Every industry has been transformed or is transforming with the advancement of technology, some were quick to adapt while others lagged behind but eventually caught up with the technology trends. The financial industry is not the first to shift to new technologies but rather it is considered as the sector which converts to the latest technology trends when they have matured enough. The financial industry is not like the music, automotive, or tech companies that host grandiose launches when it comes to new systems and technologies because let us face it a majority of such technologies are not meant for the financial sector.
The financial sector has seen its fair share of changes over the past, most prominent of which came after the introduction of Bitcoins and Blockchain technology in the last decade. Ever since they were introduced to the world they have gained quite some press and so have they brought changes to the financial industry and have introduced the world to fintech. Fintech aims to compete with the traditional financial methods with the use of modern technology and innovation, with the introduction of fintech they have a lot of changes in the financial sector.
The use of cryptocurrency and blockchain technology has been at the center of attention for everyone, but honestly, there is more to fintech than just different types of cryptocurrencies. Fintech is here to stay and most likely will grow stronger, making our everyday lives better at every step. This article will be your guide on the emerging financial technology trends that are not getting the spotlight that they deserve and could change the financial sector completely.
Robotic Process Automation
Robotic Process Automation (RPA) refers to the process of using robots to imitate tasks that are usually performed by humans. As of now, robots are being in most if not all production plants across the world, such robots save labor cost and can work quickly and efficiently as compared to humans. But the question remains: how could automation be used in the financial industry? Well, the answer is quite simple, the banking sector among others has a lot of redundant data entry tasks that are generally performed by humans for example going through numerous applications or data entry from such applications. The benefit of this is that with such labor-intensive tasks being automated, humans could focus on more important tasks like operations and policymaking.
The term Quantum Computing has been here for quite a while and if we are being honest the buzz around it has not declined a bit. Quantum computers are based on the basic principles of quantum mechanics, quantum computers use one or two-qubit operations which can be considered as the basic building blocks of quantum computing. Generally, quantum computers can be used to speed up basic computational operations which require a lot of computational power. Financial institutions have quite a lot of applications when it comes to quantum computing, applications include but are not limited to risk assessment, trading, encryption, and decryption of bank accounts.
Blockchain can save money as the fees associated with transactions is not present at all hence more and more institutions are realizing the fact that blockchain is secure and cheap to use. Here are a few examples of how blockchain is being incorporated in the finance sector.
Smart contracts are a sort of computer program that is used to facilitate, verify, or enforce a negotiation of a contract with the help of computer technology. With the help of smart contracts, the need for third-party contractors is eliminated, making the system more secure and making the transactions more credible. Also as an added benefit, blockchain will help against data tampering.
Ever since Bitcoins were introduced, cryptocurrencies have been a vital part of the economy. Cryptocurrency is decentralized forms of currency that are not owned or regulated by any government or authority. Blockchain technology is employed for keeping transaction details and to validate transactions. Cryptocurrencies have changed the financial technology as more and more people have started to move towards it as there are no fees or transactional charges involved with it.
More and more financial institutions have shifted towards regulatory technology in these past few years. Regulatory technology is used to regulate reporting, transaction monitoring, identity, and risk management along with compliance checks among other things. With the use of regulatory tech, firms could shift their resources whether human or financial towards other useful things. Regtech reduces the output time in comparison to human employees by at least 15 minutes during compliance checks. The initial implementation cost of regtech is quite high but the return of investment is quite high in this case.
Artificial intelligence has been reshaping the finance and banking sector for quite some time. According to reports the financial industry will have saved around $447 billion by 2023 as saving labor cost is the best use of artificial intelligence in the financial sector. So the question is how is this cost saved? That is done with the use of AI-based chatbots with which users can interact and clear their queries. AI can also help with improving the overall security of the banking mechanism and could provide users with around the clock mobile banking. Another example is the use of AI for prediction models based on machine learning algorithms and data analytics.
The mobile payment methods have been on the rise for quite some time, mobile payment methods provide users with the flexibility that is not possible with traditional banks. Such payment methods are on the rise in countries from Latin America and Africa as these countries are in financial exclusion, it can be defined as the unavailability of banking facilities to individuals of low or no income.
Due to this mobile payment methods have become the primary and secondary source of banking for individuals belonging to these countries. Mobile banking can be strengthened with the use of blockchain technology and it can make the records immutable. 5G technology will also prove to be more useful as it will reduce transaction times and latency.
Voice Interface for Interactions
As mentioned before chatbots can be used for automating user queries, another method to do so is using voice-controlled interfaces for query automation. Firms are using automated voice interfaces to provide their users with seamless communication at any given time. Chatbots can also be personalized based on the user requirements, such AI-based chatbots could also provide financial advice to their valued customers as well, empowering customers to connect with their banks even more.
The term big data deals with treating large quantities of data and extracting useful information from said datasets. Banks and other financial firms have bulks of data available on their users and markets associated with them, firms employ big data techniques to extract information from data and use it to risk assessment, know the customers’ spending habits, fraud management, and reporting among other things. Big data could also be used to streamline the firm’s internal process increasing efficiency and performance.
These were some of the trends that are transforming how the financial sector operates but do not get the attention that they so deserve. Fintech is in its initial stages and will evolve into something far greater and will equip the finance sector with new and improved technology making it easier, efficient, and secure for everyone around the world in the coming years.