No industry is as driven by the technology transformation as fintech is. According to PwC,
more than 81% of banking CEOs are considering the impact of digitalization on their field.
This is both good and bad news. On the one hand, fintech is on the front line of exploring advanced innovations while other industries still wait in line. However, with so many companies implementing digital technologies simultaneously, it’s challenging to keep track of recent tendencies and stand out from the competition.
Top 5 trends shaping fintech
The only winning strategy here is analyzing the tendencies and disruptive technologies and starting to implement them before the competitors brought about the change in your field. By following the track of disruptive innovations in the financial industry, you can make some improvements in smaller areas and markets. What’s more, if you know how to recognize truly great insights and use them, you will profit a lot from the tech rise of fintech.
We reviewed the leading technological advancements of the fintech industry and collected the best cases and insights of industry leaders.
Robotic Process Automation
Even if fintech companies don’t have enough in-house resources to create custom AI innovations, they look for alternative options - the easiest choice is the partnership with a technology provider. In 2018-2019, AI was used for reducing processes’ duration and as a competitive advantage - a way to stand out from the competition.
In 2020, robotics will take on critical financial processes. The future list of AI competencies will include the following ones:
Business Analytics - AI advisors will monitor financial businesses and offer critical insights on performance improvement;
Risk Management - robotic assistants will identify possible market threats by analyzing the dynamics of a financial market; given an unpredicted nature of the industry, this is a crucial feature;
Social and emotional intelligence - AI will take a leap forward in understanding customer’s and staff’s pain points and come up with coherent strategies for solving these;
Logical reasoning and self-learning - this is already AI’s strong suit, and fintech companies will do their best in exploring these capacities to their fullest for making informed management and investment decisions;
Navigation and mobility - fintech companies who are dealing with logistics and supply chain management, will use AI for transportation planning supervision.
Online trading - robotic automation lies at the core of modern e-trading platforms. Using AI to manage transactions, quotes, deposits reduces expenses both for the service provider (financial institutions) and the end client.
These changes won’t happen overnight. Robotic innovations still face a long implementation cycle - it will take time until all fintech companies can afford to cooperate closely with qualified teams and to maintain long-term AI results.
Chatbots have been a buzzword in the industry for a while, but in 2019 we finally saw some cutting-edge developments. Conversational banking assistants were implemented by the Bank of America, JP Morgan Chase, Web Fargo, and others. The leaders of the industry set high customer standards - and fintech companies will do their best to follow.
Chatbots in 2020 will be solving the challenges of 2019
The key role of conversational banking a year from now will be about the successful identification and solution of common chatbot issues. To be on the verge of conversational banking, companies have to clearly understand the difficulties and develop a strategy to approach them.
Here is our take on today’s challenges of conversational banking
Understanding customers’ needs and intentions. Chatbots are not yet capable of fully comprehending a user’s request, mainly if a casual language is used. Slangs, abbreviations, and grammatical errors stand in the way of complete understanding between a client and a digital assistant. In 2020, chatbots will solve these issues in more than 25% B2B companies by providing examples, questions, clarifications, and multiple answer alternatives.
Time-efficiency and clarity. Even if a chatbot is capable of understanding a request, the next step is fulfilling it seamlessly. Developers are already working on adding maps, schemes, videos, and natural voice memos to their assistants.
Perhaps, by the end of 2020, the end-user wouldn’t be able to tell the difference between a chatbot and a human worker - that’s what all fintech companies should be aiming for.
Secure online transactions and private data management. Online safety depends on multiple factors - the quality of the user’s connection, the protection of the bank’s service, and country regulations. Chatbots will use hashing mechanism - automated encryption which leaves the content entirely undisclosed even to the website’s creators. Another issue is finding the balance between PII and non-PII transaction data. Ideally, the chatbots have to be able to keep the conversation going smoothly with a minimal amount of personal data - so it won’t be used by social media websites’ targeting.
Digital Disruption of Traditional Paychecks
Fintech companies aim to change the way people get paid and let them have their say - when and how to get the paycheck. What’s more, digital startups can replace the traditional the-end-of-the-month payment system with a flexible on-demand offer.
We’ve already seen the first examples of such innovations. Gusto, a payroll company, launched Flexible Pay - a service that opens up a possibility to see how much users earned and choose when they want to get paid. This feature has to be approved by the employer - and not all companies are ready to jump on board yet - but similar services may become a new norm in 2020.
Blockchain is no longer news in fintech. While some experts are predicting the end of the blockchain era - some are seeing the innovation merely as cryptocurrencies - others understand the key impact of decentralized technologies.
The use of blockchain goes much further than only cryptocurrencies - it’s a flexible innovative solution that solves the majority of modern fintech problems - let’s take a look at a few examples.
Fraud detection and cyber attack prevention. BNY Mellon Treasury Services Business uses a decentralized database to protect its customers’ personal and financial data. All information about real-time payments and profile details are stored on multiple blockchain servers, as opposed to the old-fashioned centralized system. There is no longer an open possibility of targeting a single database.
Market research and customer analytics. Robobank uses blockchain for storing KYC statements - KYC stands for “Know Your Customer”. The policy on getting and storing customer data is especially strict in financial sectors - each year, an average bank invests 40 million dollars per year in complying with privacy regulations. Blockchain databases correspond to governmental requirements and shorten the time, needed for data processing.
An innovative payment system. Blockchain can substitute traditional money transfer methods - like Swift money transfers, enabling much cheaper global transactions. Just recently, we’ve seen a release of a real-time gross settlement system - Ripple. The service provides the blockchain-based services of currency exchange and international payments.
5. Public cloud implementation
By 2020, using a software-as-a-service cloud service will most likely become a norm for financial institutions all over the world. Even now, banking businesses are actively using a public cloud for data storage, CRM platforms, and HR management.
Next year, the scope of the public cloud will grow further, incorporating convenient payments enablement, billings, and loan management. Fintech companies will opt for available-everywhere-anytime cloud service instead of using inflexible hardware. The international teams will be the first ones to adopt such systems as this is a comfortable solution for cross-border management.
During the last years, fintech companies are dealing with multiple changes simultaneously. Digital competition, new demographics, rising demands, and increasing flexibility requirements - these factors are tricky to manage. Luckily, this is where technology comes into play, offering banking institutions automated solutions for data management, customer and market analysis, business administration, and regulation. However, the clock is ticking - the majority of technologies is not proprietary, so companies need to be the first ones to bring about the changes in the market. Even a small delay is enough to set the company back and give competitors a chance to develop a new strategy and take full advantage.