Hi! Looking for a comprehensive blog post on fintech technologies? Before we go deeper, we want you to hear this first;
“Technological innovations will be the heart and blood of the banking industry for many years to come, and if big banks do not make the most of it, the new players from FinTech and large technology companies surely will.” David Brear.
The 21st century birthed fintech which at the time was a core part of the back ends for several financial institutions, especially banks. From the point of inception to sometime around 2018, the technology made some adjustments to accommodate other important banking components.
This was majorly driven by customer demands and the need for banks to create and deliver customer-oriented services.
Learn more about WEARABLES AND IOT TECHNOLOGY IN FINTECH: WHY BUSINESSES NEED THEMhere.
Today, fintech technologies have come to stay because they have extended beyond the banking sector. We see their amazing roles in different industries, including retail-banking, non-profit sectors, education, e-commerce, and even education.
Let us be also quick to add that fintech technologies play leading roles in revolutionising finance through cryptocurrency.
We shall be exploring several important components, areas and perspectives on fintech technologies in this blog post.
Understanding the Concept of Fintech Technologies
Fintech is a combination of two terms; financial and technology. The term is used to describe how modern technologies revolutionise financial services. Fintech offers several solutions to companies, businesses, individuals, consumers, etc.
Looking at the term from a clearer lens, it is used to describe the role of technology in modern financial activities. This includes transactions, money, and bookkeeping.
What is Fintech?
Answering the question, what is Fintech? Sam Daley, Hal Koss, and Chris Liquin all posit that it refers to any business that enhances its processes with technologies. In most cases, these technologies automate financial services and different processes.
Furthermore, they agree that; Fintech “encompasses a rapidly growing industry that serves the interests of both consumers and businesses in multiple ways.” The adoption of technology in banking, insurance, as well as in cryptocurrency investments are examples of its applications.
Similarly, Justin Trificana says; that fintech technologies include applications, software products, and other technologies in the financial sector. He says that these technologies enable digital access, and management, of finances and financial transactions. They also offer useful insights into “finances or how best to make financial transactions.”
Technology is leading the disruption and shift from traditional to modern banking. From mobile banking and insurance to cryptocurrency and investment apps, fintech has a seemingly endless array of applications. All of which are enticing, to customers. Fintech technologies make it easier to design and offer customer-centric services in the financial market.
Fintech is taking over the business industry. Today, we see how it is transforming payment processing systems. It also plays a leading role in e-commerce transactions and even in accounting services.
The technology has actually been with us for a while but did not get the needed attention until the COVID-19 pandemic struck. The effect of this has seen businesses around the world turning to fintech technologies for payment processing.
What’s the Importance of Fintech?
The importance of fintech technologies is numerous in businesses and finance.
Let us look at some of them.
Fintech Technologies Attract Lower Costs
Traditional business and finance have many of their activities associated with rents and huge salaries. Others include mainstream media advertisements and costly promotions. However, these are very minimal in the case of fintech.
Fintech offers the benefits of cutting down large numbers of workers and paying too many staff. Also, since a lot of processes are automated, physical transactions are very limited. Even the area of customer service is now being facilitated using various online channels.
We can, therefore, say that fintech offers businesses, banks, companies and customers cheaper alternatives but with greater results.
Fintech Technologies Offer Better Convenience
With the evolution of fintech, Matt High, says this. “Digital access, digital availability and an ‘anywhere at any time’ mentality must be the mantra of any organisation looking at its customer journey.”.
Today, many companies utilise mobile connectivity for scaling their operations. In the banking and finance sector, fintech technologies offer reliable technologies that enable better customer experience.
These technologies also increase transparency and many customers perform major transactions from remote locations.
Fintech Technologies Offer Faster Transactions
Another benefit of fintech is its role in the online business landscape. It facilitates seamless transactions and approves payments at any time of the day.
Unlike traditional banking which requires too much information before processing payments, fintech makes it possible for several transactions to take place without requiring too much user information.
Fintech adopts the use of AI and Automation to power customer interactions. These technologies also perform predictive analysis and design customer-centric services.
Importance of Fintech in the Banking Industry
Mohammed Khurrum, who is a Corporate Sales Professional points out the benefits of Fintech in the banking industry. saying that the importance “cannot be overstated” the technology exceptionally introduces game-changing techniques for achieving these three things;
- Enhance efficiency
- Improves Accessibility
- Meeting customer expectations
Fintech operates like a technology with natural relationships or affiliations with the banking industry. Let us discuss some ways that it is benefiting the banking industry.
