The FinTech industry is one of the fast-growing industries of the last decade. With the growth of new technologies and innovations in the financial industry, the business models continue to change as well.
Many traditional businesses took FinTech as a competitive threat but now they both are working side by side in order to provide quality services to their customers. In the future, the FinTech industry will keep on growing which takes us to the discussion of what can happen in the future? But before going to the future let’s first explore the present of FinTech.
FinTech Vs. Banking — Why FinTech is Getting More Popular?
Before jumping on to the 7 technologies that aid the FinTech industry, first, let’s know about the difference between banking and Fintech. The FinTech industry focuses on making new technology to improve the delivery of financial services to customers. While the bank is a financial institution that deposits money or provides loans and securities.
FinTech companies focus on making their customer’s experience finer by making technologies according to the customer’s convenience, access, personalization, and purpose. Whereas, the banks completely focus on security and financial risk management for their customers.
The rapid use of the internet and smartphones made FinTech more popular among millennials. The other fact that contributed to the popularity of FinTech is the regular collaborations between the banks and the FinTech firms. Pandemic also influenced people to adopt FinTech which was the biggest turning point in the FinTech industry.
Top 7 Technologies Influencing FinTech Industry:
There are many technologies that are influencing the current FinTech industry. But out of all, these top 7 technologies have the most effect on financial technology companies.
Currently, most of the FinTech industries are working on creating a system where artificial intelligence can be used. New technologies in the field of decision making, customer support, fraud detection, and predictive analysis are being made in order to improve customer services and experience.
For example, automated chatbots are being made by the FinTech firms to provide support and financial advice to their customers 24×7. Analytics tools are developed to collect evidence regarding fraud by regularly monitoring the behavioral pattern of the people and sniffing out any chance of fraud attempts.
A blockchain system is used to record and share data with multiple sources at once. The data of a transaction done is recorded, shared, and sync with all the parties that are involved in the transaction at the same time. Blockchain is mostly used in the field of cryptocurrency at the moment due to its vast approach.
As the blockchain helps to maintain a clear and concise ledger of transactions, many FinTech firms have developed more secure blockchain technologies. Technologies such as blockchain bonds, blockchain clearing, and settlement frameworks are currently used for making intra-bank and inter-bank transactions faster and less costly.
At present cloud computing is shaping many trends in the field of FinTech as it is more flexible, accessible, and better at security. Data aggregation for banking databases is easy with cloud computing as it helps to compile data with proper processing leaving no place for error.
In comparison to the traditional IT setups, cloud computing is less prone to cyberattacks making it more secure.
IoT (Internet of Things):
For the FinTech industry, IoT is a major element as it plays an important role in payment processing and security. The system has been used in retail banking for many years. Another example of an IoT device that is used for decades is Automatic Teller Machine (ATM).
Without communicating with any human a person can do transactions with the help of an ATM. Nowadays, FinTech firms are trying to come up with new innovations by combining both AI and IoT devices to provide better customer support.
With SaaS, a company doesn’t have to maintain a server as it is software that uses cloud-based computing. A service provider is appointed who gives the company access to the Saas app as well as other services. It helps new startups and traditional businesses that are expanding to save the cost, time, and resources.
It is a rapidly growing field in the FinTech world. Many FinTech lenders use this software to provide their services to their customers. The lenders can accept online loan applications from businesses and process them in minutes. The requested amount is available for the business in three working days which is much faster than manual banking.
RegTech (Regulatory Technology) :
The other technology that influences the FinTech industry is RegTech. RegTech is used by companies or banks to improve their ability to comply with regulatory laws. As there are so many regulatory laws that a bank or a company has to comply with, RegTech helps them to implement these laws easily.
This system uses various technologies including machine learning and artificial intelligence to maintain company-wide governance and report. RegTech and Fintech work side-by-side as the former is used as a regulatory body and the latter as an assistant in connecting with customers.
Open Banking Application Program Interfaces (API):
In open banking, a bank after having consent from their customer can share their data with the third parties. This opens up new possibilities for FinTech as well as for other parties. FinTech whose most services are based on customer satisfaction and support can use this data to improve their services.
Before APIs, it was very difficult for the FinTech industry to develop apps according to the needs of the customer. Integrating data from different financial institutions under one application was difficult and required more funds and manpower. But now with third-party access, they can easily access the data which is very time-saving and low cost.
The factors from AI to Open Banking have a great influence on the FinTech industry. These factors help to bring innovation in technology and customer support to the FinTech industry. Artificial intelligence will make FinTech more efficient in the coming decade.
Cloud sourcing has huge benefits for FinTech Companies. Companies can save a lot of money and resources by outsourcing cloud computing services such as SaaS and RegTech. This can help them grow faster and more securely. Thus, these 7 factors will have a major role to play in the future of the FinTech industry.