The year 2019 was proven to be an excellent year for fintech industries in terms of publicity and making the world aware of the benefits that are gained from adopting fintech for both the perspective of the public and for businesses. Moreover, in the year 2019, there was a major increase of fintech start-ups in the market. The year also saw collaborations between some of these start-ups with well-established fintech businesses and more traditional financial institutions. These collaborations and the ongoing funding into the fintech industry have undoubtedly increased the innovation of the solutions, and the adoption of fintech technology. These factors combined have helped fintech to be recognized as one of the most talked-about industries of 2019.
Fintech is expected to become more and more decentralized over time. With each passing day, new and innovative solutions are being introduced into the market. Many of these new solutions aim to serve customers who have been ignored by the traditional institutions. The common phrase for this within the industry is to “bank the unbanked”. The further reach which many of this revolutionary fintech are prepared to go to, also accounts for the increasing attention being given to fintech around the globe.
Cyber Threats and Cyber Security
With the rapid development of technology, there is always the threat of new cyber-attacks and threats. The Fintech industry is very aware of the importance of cybersecurity, and the damage a cyber-breach would have on their operational business, as well as their business reputation. It is therefore easy to understand why the Fintech industry spends millions every year to protect the data of its users from hackers. Cybersecurity concerns for organizations include challenges such as customer data breaches, lack of skilled cybersecurity staff, security integration and effective automation. Over the last decade, there has been an acceleration within the financial industry to go digital. It is unlikely that this direction will be reversed in the next decade, therefore as more finance is handled online, the needs for more security and data protection is more than ever before. We therefore see enhanced security offerings being one of the most important and in-demand trends of 2020.
Extension of Wireless 5G
With the continuous growth of smartphones and connected device usage for everyday tasks, there is a severe demand for high-speed internet both from individuals of the public and from businesses. There is a fear that the current network infrastructure will not be sufficient to meet the growing internet demands around the globe.
The much talked about 5G technology is being hailed as the answer to this problem. The banking industry, just like many other industries, needs to be able to have a stable and high-quality internet connection, so that it continuously send and receive data from their users. It is also mandatory for successfully stable fintech to integrate new technologies such as APIs and security tools, some of which may need an internet connection to fully function.
It is therefore imperative that companies have reliable internet services, and that their users, also have high-performance internet, in order for them to make full use of the Fintech’s benefits. The stability and high-speed connectivity of 5G data processing is expected to significantly improve both the bank infrastructure and the customer experience.
IoT and Voice-Assisted Applications
The demand for connected devices has been gradually increasing over the last decade. The most widespread of these devices being Amazon’s Alexa and Google Home. By providing high-performance and seamless internet connectivity to users, 5G will maintain the high-performance of these devices and will enable the expected adoption growth throughout 2020 and into subsequent years.
Devices such as Amazon’s Alexa and Google Home come under a broader term of Internet of Things (IoT). IOT is the hardware that has the ability to transfer data over a network, without requiring human-to-human or human-to-computer interaction. If the growth in IoT devices increases exponentially in 2020, customers may become widely ready to undertake their financial activities using devices such as Amazon’s Alexa or Google Home.
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AI and Machine Learning are bringing rapid evolution for these voice-controlled devices, and are changing the way human’s interact with hardware. With many IoT devices being to provide precise and contextual real-time recommendations to users, it is highly probable that at some point there will be a connection between these devices and common financial activity.
The new generation of customers wants to use mobile apps that can better understand what they want, and quickly deliver on this want. The banking industry will not be unaffected by this change in society. Voice-assisted apps could be part of the solutions, as customers may soon be able to open a new account, or deposit money in their accounts by using only their voice via a mobile application. Some of the organizations like Bonify (a Berlin-based Fintech start-up), Inge (ING Netherland, a Dutch multinational banking and financial services corporation), and Financial Software and Systems (FSS)have already started the integration of voice-assisted technologies in their business.