Fintech Technologies Streamline Processes and Reducing Operational Costs
Applying fintech in the banking and finance industry is very strategic in streamlining processes. It is also very instrumental in reducing the cost of operation in business.
For example, the banking sector has a lot of repetitive tasks which are fully automated. The processes here may include, account creation, customer care services, and transaction processing.
As fintech encourages the use of automation, it is also reducing the need for human input. This also means errors are minimised.
Fintech Technologies Decentralise Finance
Decentralised financial services are long overdue. With the traditional banking systems operating on systems that frustrate users, people need viable alternatives and fintech takes significance here.
Mohammed Khurru, observes that; “Fintech solutions; mobile banking apps, and digital wallets, provide convenient access to financial services irrespective of location or credit history. This inclusivity empowers individuals and fuels economic growth. It does this “by bringing previously marginalized populations into the formal financial system.”
With fintech, the evolution of modern banking is fast developing. And inclusivity has become a thing.
Fintech solutions, such as mobile banking apps and digital wallets, provide convenient access to financial services irrespective of location or credit history. These services are fantastic, for everyone.
Fintech Technologies Brings Healthy Competition to Banking
With fintech, there are so many innovations in the industry, and those who adopt the best will go far. Their ROI will also be high.
However, many banks will need to revamp or upgrade their technologies to integrate with fintech technologies. Practically, banking institutions or financial service providers with fintech win the hearts of users. This is because the technology makes it very easy for businesses to design customer-centric services and policies.
The technology is also the number one driver of open banking systems. this is a powerful innovation whereby a third-party app can help bank customers perform transactions on their accounts.
Fintech Technologies Improve Security Systems
As modern technology is leading a lot of transformation, issues of security and safety are important. Fintech features the use of encryption tools and techniques for optimal safety. The technology also utilises strong security solutions like biometrics, face recognition, and AI-powered fraud detection tools.
To sum this up, the technology champions transaction security as well as protecting user data.
Therefore, in relation to the benefit of fintech in the banking sector, we can see that it transforming operations and customer service experience.
Top 7 Technology Trends Shaping Fintech Future
One of the most competitive landscape industries in the world is the financial sector. This industry is driven by advanced technologies that both reinvent and reshape it.
So, what are the top 7 technology trends shaping fintech’s future?
Artificial Intelligence in Financial Services
Artificial Intelligence is already establishing and improving value creation in the banking industry. There are estimates that it is capable of generating up to $ 1 trillion in value for the global financial market.
Currently, AI and Machine learning are being integrated into different banking technologies for improved performance. This is birthing the implementation of automation and machine-based performance in shaping financial modelling.
Also, with the application of AI technologies, the financial sector is taking advantage of knowledge graphs and graph computing. These tools play significant roles in studying and understanding different patterns in the industry. They are also useful for deciphering complex financial networks by analysing and interpreting big data.
Lastly, through analytics, AI incorporates safety protection for safety improvement. The fintech technology is capable of training different models to study abnormalities in user behaviours and take relevant preventive measures. These include decentralised machine learning and risk analysis.
For advanced privacy protection, AI introduces powerful advanced encryption, zero-knowledge proofs, secure computing, etc. All these are fintech technologies that are also capable of establishing strong consumer protection in the banking industry.
So, in the future, what we expect is for AI to penetrate every nook and cranny of the banking and financial industry. It will integrate with different technologies to improve their effectiveness and efficiencies by making them intelligent.
Cloud Computing in Financial Services
Here is another important trend in the banking industry. This one will undoubtedly shape the fintech banking.
Cloud computing has a very important role to play in modern banking. With the way it is evolving, it may soon become the number one tool for Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA).
The McKinsey & Company research shows that banking institutions that implement cloud computing will experience the following;
- Increased efficiency by 38%
- Raise infrastructure cost efficiency by 29%
- Reduced downtime (for migrated apps) by 57%.
Their research also shows that “cloud can improve platform integrity through automated and embedded security processes and controls”. The technology explores security control tools like data encryption, and zero-trust verification in reducing security risks.
It is also one of the excellent fintech technologies for reducing technical risks. Cloud computing can reduce technical risks because it offers a great level of consistency, and cross environmental technology stack.
McKinsey & Company, agree cloud computing is a game changer in the banking industry. Following this, they posit that the fintech technology “liberates financial companies from non-core businesses such as IT infrastructure and data centres. While it does so, it enables “access to flexible storage and computing services at a lower cost.”
