Financial technologies

Technologies transform different aspects of the financial sector, including payments, digital currencies, and banking systems. So, what are the key tech innovations that will keep shaping the financial industry in the upcoming years?

What is fintech?

Financial technologies, or fintech, refer to software and other know-hows that streamline, automate and enhance the delivery and use of financial services. From paying for purchases with a smartphone or cryptocurrencies to transferring money through PayPal or any other online payments system, fintech solutions are woven into our everyday life.

Moreover, the ability to buy and sell products online and the introduction of digital payments enabled by tech that comes in a different form that is legal and accessible for the user provide new revenue streams for companies and improve the overall customer experience.

Let’s go through the technology trends in finance that have the potential to help you remain at the forefront of business.

Six key technologies disrupting the financial sector

1.  Digital banking

The concept of digital banking is not new for the financial industry; however, the global pandemic more than ever has highlighted its importance. According to Statista, in 2020, around 1.9 billion users globally used online banking services.

The term digital banking encompasses both online and mobile banking. The former refers to web-based access to the account, meaning a customer can log into the account to apply for a loan or pay a bill via the website. While the latter includes the same banking features that can be accessed through the mobile application.

Digital offers more benefits than traditional banking. For example, brick-and-mortar banks require the physical presence of customers; in addition, they usually have to wait in lines and deal with paperwork. Digital banks, on the other hand, provide 24/7 access to services from anywhere with an internet connection what has become a necessity after the introduction of social distancing restrictions. Moreover, compliance with the latest security standards and embedded with multi-factor authentication digital banking services are often more secure than physical cards.Replacing the physical branches with online and mobile services allows financial institutions to save budget in the long run regarding office expenses.

2.   Voice technologies

The application of voice technologies has gained popularity across industries a few years ago and has been incredibly huge during the pandemic. And while in 2019, users were prevailingly using voice assisting technologies for directions or fact-checking, voice tech is entering the financial sector nowadays.

Voice assistant solution for the customer service can automate answering frequently asked questions, streamline the process of checking card balance, and make regular payments. Voice-based biometric authentication can enhance user identification security. Advanced software can recognise a specific user through voice modalities, such as pitch, accent, pronunciation, etc. And while voice authentication does not entirely safeguard the account from cyber threats, it is much more secure than a password or PIN.

3.  Blockchain

Blockchain technology ensures encrypted information storage that is transparent to all the authorised parties. Blockchain consists of a set of “blocks”; each block contains unique data and information about the previous block. Such records are hard to tamper with; thus, they are increasingly used to prevent fraud in the financial industry.

Smart contracts allow to self-execute a transaction once all the conditions are met. It can boost the efficiency and speed of the payment process, resulting in improving financial services such as receiving loans, exchanging stocks, and others.Cryptocurrencies which validity is provided by blockchain offer financial companies a cheaper and more seamless way to conduct cross-border payments.

4.   Regulatory technology

Financial enterprises operate in a highly regulated business environment. Regulatory technologies, or regtech, are a combination of different technologies aimed to help companies simplify meeting compliance demands. Advanced software solutions are used to monitor transactions, manage identity and assess risks such as market abuse or fraud.

According to KPMG, the investments in regtech skyrocketed and reached $10 billion in 2020.Banking institutions can leverage regtech to automate manual processes that are error-prone and create disparities in compliance operations. As for regulators, it is expected that it will be possible to implement regulations digitally. Thus, with just a single click, regulations could be delivered and executed on devices.

5.  Big data technologies

Today’s customers are searching for a more personalised experience. As a result, finance companies process more and more data to provide customer-tailored offers. However, companies need assisting technologies to manage such massive amounts of data. Here big data technologies come in handy. It deals with huge data volumes of a different types.

Financial organisations gather information about their customers, including gender, location, likes and dislikes, purchasing behaviours etc. Companies can get valuable insights from the collected data and create a customer profile with big data technology. It helps to make personalised offers at the right time, predict preferences, and optimise pricing strategy.Big data has the potential to reshape the traditional business model of financial companies while creating a data-driven and customer-centric approach that leads to better performance results.

6.   Artificial intelligence and machine learning

Artificial intelligence (AI) and machine learning (ML) can help financial sector players to improve customer management and business operations. AI and ML algorithms can be applied to identify what products or services can meet customer needs and predict buying preferences based on the available datasets. Successful implementation of AI and ML depends on the data sets; thus, companies should have structured data before the analysis.

AI can track the behavioural patterns of a particular customer. Once it detects an irregular activity, AI can notify the system, preventing potential criminal actions. The same can be applied to changes in regulations; if there are any new updates, AI and ML can alert the company. Customers can also benefit from AI-powered personal finance management. Clients can leverage AI when making such financial decisions as investments or searching for the lowest bank rates.Moreover, AI-driven technology allows automating regular payments, including utility bills, leasing, rent and many others.

Key takeaways

Current trends point out that the fintech sector is going to grow. With the increasing need for automation and personalised services, fintech solutions will become vital for companies who want to stay ahead of the competition.

Author: OlhaZhydik

OlhaZhydik is a Content Marketing Manager at ELEKS, a global custom software development company. Olha has been working in the IT industry for over 10 years, including 6 years in marketing. Thanks to her diverse experience, her writing offers a fresh perspective on how technology can help businesses not only innovatively solve problems but also gain a competitive edge. You can connect with Olhaon Linkedin or Facebook.

Financial technologies