While traditional banks are not going anywhere in the near
future, more than three-quarters of respondents still seek financial support
and advice from their primary bank, according to World FinTech Report 2021.
They have a serious opponent, FinTech. As stated in the report, FinTech-powered
solutions thrived during the black swan events of 2020: digital asset
exchanges, payments, savings and other services saw an average YoY growth of
almost 20%.
The massive shift to digital is not the only driving force.
Advocates of AI-driven digital transformation choose FinTech solutions because
of faster delivery, personalized services, swift query resolution and
accessibility. The demand provoked a recovery of the overall deal volume in Q4
of 2020, for the first time after four consecutive years of decline. The trend
is expected to boost the emergence and development of FinTech startups seeking
to serve clients only.
5 FinTech Solutions Reducing the Burden on Workers
The emergence of tech solutions has ramped up the
competition in all industries and financial services are no exception. A decade
or two ago, making a transaction or getting a loan was a lengthy and tiresome
process, where banks were in charge, not clients. However, financial technology
shifted the focus to a user, whose comfort, convenience and security have
become some of the top priorities. As the technology has matured, we have seen
more and more FinTech companies serving not only regular users but also
enterprises.
As a result, financial management has become simple and
accessible like never before. Here are the top five solutions that make our
life easier:
1. Financial Management Tools
Financial management is the backbone of prosperity. But, the
manual calculation of assets and liabilities can often take up too much time
and effort. Not to mention the human factor that can lead to duplicates or
discrepancies. All these processes take a lot of time that can be spent on much
more important tasks, plus you are not guaranteed any good or accurate results.
The stakes are not as high for personal financial management
compared to business resources. When it comes to companies, not only can they
face problems with legal offices but have their business operations disrupted.
That is where FinTech comes into play and does all the tough
work. Financial management applications take on the task of tracking and
analyzing income and expenditures. Some even provide valuable insights about
budget optimization or customized loan offers.
Enterprises of all scopes often automate bookkeeping to
minimize manual data entry and analysis, transaction pattern identification and
expenses categorization. The task is delegated to RPA (Robotic Process
Automation) software that helps boost productivity.
2. FinTech Cards
While banks are still hesitant about adopting technologies
and becoming flexible for the sake of the client’s comfort, FinTech is not. One
of the leading FinTech innovations is brand-new cards that offer a better
cashback rewards program or facilitate loan approval.
FinTech cards are created at the intersection of banks and
tech, where the former, is responsible, for the financial side, while the
latter, for the customized offers. These cards provide the same banking
services that you normally receive when issuing a credit/debit card in a
traditional bank but with better terms.
While the majority of products focus on financial perks
only, some allow you to complete transactions faster. For example, Chime Bank
reduces the fees as well as sends you the paycheck two days earlier than usual.
Aspiration offers a debit card with up to 10% cashback and plants a tree for
every purchase round-up into your savings account, helping you to reduce your
carbon footprint.
3. Electronic Payments
Cash is slowly but surely going away, paving the way for
electronic payments, especially after the COVID-19 pandemic shaped new consumer
habits. According to ResearchAndMarkets, the transaction value for the Global
Digital Payments Market reached $5.44 trillion and is expected to grow at a
CAGR of 11% up to 2026.
Indeed, you no longer need to leave your premises to shop,
book tickets or order services. Online payments have become even simpler thanks
to the mass adoption of mobile apps. According to PwC, more than half of
financial institutions have a mobile app, and 18% of respondents are developing
one. Banks offer mobile banking services powered by FinTech for clients to pay
taxes, book flights, pay bills and complete many other operations in a single
application. There are also FinTech projects like Paysend or Paysera that
facilitate instant transactions at lower costs.
Whether you represent a business or you are a single user,
such tools help you do more in less time. In other words, you can cover all
your expenditures without leaving your home or office, saving a lot of time
while doing so.
4. Online Borrowings
While 73% of financial sector executives perceive consumer
banking as the one most likely to be disrupted by FinTech, according to PwC’s
findings, online borrowings seemed unrealistic until now. Once the problem of
online client verification was solved, the world saw the dawn of e-borrowings.
Banks and FinTech companies have established a mutually
beneficial partnership, where financial institutions turn to tech to assess
customers’ creditworthiness. Banks can expand their client base thanks to
alternative data sources for evaluating a person’s ability to repay loans. As
for clients, they enjoy quick request processing and consumer-friendly lending terms,
for example, no collateral requirement. Therefore, you can quickly get yourself
a loan on platforms like Kiva or Proper to cover your business or personal
expenses almost immediately.
5. Insurtech
Insurtech is one of the FinTech trends that is going to
evolve in the near future because of its customer-centric approach.
Acknowledging the power of personalization, major insurance companies started
to adopt financial technologies and tailor their offer to the current market
demand: custom products.
With the help of AI and machine learning, you can now get
predictive underwriting, personal offers and pricing based on your risk level.
It means that if a consumer has a healthy and safe lifestyle, their policy will
be cheaper than for those who do not.
For instance, a business can get coverage online from Next
Insurance. In addition to quick processing, you can choose from several options
regardless of your location and tailor the end product to your needs to get
maximum benefits.
What Drives FinTech Forward?
FinTech is maturing and getting more and more advocates that
leave traditional banks and insurance companies for custom offers and quick
processing time. All this became possible due to technology that powers the
FinTech evolution:
AI. FinTech and Artificial Intelligence are
indispensable. AI software is among the major drivers that allow detecting
fraud and ensuring transaction security. For example, Alipay (a payment system
by Alibaba) relies on proprietary AI software to prevent security risks. Besides,
AI technology improves customer support via chatbots, target clients’
acquisition based on their behavioural patterns, data analytics and many more.
ML. Machine learning usually accompanies AI when
processing data for advanced analytics or security. ML algorithms are capable
of analyzing tons of data points within seconds and identifying abnormal
transaction patterns that are later inspected by AI algorithms. Thanks to
predictive analytics powered by ML, Mastercard managed to reduce declined card
transactions by 50%.
Big Data. FinTech has been founded on different types
of data, including transactional records, user habits and preferences. As
cutting-edge financial solutions analyze this data, they can make a unique
offer that drives user flows. Businesses can now harness the power of Big Data
and make informed decisions about new products, services or offers.
IoT. Internet of Things acts as a mobile point-of-sale
system and a cybersecurity tool that processes and encrypts payment information
securely. For example, Kontakt.io provides low-energy Bluetooth beacons for
mobile payments. They replace traditional point-of-sale technology by
streamlining and speeding up the shopping process, as well as by generating
valuable data for business.
While there can be other drivers like blockchain technology,
the ones discussed above are key FinTech boosters. Nonetheless, not all of them
are equally important. Nothing compares to the power of machine learning to
personalize everything and anything, from analysis of credit score factors to
users’ spending habits. AI-driven insights gathered from non-human interactions
via chatbots allow businesses to tailor their offers and establish better
connections with users.
That is why the future of FinTech depends on the development
and advancements in AI and ML. These two technologies combined allow startups
to take full advantage of data and reach a new standard of customer service in
the financial industry.
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