Furthermore, the tech contributors make more spawning claims, saying that; is enabling open banking and banking-as-a-service which is actually “shaking up the age-old relationship between customers and financial service providers.”
Overall, cloud computing is liberating fintech companies with its amazing benefits and flexibility in computing services. It lower cost of storage services is also on another level. As it does a lot for the fintech industry, it helps them to conform to standards and regulations.
Cryptocurrency Adoption in Finance
Blockchain in fintech is yet another interesting trend in the financial sector. The blockchain digital ledger allows fintech companies to easily “easily record, synchronize, and share data”. Mahipal Nehra says all these can be done in “real-time” and “across a diverse network of participants simultaneously.”
Blockchain also offers other interesting benefits to financial companies, these include;
- Cryptography
- Smart Contracts
- Distributed Data Storage
- Zero-Knowledge Proof
These are disruptive technologies which are already being used by fintech companies in different ways. For example, fintech companies are using blockchain for decentralisation, digital wallet features, NFTs and even digital assets.
The total digital asset in blockchain fiancé has a cap of $2.1trillion. also interestingly, many blockchain exchanges are springing up and in 2021 alone, their total profit reached $ 15 billion. This is a strong indication that blockchain finance has its place and has come to stay in the financial sector.
Traditional Banking and Fintech Collaboration
2023 is witnessing an unprecedented collaboration between traditional banks and fintech companies. Both banking systems have come to realise that they can help each other in many ways. In other words, they now realise that they can exit and win together in the banking industry.
For example, traditional banks are collaborating with fintech companies to have an open banking policy that works. They are also exploring different fintech technologies to create more robust customer-centric services. Also, fintech companies are collaborating with traditional banks to access customers’ data which they use in developing their products and services.
As this continues, more and more opportunities will open up in the banking system. As a consequence, we are expecting a larger use case of fintech technologies across all banking components in years to come.
Big Data Analytics for the Financial Industry
This is indeed, one of the top 7 technology trends shaping fintech’s future in the year 2023. We describe big data in finance to include the influence of data on all aspects of finance and financial decisions. Big data in finance is also relevant in enhancing all processes and aspects of the financial industry. This includes all the markets, investments, services, risks, fraud, institutions, and management.
Big data analytics is deployed in all the financial sectors, processes and components to analyse relevant data. The aim of this is to study and understand patterns, behaviours, trends, abnormalities, etc for improved services. Most importantly, the services will be customer-centric while effective banking and marketing strategies are created.
Open Banking Platforms and APIs
With strong collaboration between traditional and fintech banks, including the roles of blockchain in finance, open banking and APIs are the future. It is here to change how financial services are designed, created and implemented.
Open banking involves the use of APIs in sharing data and even important services with third parties. By third party in this case, we mean, mobile apps, financial institutions, exchanges, websites, authenticators, etc. In essence, open banking platforms are the technological infrastructures and legal frameworks that make it possible for data sharing to take place.
Digital Payments Innovations
This is the last of the top 7 technology trends shaping fintech’s future.
Digital payments include electronic transactions between two or more parties. It is a modern payment method that is driven by fintech technologies. The innovation includes the use of mobile apps for payments, online payment methods, and contactless payments.
Also of importance in digital payment is the role of AI, Machine Learning and blockchain technologies. The innovation also includes regulatory and legal frameworks for all transactions.
Digital payment innovations offer several advantages to both banks and customers through the following;
- Convenience
- Transaction speed
- Improved security
- Reduces cost
- Easy third-party integration
- Reduced or Contactless payment
- Accessibility
This trend is still evolving but already opening up many opportunities for the financial sector to grow and develop.
If you enjoyed this post, you might also like our post on IoT in Banking and Fintech: Benefits, Examples, and Cases
FAQs About Fintech
What are Fintech Technologies?
Financial Technologies are a combination of new technologies that are adopted to make improvements in the banking and finance industry. They play important roles in transforming processes and financial services, including customer experience.
Is Big Data Part of Fintech Technologies?
Yes. Big Data is a very important part of fintech. Its role is important for gathering and analysing large and complex data for insights and informed decisions.
Is Blockchain A Fintech?
Originally, the blockchain technology focused on Bitcoin. However, it has evolved to offer more services including becoming part of fintech technologies.
What is the Difference Between Banks and Fintech?
The biggest difference here is that banks are more interested in managing customer finances while fintech companies focus on client experience..
