As the broader economy shifts from respond to recover, COVID-19 may create new opportunities for some fintech’s. For example, as social distancing has taken hold worldwide, there has been tremendous growth in the use of digital financial services and e-commerce. FinTech’s have a unique capability to extend financial inclusion, improve the daily lives of people and spur growth. Fintech firms can use this opportunity to build their reputations and emerge stronger once the crisis has passed.
The following are the unique trends that enable the future growth of the fintech industries:
Platform as a Service (PaaS) Offerings Expand
Customers crave convenience. However, financial institutions struggle to meet their demand while safeguarding information. As banks comply with evolving regulations, customers will benefit from the opening of APIs to customer data. With PaaS, institutions can adapt to changing needs with customized infrastructure that allows them to embrace cloud platforms fully.
Increase in Dependence on Intelligent Technologies
From traditional establishments testing robo advisors to advanced algorithms assessing credit profiles, we’ll see companies expand their use of intelligent technologies. The mixture of artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA) provides multiple benefits to those in the financial industry, such as:
· A decrease in risk from loan defaults through the use of alternative credit decisioning models (ACD) that use ML.
· Smarter risk management that uses predictive and proactive models instead of reactive processes.
· An increase in operational improvements resulting from data collection and analysis.
· Better customer experience through the adoption of virtual customer assistants (VCA).
Technologies that deliver, manage and analyze data help financial services reduce the time and cost associated with workflows. As use grows, customers expect conventional institutions to keep up with the pace.
Mobile Payment Options Go Mainstream
There are other platforms where customers can pay or get paid. This low-cost initiative has become famous across the world, enabling the customers to accept money, send money, and transfer the money to the bank. Using this technology, customers are using the mobile-based money transfer/accept as an alternative method. One of the primary reasons that Mobile Money has become famous is because people do not have to worry about internet banking, credit cards, password, PIN, and so on. Similarly, financial industries such as life insurance and general insurance can also follow this initiative to attract the customers, for new policy and renewing the policies. In the US, consumers feel comfortable with wallet-less options and rally behind big players, like Google and Apple. Payment options use blockchain technologies to verify identities for greater financial inclusion.
While customers embrace smartphone payments, those in the financial services industry worry about how their technology stack will handle increased transactions. However, the upcoming 5G technology ensures that networks can handle higher quantities of transactions and provide a reliable experience.
Use of Regulatory Tech (RegTech) Grows
The investment increase will be driven by the increasing amount of regulatory oversight with regards to fintech as well as the increasing number of regtech solutions allowing large financial institutions to implement tech instead of hiring more compliance employees. RegTech uses AI to automate risk assessments while delivering insights on big data.
Regtech solutions address regulatory reporting, compliance checks, risk management, identity management, and transaction monitoring. The breadth and scope of solutions housed under the regtech umbrella provide financial institutions with a wide range of use cases and potential for efficiency improvement.
Regtech investment improves operational efficiency in compliance activities, allowing compliance departments to reduce overhead and improve performance. Regtech has proven its value for many financial institutions, and investment in this category of solutions will continue to rise.
Blockchain pushed fintech into the media spotlight, and blockchain technology will drive mobile banking adoption outside of the high growth areas in which it currently maintains the most market share. Blockchain software and applications outside of cryptocurrency will prove their staying power in the financial services industry, and real estate is the industry in which they’ll have the greatest impact.
While cryptocurrency may never solidify itself as a mainstay in the markets due to its volatility and the uncertainties regarding its viability as a store of value, the underlying technology is applicable. Blockchain, by providing unbanked individuals a verifiable, easily created online identity, will allow more individuals to be financially included than ever before.
Great user experience is no longer enough
Back when banks had cumbersome websites that didn’t render on mobile, it was easy for fintech’s to win over customers by building a half-decent app with a great user experience (UX). Today, most financial institutions have transformed their retail user experience, offering full mobile functionality with best-in-class design principles. Great UX is now the norm. Customers, as a result, require more reasons to switch to new fintech offerings.
Simple interfaces, ease of use, and free stuff no longer equate to a viable business model. A FinTech app should keep a balance between user experience and security: for example, you should make sure it’s neither too easy nor too hard to get access to a mobile banking application. Attackers now need to find more robust ways to differentiate themselves from incumbents. Make sure your UI/UX decisions are both secure and user-friendly.
The introduction of cloud native solutions
Banks are realising that to stay competitive, they need to push beyond the regulatory and market mandatory ‘Open Banking’ strategy into new services and new products, and cloud technology is a perfect leverage for this. During 2020 we will see traditional banks increasingly realise the huge benefits of migrating their core systems to the cloud. Banks can cut costs, as they will not have to invest heavily in dedicated hardware, software and related specialised manpower, and will be able to take advantage of the cloud’s modular, pay-on-demand model.
Banks can drop their on premise monolitic software and embrace the modular shared approach that cloud applications provision for, creating greater efficiency and closer relationships with their clients. They can make use of the cognitive, processing and storage cloud capacities to better know themselves and their clients and with it innovate in products and services. Through using cloud computing, banks can adapt to changing market needs and regulatory developments faster to launch either on a stand-alone basis or in a partnership.
Finally, to survive the dynamics of the industry, fintech players should focus on the flexibility of their product architecture and be ready to adjust it to accommodate market and technological changes. To do so, these companies must have the brightest talent and provide these people with educational opportunities, including those in robotic technologies and automation. This year will also show which trends will solidify in fintech and which ones may lose their relevance, so it’s important to keep on keeping up with these trends.