Fintech companies are actively leading innovation in financial service right now, and there are no prerequisites to think otherwise about the future as well. It takes a short comparison to see where the technology has led us regarding the impact of fintech on banks, taking into account both corporate and personal banking, financial management and audits.
Though slower than other industries (and history has shown precisely why), financial service providers explore innovation opportunities and adopt the most efficient techniques.
Three main factors that dictate such behavior
- Aging. Even the perfect devices and software are aging, and it takes its toll on how well the business is conducted in the financial sector. Time gives birth to new challenges and threats. By using only top-notch means, one may secure the company and make it move forward rather than become forgotten.
- A fight for consumers. As the population becomes more digital and mobile; as Millennials become the main driving force of the economy, the customers are more inclined to use technology for anything, including banking and insurance. People strive to use something that is simple, reliable, and efficient, regardless of the industry. With financial services being a crucial part of modern society, the organizations are also vulnerable to losing customers when a more skilled and technically advanced competitor enters the market.
- Withstanding competition. Continuing the thoughts from the previous paragraph, we would like to assert that innovation is currently one of the main factors that shape the financial services market. Technology unlocks possibilities in the areas of safety, transaction speed, collaboration with other industries, etc. Not utilizing these chances to improve creates gaps in the market which are then filled by visionary startups like PayPal back in the day.
These factors are a part of digital disruption that has hit the global market already. Enhanced by changes in the financial services industry, customers' expectations (safety, reliability), responding to new threats may only be possible by creating new solutions or funding those who would do that for the organization.
At this point fintech companies become an immense part of the game, being able to dictate the direction of innovation at some point. Just one discovery, one improvement can largely impact financial services, shake the whole financial sector, and open possibilities never available before. It was the case with the emergence of blockchain; it is the case with more in-depth studying of machine learning, robotics, and big data. The future of financial services has already taken a new direction and it’s going side-by-side with technology.
It's time to analyze the use cases of the most advanced technologies; see how fintech becomes a significant part of the financial sector and how even the smallest startup with a bright idea can attract huge investments from the leaders of the market.
Fintech improves existing services by offering new solutions
Technologies like biometrics, chatbots, blockchain and big data compete with traditional financial methods and push the development of the financial sector forward. Let’s see how each of these innovations improve existing approaches.
A new step in security. Users are no longer required to remember all passwords — fingerprints, face scan, eye scan, and so forth — the technology allows even more secure authentication with less effort from the customer.
Mobile solution created by Wells Fargo, a community-based financial services company, allows viewing account balances, making deposits, and approving payments all through mobile devices. The solution includes biometric eyeprint feature, which is an automated biometric identification that allows users to sign in by scanning and recognizing their eye patterns via phone camera without a password.
Chatbots are software apps that simulate human behavior by conducting on-line conversations via messaging apps.Based on AI and improved use of machine learning, chatbots save tons of money and time by letting the support crew focus on the most challenging issues when the chatbot answers inquiries, redirects users, and explains more straightforward concepts. It results in better customer retention, conversion, and satisfaction.
Bank of America, a market leader in the US, started using chatbot, called Erica, to notify users regarding updates, provide information about their balance, suggest money saving techniques, help with transactions, pay bills and make credit reports.
The financial sector benefits from the transparency and security blockchain offers. Smart contracts that are written as a protocol within the blockchain network system take the contract management to the next level, leaving a lot of tinkering and manual adjusting in the distant past.
Smart contracts are digital self-executing contracts that enable process validation without a third-party involved between two parties. According to the initially agreed terms the system autonomously validates and completes the contract.
Banco Santander, a Madrid-based multinational commercial, and Banco Sabadell fifth-largest Spanish banking group already implemented smart contracts for digital payments to automate the issuing, registering, executing, and canceling of bank guarantees.
Large financial organizations sooner or later face a huge data turnover. Big data helps to structure it and extract the needed bits in a matter of seconds. It allows a better reaction to identifying untrustworthy payers, a more efficient collection of user data, enabling more personalized experience for everyone, and so on.
To automate processes and reduce manual work with big volumes of data an Australian-based bank lender started applying DemystData platform and minimized manual verifications up to 40%. DemystData offers a centralized dashboard to help organizations access and analyze all of data to effectively profile clients, indicate fraud, automate validation and strengthen compliance efforts.
Fintech companies strengthen competition among financial institutions
Technology impacts financial services to a large extent and it has shifted the market balance. Financial institutions are actively searching for fintech service providers to partner with.
With the competition among banks, insurance companies and financial security providers the smooth work of existing services won't be enough to win customers. Economic enterprises will have to innovate further, making the services more reliable and straightforward to use which will only benefit the financial sector itself, alongside its customers.
It won’t matter whether it will be a fully automated system of smart contracts, ready to handle and enforce the most complex deals, advanced AI systems that provide better help with stock markets and asset management, or more efficient use of big data to push the personalized experience to new heights.
Fintech service providers capitalize on existing technology, providing better solutions. This, in turn, makes the market denser and competition for innovative financial services becomes even more significant. The combination of these factors leaves no margin for a second thought — the race for better value and technology will result in breakthroughs in the field.
If you have a fintech project in mind, don’t hesitate to contact us, inVerita has a proven track record creating fintech projects and surely can handle yours!