The Global State of Financial Technology
Like most industries, financial technology (“fintech”) has seen significant changes in response to the current state of our world. Banks, financial institutions, and mortgage lenders are rethinking business models based on customers’ needs and social distancing guidelines. Handling money and paperwork has become almost obsolete as we recognize how germs are spread and consider the lack of necessity for in-person bank transactions.
The finance industry is in a position to figure out how to keep the same valuable interactions with their customers while maintaining the standards in which banks uphold. Some, such as the commercial real estate (CRE) industry, are incorporating new technologies such as online banking and artificial intelligence into their business models while also considering cybersecurity and challenger banks’ risk.
Fintech industry trends
Before the pandemic, the financial technology industry was steadily growing. Still, due to restrictions on team and in-office interaction, fintech is progressing even more rapidly and completely changing how we interact with our finances.
The way we pay for goods and services goes far beyond cash or card options in 2020. Many of us no longer feel the need to carry a physical form of payment due to easily accessing our bank accounts through smartphone applications such as Apple Pay and Zelle. When we shop online, we give retailers direct entrance to our funds while waiting for our products to arrive. When we go to the grocery store, we tap to pay for our items. When we eat out with a friend, we send them half of the bill – digitally. Payment options are getting a much-needed upgrade and are simultaneously reducing the amount of physical cash we carry.
What does this mean for banks?
The banking industry is turning its focus to online services to fit its customers’ needs as we navigate through the pandemic and the major technological shift from traditional techniques to a fully digital world. Banks realize the focus is no longer on in-person transactions. There is an emphasis on making online banking accessible and reliable so customers can bank simply from home whether that is a simple money transfer or access to important documents online.
In addition to consumers, banks are leveraging technology in order to make their employees work more efficient and up to speed to keep up with the growing banking demand. Lending institutions are taking advantage of a rising trend in this space, digital mortgages. Digital mortgages are exactly that – digital. They are produced, transferred, and stored online, without the need for physical paperwork.
As online banking continues to progress many are incorporating other unique resources into business like artificial intelligence (AI) or machine learning.
Artificial intelligence is not a new concept and is incorporated in various industries ranging from customer service, cybersecurity, healthcare, and even real estate. Approximately 80% of banks use artificial intelligence to collect essential data about their clients’ style and banking preferences. Now, banks and financial institutions have the ability to utilize AI in their day-to-day operations.
Most notably, AI is used for big data management, so banks can break down every piece of information and categorize it into more digestible parts from client information to calculations which is incredibly useful in industries like real estate financing.
Integrating artificial intelligence as a fintech solution gives financial institutions, such as those servicing mortgage and lending, an opportunity for better organization, the ability to anticipate customer needs, make accurate calculations quicker, and analyze feedback for better decision making in the future. The largest benefit of incorporating artificial intelligence in finance is the reduced risk of human error when working with large amounts of data and money such as that of buying a home.
AI can also give customers a more authentic online interaction with their bank. Artificial intelligence can act as a 24/7 chat-bot for immediate online assistance or identify customers quickly and securely. Incorporating features such as these can give users a genuine and personalized connection with their bank.
Future of Fintech
The coming year will most likely be a significant opportunity for global fintech. According to CB Insights, in 2019, fintech startups had gained scale, moved into new international markets, and found mass adoption and scale moving forward.
The world is seeing a rise in banking alternatives and challenger banks as they are disrupting how and where consumers choose to keep their money. Challenger banks are small digital banks specialized in creating financial solutions and opportunities for those underserved by the traditional big four banks.
Due to our economy’s current state, a challenger bank may be a better option for some. They offer flexibility and are usually hosted by a cloud for easy access and fast results with fewer fees than conventional choices. Utilizing AI is key in the future success of traditional financial institutions, challenger banks, and even digital banking in order to sustain a competitive advantage. AI is the future of fintech.
The banking industry has come to a fork in the road and now is the time, more than ever, to adapt to these new technologies and trends or risk being replaced by the smaller, faster competitor.
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