Fintech, or financial technology, is a business model that can both replace and complement traditional banking practices by enhancing and accelerating financial services. Valued at $40 billion in 2017, fintech is projected to reach $153 billion by 2025, a CAGR of more than 18 percent.
So why is there such a growth? Well, there are a few driving factors. Consumers have a mindset of “I want it all and I want it now”, and while they may have gotten the idea from the great Queen song, financial technology is finally poised to give it to them.
Those consumers are increasingly mobilizing their investment and banking activity to smartphones, computers, and tablets — and they’re demanding applications that integrate all their information from a multitude of different accounts. Meanwhile, banks and financial institutions are incorporating fintech internally to reduce their reliance upon brick-and-mortar locations, while developing products and services that make them “stickier” to their enterprise and consumer clients. Just think how every card has their form of cash back and reward points now – it’s really what you can do WITHOUT your card that is the differentiator: Card-free cash withdrawals, mobile payments, in app transfers to friends and family. The accessibility and opportunity is unfounded.
Yet, there is still more opportunity on the horizon. Just a few of the technologies that will be key to fintech’s continued growth are:
Blockchain: According to Futurum, 90 percent of banks are exploring blockchain, everyone from JPMorgan Chase and Goldman Sachs. This is because blockchain technology provides a high level of safety in storing and transmitting data, open and transparent network infrastructure, decentralization and low cost of operations.
Artificial Intelligence: Fintech and AI are already working close together. AI is already being used for applications like detecting suspicious account activity and more accurately assessing the creditworthiness of borrowers. Additionally, AI-powered algorithms can evaluate information from credit reports, glean information from bank statements and support the accuracy and efficiency of chatbots for enhanced customer interactions.
Robotic Process Automation: According to KPMG, robotic process automation (RPA) can cut up to 75% of costs for financial services firms. RPA is a powerful risk management resource that many financial institutions already use to monitor compliance and create audit trails. RPA bots also are used for customer-facing services to populate data fields based on photos of documents for everything from mobile deposits to loan applications to peer-to-peer lending.
Biometrics: The financial sector is always looking for ways to improve and strengthen security and, as such, it increasingly is turning to biometrics. It remains to be seen whether biometrics will render the PIN obsolete by 2020, but the technology increasingly is being used in fintech. Biometrics enables identification in numerous ways: fingerprints, vein patterns, voice, and retinal scans and facial recognition.
Regulatory technology (regtech): Investment in regulatory technology for the financial services sector is projected to increase by 500% by 2020, from $10.6 billion in 2017 to more than $53 billion. Financial institutions spend millions of dollars to ensure that they meet regulatory compliance. Regtech solutions address regulatory reporting, compliance checks, risk management, identity management, and transaction monitoring.
Without question, fintech holds a great deal of promise for organizations that want to differentiate their service offerings, compete on a global scale and give consumers ‘what they want’. To learn more about how Infostretch has helped organizations accelerate their digital transformation through fintech, take a look at how we worked with GlobeOne. If there’s a particular fintech challenge holding up your software initiative, we would love to help. Submit the form below to contact us!