These days, we do everything online - from working to ordering food to socializing with friends. Even dating, we depend on technology to help us find the love of our lives and sometimes even to stay in touch with them.
It is impossible to find where we end and technology begins, it has become such an integral part of our day that a blackout could very well bring our lives to a total halt.
Similarly, technology has changed the way we deal with money. According to Insider Intelligence’s Mobile Banking Competitive Edge Study, 89% of total survey respondents, and 97% of millennials, said they fully depend on mobile banking to provide them with everything they need.
As useful as it is, however, mobile banking merely scratches the surface of what technology can do for us. In the next decade, it is estimated that AI will power 95% of all customer interactions, and by this year, robo-advisers are expected to manage $2 trillion in assets.
To this end, the rise of integrated digital systems has introduced a new level of visibility to our finances, enhanced our accessibility to financial services, decreased human error with the power of automation, and laid down the foundations for unprecedented security.
Here are some of the ways technology has transformed FinTech today:
Analytics and Predictive Intelligence:
Just as Machine Learning is helping us demystify massive amounts of financial data without the inconvenience of having to sort through it manually, Artificial Intelligence is also providing us with better insights, helping analysts make more educated decisions on complicated topics such as cash flow, forecasting and risk management.
These days, the financial sector is ripe with AI applications, including automatic factor discovery, which could improve financial modeling through the machine-based identification of the elements that drive outperformance; knowledge graphs and graph computing, which help us identify patterns in complex financial networks; advanced encryption through zero-knowledge proofs and multi-party computing, fostering better privacy through training financial models to process only necessary and relevant information; and federated learning, which decreases privacy risks by bringing computational power to data rather than vice versa.
AI also enhances customer-facing applications with personalization and security, providing customers with highly tailored products, insights and user experiences; enhancing customer support by providing a consistent quality of service; and implementing fraud detection mechanisms through facial recognition authentication and natural language processing.
By 2035, AI is estimated to increase labor productivity by up to 40% and the profitability of all the industry by an average of 39%.
Cloud Computing:
Gone are the days of physical servers. As more banks move towards becoming a digital native company, they are also harnessing the power of the cloud in optimizing data management and processing. By 2030, McKinsey research shows that cloud technology will account for EBITDA in excess of $1 trillion across the world’s top 500 companies.
Cloud computing is helpful in more than just enabling access to flexible storage and computing services at a lower cost, it also takes off the load of non-core business functions such as IT infrastructure and data centers, making way for new formats to emerge, such as open-banking and banking-as-a-service.
Blockchain Technology:
Estimated to hit $20 billion in revenue by 2024, blockchain technology revolutionized the world of FinTech by giving service providers the ability to record and share data across multiple data stores in an immutable manner.
Blockchain technology is considered the safest and most secure form of financial transaction available, as cryptocurrency transactions are carried out on a digital ledger, which is defined as a “chain” that is made up of singular “blocks” of data. Once a change is made, the new ‘block’ is added to the ‘chain’, hence the name: “Blockchain”.
By distributing information through a synchronized network of participants, blockchain technology not only enhances the overall security of transactions, but also facilitates blockchain interoperability; allowing blockchains that employ different protocols to communicate with ease.
Applications for this technology are far and wide, including real-time transaction settlement, where banks use smart contracts to settle both the collateral and cash parts of a transaction at the same time; carrying out transaction processing, securities lending, and equity trades on the blockchain, as well as supporting trading securities with digital collateral; digital asset support services such as tokenization and key escrow encryption; and building authentication ecosystems on zero-knowledge proof to safeguard user data.
Other DeFi (Decentralized Finance) applications can replace intermediaries, making it possible to obtain loans or make investments without having to rely on a centralized entity, which not only improves market efficiency with real-time transparency, but also significantly cuts costs.
According to “Accenture”, investment banks could save $10 billion by clearing and settling processes to blockchain.
For these uses and more, Blockchain technology adoption is on the rise. According to a survey conducted by the Bank for International Settlements (BIS) in early 2021, about 60 percent of central banks said that they are either testing or studying Central Bank Digital Currency (CBDC).
Speed:
In addition to personalization, transparency, security, and accessibility, technology also gave us the gift of speed. We no longer have to take a number and wait in a long line to know our balance, or even visit the bank at all. We simply have to log on to the bank’s website or check its mobile app, and today, about 60% of us prefer to only deal with a bank that provides one.
The presence of these integrated digital systems has also made it possible to carry out complex processes like combining different data points for better insight or performing mathematical calculations on 10-yearlong projections, giving us access to a wealth of information that was otherwise unavailable, or extremely time-consuming to obtain.
In the world of electronic securities trading, speed of transaction can also be the difference between profit and loss. Using technology, we now can now enjoy High-Frequency Trading, a method of trading that uses powerful computer programs to transact a large number of orders in fractions of a second.
High-Frequency Trading not only reduces operational costs, latency and the risk of human error, it also maximizes overall efficiency and productivity, helping people execute transactions a thousand times faster than traditional methods.
As time goes on, more and more technological innovations improve our world, either through standalone updates to applications or partnerships between global services to provide an integrated, augmented offering that enhances accessibility, usability, and customer experience.