Evolution of Artificial Intelligence
In 2019, the massive trend within the fintech market was the research, integration, and use of artificial intelligence (AI) solutions. Machine learning (ML) solutions were also been a popular topic within the fintech industry, with the goal of both AI and Machine Learning being used to improve operational efficiencies within financial services companies, and to improve the user experience through personalization.
AI brings some huge opportunities for fintech industries, through seamless customer data and sophisticated information collection methods. To improve existing performance and features, most of the money lending institutions are adopting interactive Machine Learning methods, and this is the reason, may be why they are not ready or prepared to integrate Artificial Intelligence also.
The upcoming years holds some great benefits for the fintech industry. The existing alternative data sources, existing business approaches, and enhanced analytics will be the major sources for bringing changes in the financial sectors.
Growth of Chinese Fintech Ecosystems
When we compare Chinese ecosystems with the Western ecosystems, it can be quickly recognised how different they are from each other. In Westernised countries, successful fintech companies tend to primarily focus on providing particular solutions, such as online deposits, lending services, or P2P payments. These fintech companies usually focus on a specific field of finance to geographically expand their business. For example, Google Pay primarily focuses on online payments, whereas Wealthfront focuses on wealth management only.
On the contrary, Chinese language fintech disruptors act following a very different set of guidelines. Typically, it is tech giants that assemble fintech ecosystems, with it primarily being based on the highly-engaging and robust consumer platforms that they are built on.
An exquisite example is Ant Financial. This tool is built inside of Alibaba’s e-alternate platform. Ant Financial gives a number of commercial enterprise-to-consumer answers, together with Alipay for online bills, Yu’e bao for investments from the Alipay wallet, MYbank for cellular banking, and more. The implementation of fintech offerings from tech giants has proved to be very successful in China, which is evidenced by the large market share held by Alibaba and Baidu.
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A Complication but Important Transformation
If we look back in 2019, the integration of blockchain in various sectors and industries was slower than previously expected. However, it is possible that 2020 is the year where blockchains potential will be uncovered through digital banking services. Since blockchain solutions are new in the market, their use stills require extensive testing before being released to the mainstream. However, there is no doubt that if correctly implemented, blockchain can be used to build a stronger relationship between financial organizations and their customers through improved trust and transparency. Moreover, blockchain would decrease the time taken for transactions to go through, which in turn will increase the speed of money flow within the banking network.
Other great advantages that blockchain technology also offers the fintech industry is helping to prevent KYC/ID fraud, improvement of fund transferring operations, and risk scoring. However, in order for blockchain to fully realise it’s potential within the digital banking industry, both financial organizations and customers have to trust this technology for sharing their personal data. This factor is one of the main reasons why most organizations are not yet integrating blockchain into their services.
Six Priorities for 2020
Upgrade your IT operating Model
Maybe your product is serving you great today, but in upcoming months it will becoming obsolete because the services offered by various financial institutions will surely change in the future. Being it small or large, the changes are going to affect the whole IT sector, which will require an up gradation in the whole IT stack. The most important principle that needs attention is that every financial institution and IT organization will have to be prepared for these constant and continuous digital changes. Some of the financial institutions still believe that the existing models can be used with mainframe structures to bring out the potential of financial services for users. The existing model can be replicated with new features probably at half of its cost.
Build Technology Compatibility
Customer intelligence—and the functionality to behave in real-time on that intelligence—is one of the key trends affecting companies financial offerings. This functionality has the ability to improve revenues and bring more profits for companies in the future. And if this happens, the numerous attributes that make today’s manufacturers extremely-modern, from design to shipping, may also become less important in future. By the year 2020, we anticipate that the ‘new normal’ walking model will be customer- and context-cantered. Based on these ‘new normal’ walking models, the way by which the fintech agencies interact with their users and customers will also be affected positively. They will offer a seamless omnichannel experience, through a smart balance of human and machines.
