The biggest upcoming trends in fintech
By Neer Lazar
Financial technology, otherwise known as fintech, is innovation that can either help or compete with traditional methods of delivering financial services. As an emerging industry, fintech includes new applications, processes, or products based in technological solutions. According to a recent report, the global fintech market was valued at about $127 billion in 2018, and is expected to grow to $309 billion at an annual growth rate of 24.8% through 2022.
Let’s take a look at some of the biggest upcoming trends in fintech:
Hyper-personalization using AI
Because artificial intelligence (AI) helps organizations process and drive data insights, financial institutions are primed for hyper-personalization. Business Insider Intelligence expects that integrating AI to front and middle offices can potentially save banks up to $416 billion by 2023.
Banks are adopting AI to streamline internal processes, deliver personalized experiences to customers by predicting their needs and behaviours to better direct them, and even help protect the organization from potential risks.
For example, financial institutions can use AI to send emails and advertisements for new products, lending options, and more based on customer’s age, expenses, banking packages, etc. By analyzing behaviours, banks can not only personalize their communication with their customers but also their offerings.
Robotic process automation (RPA) — a form of process automation technology that uses digital workers, aka software robots, to automate tasks usually performed by humans within a business process — is becoming increasingly popular in financial services. RPA has been implemented by the financial services industry to reduce costs and improve organizational efficiencies.
Financial institutions are adopting RPA digital workers to automate back-office processes like customer onboarding, security checks, account maintenance and closing, credit card and mortgage processing, trial balancing, and more. Digital workers can complete these tasks much faster and allows staff to focus on higher value work, like direct customer service.
According to Gartner, as of 2020 chatbots will be interacting with the customers of 85% of banks and businesses. Financial institutions have implemented chatbots to help answer basic questions, direct customers, complete simple account updates, and even promote new services and products.
Chatbots help financial institutions better serve customers by allowing them to do more flexible business on their individual schedules, and through simple methods like apps and texting. They help reduce the need for in-person branch visits, saving time for both the customer and institution, and enabling 24/7 customer service.
Using chatbots to alleviate the burden on customer service reps’ interactions with customers also has the potential to save financial institutions a lot of time and money. For example, Swedbank’s Nina virtual banking assistant, handles an average of 75,000 conversations with customers per month, resolving roughly 80% of issues on its own. This equates to approximately 50 full-time equivalents for the bank, which means customer service can focus on more complex scenarios that AI cannot resolve.
Blockchain — a record-keeping technology used to record information across a system of computers — can help financial institutions improve efficiencies through smarter contracts, digital payments, identity management, and share trading. Within fintech, blockchain is expected to reach $6.7 billion by 2023 in the United States alone.
As fraud and identity theft cost banks billions of dollars each year, blockchain can help significantly lower these costs and risks. For example, when a customer wants to file for a loan they generally need to provide personal information, like their salary. With blockchain, an employer can verify the customer’s salary without revealing any personal information. This makes identity theft much harder when personal information is no longer as easy to find.
Mobile payment innovations
Consumers are becoming less reliant on cash and more interested in faster and easier ways to pay for goods and services. Credit card giant Visa, for example, has seen sales processed through mobile devices grow 53% faster than sales made on a desktop computer.
Payment systems have been traditionally dominated by banks. But, over the past few years we’ve seen a rise in non-bank players entering this space and competing with the big banks. Ranging from retailers, telecommunications, technology companies, and start-ups – these players are introducing value-add services in this space.
We’ve already seen Apple revolutionize this space with their Apple Pay system, allowing users to easily pay for goods with their iPhone, and more recently with their compatible wearable device, the Apple Watch. With more advances in mobile payment technology, we can expect to see future ability to also pay fees to transit providers, educational institutions, government, and more.
Advances in fintech will continually drive change for financial institutions, offering ways to streamline business operations, improve personalized customer service, and reduce risks to better protect both the business and its customers.
About the author
Neer is an Account Executive based in New York. He has over 20 years of experience working with financial institutions in the areas of market data, trading applications, compliance, and enterprise software. In his roles, Neer has helped major financial institutions leverage new technologies to achieve desired business outcomes. When he’s not working, he enjoys working out, spending time with his wife, daughter, and son, and going to live concerts of his favorite indie bands.