banks for automation, enhanced customer experience, and personalization. Big data isn’t just any temporary fintech trend. It is here to stay and in the upcoming time, it will grow rapidly thanks to the advancements in mobile technologies and IoT.
Cloud can enable financial institutions to store and monitor huge sets of data. It is beneficial for them as it helps them to verify all the financial transactions. Also, this is what makes financial institutions safe and agile. Cloud also opens up new opportunities for the fintech firms to expand to new markets irrelevant to their native region.
Data processing is a part of big data but here we consider it different because, in most banks and financial institutions, data is processed without the use of data analytics or big data. It is their way of offering improved products and services to the customers. However, data processing is always challenging and too big to handle. But with the recent advancements in blockchain technology, data management has become easier than before. Apart from that, many platforms are launched in the market specifically to capitalize on complex and huge sets of data.
Natural Language Processing
NLP or Natural Language Processing is a branch of AI that uses languages to generate meaning and significance. This technology trend has become very popular in the last decade. NLP technology is leveraged to extract value from the huge quantity of unstructured data including the log files, PDF and Word documents, social media messages, and everything else that makes the internet. NLP offers once-in-a-lifetime opportunities. Apart from that, natural language processing is also used in various applications of the financial sector like scanning legal documents, digital banking chatbots, and more. But the best of NLP is yet to come because this technology trend is still not utilized at its best.
The most important technology trend that has a huge impact on the financial technology industry is none other than blockchain technology itself. It is not any kind of niche technology but some sort of decentralized technology. Growing rapidly, this technology is meant to empower not only the entire fintech industry in the future. As you all know, the term blockchain is popularly associated with digital currency but it is more than that. It helps all the financial products and services that depend on the contracts.
In short, blockchain technology encodes smart contracts with the help of a decentralized ledger which leads to the elimination of the middleman system. This means that blockchain technology can help you with the creation of many financial items like insurance plans, future contracts, and more that are both safer and stable.
The rise of mobile-only banks and Financial Institutions
Gone are the days of those traditional brick-and-mortar banks. The whole world is entering a new era of mobile-only banks. The financial industry is gonna change completely with the rise of mobile-only banks. These banks don’t have any physical locations. They can only be accessed through smartphones. The popularity and the use of such banks are growing rapidly. HelloBank, Revolut, and Moven are some examples of mobile-only banks.
Such banks offer all financial services like contactless credit cards, global payments, P2P transactions, and more without charging any transaction fees. This is the best option for those people who can take care of their finances on their own in the comfort of their houses. They won’t have to struggle anymore with the queues and unnecessary bureaucracy. They can now manage all their finances in a single mobile application.
A report has predicted that the visit to the physical bank locations will decrease by 36% by the year 2026. You can notice that the number of digital banking solutions and transactions performed daily was already on the rise and has now increased due to the pandemic. As per the report from Global Market Insights, the market for digital banking services is predicted to grow approximately 6% CAGR by the year 2026. These stats give a new meaning to the product strategy and design, technology stack, and more in the fintech industry to build opportunities for technologies that are already focused on creating simple app-based solutions.
Convenience is crucial to customers. For a long time, the customers have been troubled by the complex traditional banking services and financial operations. But not anymore. the latest financial technology trends have started to turn the tides and have shown that in the finance industry also the customer is the king these trends has offered an alternative option to the traditional banking to the customers but the recent pandemic of Covid-19 has shown that these new financial operations are the need of the hour. The pandemic has indeed boosted these trends and people have widely adopted them. I know most of the trends we discussed in this blog are slightly different from the most popular ones but the stats suggest that they are the future of fintech. And since no one was talking about them, why shouldn’t we address their popularity too?
I hope you have enjoyed reading this article and have grasped something new to learn. Thanks for taking the time to read my opinion on the topic. I would also be glad to know your thoughts on the same. Feel free to convey them in the comments section below.