Simplifying Legacy Systems to Reduce Costs
One of the starkest differences between a long-established economic services organization, and a fintech start-up, is the number of assets held by the organization. It is likely that the longer a company has been operational, the more layers there are of code. This leads to subsequent charges taking longer to implement, and being more expensive to action. Furthermore, established financial companies are more likely to have bolted on a number of software for situations no longer present, such as specific promotions or regulatory requirements linked to legacy business lines. This leads to a catch 22 situation where legacy companies have much higher software costs, which reduces the available budget for capital investment. If investment is not made into overhauling legacy systems and cleaning the code, running fees will continue to accelerate. This is good news for the may-be disruptors, who generally have far lower running costs, and due to their flexibility and size, they only run the software which they actively need.
From our experience running with an extensive style of clients in banking and capital markets, insurance, and asset managers, we anticipate many financial institutions are spending twice as much they really need to spend on their IT service providers.
You Need Necessary Talent and Skills to execute Your Plan
Pay Enough Attention to Cyber Security
In the last few years, financial companies have been active in addressing their risks and information security issues. However, a growing amount of cybersecurity attacks has shown that there is still plenty to do to improve the security of companies\' systems. In PWCs Global State of Information Security Survey 2016, there were 38% more security incidents recorded in 2015, than in the previous years.
Most of the financial institutions are still dependent on the traditional security information models they have been using for years. One of them is compliance and controlled-based, as well as perimeter-oriented that is particularly used for securing data. However, security threats have evolved dramatically during the last few years, with the techniques that financial institutions used to govern these threats not keeping pace.
Prepare Your Model to Connect Anywhere
Here are some potential offerings that could be integrated into fintech in 2020:
Top Technology-Driven Influencers for 2020
Blockchain Will Bring Disruption
Many industries have decided to partner up and come together to bring changes and advancement in the financial services sector. It is expected that this surge and growth of financial services will continue to increase, as will the growth of FinTech. It is expected that Fintech will soon start to integrate blockchain technology, and once it occurs, it will happen at a rapid pace. In the upcoming years, it is possible that the tech companies that are resisting the adoption of blockchain may be frozen out of the market. It is likely that the integration of blockchain with financial institutions will become an important aspect of FinTech innovation and operational infrastructure.
The innovation of AI and Robotics
Many leading financial institutions and technology companies have partnered to bring robotics and AI into the FinTech field. The aim of integrating these technologies into financial services is to provide customer personalization, eliminate risk, and reduce costs. There are target features which AI and robotics will focus on. Some of these are natural language processing, logical reasoning, self-supervises learning, emotional and social intelligence, mobility, navigation, and more.
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The robotics industries have advanced to a level where robots can sense their environment, recognize objects, and respond to human interactions. Soon these robots will be able to perform even more complex tasks. Currently, service robots are still under the development phase, with their development experiencing technological hurdles. However, the upcoming years may see some revolutionary innovation for service robots.
Evolutions of New Business Models
Previously start-ups faced an incredible number of obstacles if they wanted to break into the financial service industry. Now the scenario has changed, with many of the barriers for start-ups being lifted, and as a result, disruptors are finding easy ways to break-in.
Some start-ups or fast-moving companies are defined as disruptors due to their focus on identifying new valuable innovations that can improve the offerings within an industry. This may involve making use of the latest technologies, and applying it to financial markets such as mobile payments or insurance.
This directly affects those incumbents who have been in the field for a long time, but are now stuck offering less valuable services. The latest report by PwC Global FinTech Survey, says industry owners think that around 25% or more of their business is at the risk of being lost due to these disruptors.
In 2014, the global investments of USD. In the same year, approximately $215 billion was spent by banks on IT for software and hardware services.
Digital Will be the Main Focus
Approximately 20 years ago, some of the famous financial institutions started the trend of “e-business”, to eliminate the wave of e-commerce interest. Subsequently, the preliminary “e” went away, and this internet presence has become an every day assumption for brands.
In the last few years, fintech has undoubtedly evolved and will continue to evolve at a rapid pace in the years to come. The trends mentioned above highlights the most powerful changes we expect to change the future of financial institutions.
Jermaine Trotman is the co-founder of Nimble AppGenie, a company renowned for its bespoke mobile app development and web development in e-wallet app development and fintech development.