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Fintech Disruption: Trends Affecting Financial Service Businesses

The fintech revolution that has reshaped the financial services industry will continue to speed up in the next few years.

source: pixabay.com

A host of new technologies are combining to create greater efficiencies and versatility in an industry that was stagnating compared to other sectors of the economy 20 years ago.

In this article, we’ll introduce the top fintech trends that have already started impacting the financial industry, and will continue to do so next year and beyond.

Artificial Intelligence

The biggest story in fintech is artificial intelligence and its potential to transform financial services.

The availability of data and the processing power that cloud computing has unleashed are combining to make AI a more powerful tool for businesses of all kinds.

The financial industry has been quietly redesigning back office, customer service, risk management, and the delivery of financial products into streamlined, AI-powered processes.

This trend will speed up as more banking institutions overcome the obstacles to greater AI utilization like internal data silos and poor data collection policies.

Cloud Computing

Running a financial business with cloud computing has become viable in the banking industry despite the unique security and regulatory hurdles that initially slowed adoption.

The cloud computing technology has matured and become as secure as in-house software and infrastructure.

The trend will continue with hybrid cloud computing, which combines both public and private cloud applications.

With the public cloud, customer-facing applications move to distributed servers and data centers to enhance performance and backup systems.

The private cloud allows financial institutions to move much of their IT infrastructure to data centers and hosting services.

The cost savings, increased flexibility, and performance gains will be significant as this trend moves through the industry.

Process Automation

Automation technology has met up with big data and artificial intelligence. The next trend in automation is called robotic process automation, and it promises to take internal processes in the financial industry to the next level of intelligent automation.

Leveraging the explosion of structured data, AI applications can automate tasks that have traditionally required human workers to execute.

Using a set of rules and learning from data patterns, these applications can make more sophisticated decisions and free employees for other tasks.

An example that has already seen implementation are customer service bots that interact effectively with customers using chat or voice technology.

These applications can handle increasingly complex customer questions by accessing related data in real-time without the intervention of human representatives.

Instant Payments

Party-to-party payment processing began the move to instant payment technology that eliminates traditional delays in clearing transfers between accounts.

Even in countries that lack the infrastructure needed for instant payments, financial institutions are partnering with each other to offer these alternative payment systems to their customers.

Digital payment systems are giving banks and payment processors the ability to conduct transactions online at the same speed as cash transactions in person.

For consumers, their experience and satisfaction will improve.

For financial institutions, the increased use of digital transactions rather than cash will automate further their processes and reduces their cost per transaction.

Advanced Security

Data security became paramount in the financial services industry with the rise of cyberattacks and financial fraud in the past decade.

Coupled with regulatory requirements, security and customer privacy are central to any financial institution’s business.

Cybersecurity threats have become persistent and sophisticated, forcing security departments to implement the latest AI and automation technology to stay a step ahead of them.

Advanced AI security tools can monitor network traffic and discover complex attacks that were once too difficult for filters and traffic monitors to recognize.

Today, AI algorithms can learn from logged traffic history and past attacks to recognize attacks as they evolve and take measures to stop them without human oversight.

This technology will prove essential as sprawling corporate intranets and web applications continue to become more intricate.

Blockchain Technology

Blockchain technology promises to make transaction authentication between institutions and customers a simpler and more transparent process.

Some financial institutions are rolling out experimental blockchain projects that handle inter-bank transactions, customer payments, and loan processing.

The technology will further reduce financial fraud and improve customer authentication.

The smart contract concept is set to bring more efficient and cost-effective systems to the financial industry in the next five to ten years.

Augmented Reality

Augmented and virtual reality applications are reaching larger audiences using mobile devices as the primary way to deliver 3D user experiences.

Financial institutions have begun to experiment with ways to apply this technology to their services.

An example is an augmented reality app developed by the Commonwealth Bank of Australia designed to present real estate data for their customers.

The app uses 3D visualizations to make historical property sales, price trends, and geographic trends easier to understand.

Quantum Computers

Another technology that has been on the horizon for years is the quantum computer technology. This technology is getting closer to real-world implementation and will usher in a new era of exponential computer power growth.

Traditional integrated circuits have hit a wall as electrical physics limits their miniaturization and speed, but quantum computers leverage quantum physics to overcome it.

Quantum computing is a fundamental change in electronic technology, using photons rather than electrons to store data and execute logic.

The traditional binary bits (1s and 0s) of electronic circuits are replaced with quantum bits that can represent three values: 1, 0, and both.

The increased speed of quantum circuits promises to achieve the computing power needed for the real-time AI and big data applications of the future.

The Bottom Line

Fintech disruption will continue to transform the financial industry at an increasing velocity because of the number of advanced technologies that are coming to market soon.

The increasing power of artificial intelligence and the volume of structured data that’s available to financial institutions will enable even greater efficiencies.

Internal cost savings and security will be realized together with better consumer products and satisfaction.

Joe Peters is a Baltimore-based freelance writer and an ultimate techie. When he is not working his magic as a marketing consultant, this incurable tech junkie devours the news on the latest gadgets and binge-watches his favorite TV shows. Follow him on @bmorepeters