Fintech is short for Financial Technology, and is a fairly recently coined term used to describe the advances in technology for personal and industrial finances. It has been regarded as a game changer in today’s financial landscape, generating excitement and attracting venture capitalists, private equity firms, corporates and a number of other players to pour an unprecedented amount of money into global fintech start-ups and products. The ease of use of a digital product in banking channels redefined the way in which we store, save, borrow, invest, move, spend and protect money and earned a paramount significance in client satisfaction – the key to driving higher customer engagement, sales, longer term banking-client relationships and bigger business growth. As of today, notable technology industry leaders – Google, Apple (ApplePay), Amazon (GAFA) and Asian tech titans – Alibaba (Alipay), Tencent (Tenpay), and WeChat (WePay) have dominated the landscape by creating apps and cutting-edge tools that have challenged and surpassed the established banking industry.
While there’s great enthusiasm about the fintech disruptions, or of 3 major lucrative impacts which FinTech was anticipated to bring about: a cashless society, high-speed global information dissemination & new ways of getting loans and capital, have been backfired in traditional financial sector – making them obsolete in today’s market. In 2017, banking executives missed the mark at correctly understanding the rise in popularity for fintech product. Their failure to understand just how important an exceptional user experience (UX) is for consumers made them face hurdles in global investment opportunities and angel funds. Too many banks operated as if they are still in the 20th century, protecting the core franchise and making digital a secondary channel to branches, to the dismay of highly empowered customers. On top, the superannuated legal practices and government regulatory barriers on the development of Fintech platforms appear to raise real concerns among many market insiders. It is still unclear whether Fintech presents more of a challenge or an opportunity for industry incumbents, but it is established that the digital revolution in financial services is under way and financial services players are attempting to take bold steps to engage with emerging innovations.
On the contrary, all three of the above predictions have already started to take place in their counterparts. The tech giants are heavily involved in the tech sector, with solid footholds in consumer goods and mobile Internet technology, among others. Last year e-wallets accounted for nearly 60 percent of all mobile payment methods alone, allowing these systems to bypass traditional banking institutions completely and changing the way money flows in the market. Fintech in China, in particular, has experienced exponential growth in the last several years, owing to the success of the nation’s mobile-first initiatives and e-commerce developments. Diversified mobile payment platforms, and peer-to-peer (P2P) lending have reached a large number of consumers, providing a superior user experience (UX)— across devices, platforms, and even traditional banking institutions. This growth has been spearheaded by unique collaboration efforts between the Chinese government entities, established corporations, and emerging startups. Consequently. China has been able to use the fintech boom to not only pivot its economy but also bring it to levels unseen before.
So what’s next for Fintech?
The future of fintech is right there in the name. The industry has a heavy focus on technology, and technology is constantly changing. We expect the future of fintech to continue growing and crossing almost every industry, mainly disrupting the financial industry at large, and simultaneously helping them create better, faster, cheaper services that make them an even more essential part of every day life for institutions and individuals. The only thing that we can know with any certainty is that the rewards for those who get the mixture of innovation and practicality just right will be enormous. More than ever, established banks need to acknowledge that they need to shake themselves out of institutional complacency and recognize that merely navigating waves of regulation and waiting for interest rates to rise won’t protect them from obsolescence. Learning from their previous mistakes, re-imagining their business model to embrace openness towards financial technology and building momentum in making smart investments seems like a good place to start.
5 Fintech Trends for 2018:
1. Improved Customer experience
Consumers are seeking even more enhanced customer experience and processes that are seamless, intuitive, and easy, whether they are handling payments, opening new accounts, or engaging in other typical financial activities. And it’s not just millennials who have these expectations. Plenty of GenXers and baby boomers – arguably today’s most profitable customers – are also digital customers who are seeing the benefit in conveniences and functionality in our banking and financial experiences. Recognizing this reality, financial institutions are doubling their efforts in finding ways to support this goal without increasing cost or risk, incorporating and applying improved User interface design (UI) and online channels that allow customers to easily navigate on its digital platforms. Brett King, an Amazon bestselling author and the CEO of Moven, stated that banking is no longer somewhere you go but something you do. By making it easy to do business with, banks are paying heed to help customers to feel as though their experience is a priority. A growing customer base and an increase in accounts, deposits, and loans prove the bank is on the right track.
2. Maximum Cyber-Security & KYC Regulations
The fluidity of fintech, its speed and ability to change rapidly, makes regulation a problem and provides an outlet for criminal activities that would be much more difficult under traditional protocols. But like taxes and death, regulation is inevitable and we’re likely to see larger institutions and governing bodies placing increased emphasis on the regulation of both software and hardware. The financial industry is a high-profile industry that demands the utmost security and people’s money that we’re talking about. The trend in intensified handling of Personal Identifiable Information (PII) and deploying Know Your Customer (KYC) more aggressively makes the industry stronger and cyberspace more secure, increasing consumer confidence. Then we can expect to see a corresponding surge in uptake and innovation in the fintech industry. The demand will drive the supply.
3. Artificial Intelligence in financial services
The paradigm shift towards artificial intelligence (AI) and augmented reality (AR) will continue to disrupt the financial services industry. While AI development focus on cognitive use in the sales, marketing, investments, wealth management and compliance sectors of the financial services industry. The robo-advisors, which will be available mostly in fintech apps, provide automated financial planning services driven by AI algorithms — for more solid, spot-on, and quick financial advices. Moreover, FinTech robo-advisors will allow younger and less financially savvy people to start investing. The advanced robotic and augmented technologies like machine learning and predictive algorithms gain a competitive edge, moving from cognitive computing to real potential growth in both UI and UX.
4. Blockchain in financial services
Despite its volatility, the increasing popularity of crypto-currencies and block-chain technology seeks to pose a challenge to the status quo of traditional financial infrastructure & institutions. From a tech perspective, thing seems to be just getting started: 2018 promises to be the year that a number of highly anticipated projects regarding cryptocurrency are either launched or adopted. Whilst early adopters urge that acceptance into daily lives will take time, the unrushed pace in which banking institutions have historically taken to embrace other new technologies (the humble credit card, for example, took 40 years from its initial inception to introduction to the general public) is telling, to say the least. These challenger banks will fuel increased competition in the industry, forcing traditional financial institutions to improve their digital offerings and extend their reach to fend off these disruptors.
5. From competition to collaboration
Forming partnerships and industry alliances between fintech startups and established financial services is one fintech trend that can help bring new technologies to broader adoption and work out implementation kinks. Reaching out to other companies and finding areas to work on together can improve B2C relationships and UX. As noted by Dilip Krishna, managing director and head of innovation for Deloitte & Touche LLP’s financial services businesses, organizations have to figure out implementation gaps and understand customer needs. One of the best ways to find those answers is to work together. The collaboration is expected to translate those airy promises into concrete progress and help the fintech become more mature.