Financial services might have been slower than other industries in adopting disruptive digital methods and techniques, given how paranoid customers are about their security when it comes to banking and finance. However, in recent years, Fintech has seen a rise both within traditional banking ecosystems, as well as disruptive Fintech startups. 2019 will see this digital trend grow, and below are five major ways your financial services are changing and adapting to the times.
1- Artificial Intelligence
It’s almost impossible these days to not hear or read the words “artificial intelligence” across the board. From our smartphones, to our cars and even our home appliances. The financial sector is no different, with initial resistance to AI quickly dissipating as the technology evolved to meet the strict standards and regulations of financial sectors.
AI’s role in finance will be to automate a lot of the repetitive tasks currently being done by humans. Tasks such as data entry make up a significant portion of the work that keeps financial professionals busy, and AI can now do it much faster and with zero human error. Perhaps the best part of this AI integration, is that the software uses the exact same interface humans use, such as Excel, meaning human modification is still easy and human intervention when needed will not be a problem.
Some predictions expect that three quarters of tasks like data entry will be delegated to AI by the end of 2019, signaling a major disruption in what working in finance will mean.
2- Blockchain Technology
Blockchain is often considered exclusively for cryptocurrencies such as Bitcoin and Ethereum, however the benefits of blockchain technology have proven quite successful within traditional financial service infrastructures.
Perhaps the most obvious benefit of incorporating blockchain is the transparency it adds to Fintech services, making the once opaque transactions deals a lot easier to trust, given multiple stakeholders have access to the same ledger, insuring money laundering and other shady business is nearly impossible and granting Fintech the one thing it still lacks in the eyes of governments and central banks: regulation.
In 2019, the adoption of blockchain by banks and governments will help increase the trust in Fintech solutions by demonstrating that they can be trusted and cannot be abused by criminal organizations to launder or hide money. After all, it’ll be extremely hard to practice fraud if countless ledgers exist and keep a log of every transaction, instead of just one centralized financial entity.
3- Mobile Payments
Mobile payments are growing every day, with estimates of about a billion USD a day being completed via smartphones worldwide. This is especially important in developing countries, where traditional banking infrastructure cannot sustain growth and provide financial services to rural communities.
The fact areas like sub-Saharan Africa and Latin America lack the financial services infrastructure in place elsewhere in the world, hasn’t stopped these markets making huge strides in smartphone penetration. This has provided a route for financial service providers to expand in these once-inaccessible markets. That, combined with the saturation in developed markets, promises huge benefits for rural communities as well as massive potential for growth for traditional banks investing in Fintech.
4- Regulation Technology
The largest hurdle for Fintech is regulation. Blockchain might be the solution in many cases, but in other situations, regulating the industry poses a major challenge.
This has made investing in regulatory mechanisms almost impossible for startups, with established banks being the only ones able to hire compliance teams that ensure all transactions are compliant with local and international regulations.
That’s where “regtech” can offer opportunities to minimize the investment of funds and time in ensuring financial service providers stay compliant. Software that automates menial tasks and draws upon large data sets to help compliance teams do their work more efficiently, quicker and with less errors. The development of regtech will open the door to new contenders in the financial services industry, allowing them to invest their funds in growing their customer base instead of sinking a huge part of it to make sure their practices are compliant.
5- Financial Inclusion
Most of the digital trends disrupting the financial sector in recent years has focused on one massive market: the unbanked. This means people without a bank account, access to credit, loans and other financial services.
According to Learning Hub, In South Asia, up to 71% of rural residents don’t have a bank account, and in Africa and the Middle East it’s more than 60% with Southeast Asia and China close behind. This provides a massive untapped market, facilitated by Fintech solutions such as blockchain technology.
In other words, even if cryptocurrencies don’t make much headway because of their volatility, the underlying technology works and is already being implemented. That, coupled with an increase in mobile banking, means that 2019 will be the year Fintech startups and traditional banks try to include more and more people, especially poor and rural communities, into the financial services industry.