Technology moves so fast and is so embedded in our daily
lives that, if you work in a technology-driven sector, it’s easy to develop
blinkers.
Those who work in financial technology can become so focused
on financial technology that the broader picture can be missed. What about
advances in automation, in AI, in infrastructure? How close are big changes
that will affect every sector–are some making their way from theoretical
research into real-world applications?
The disruption caused by fintech was not a one-off event –
it was the peak, maybe not even the last peak, of an ongoing event that is
shifting how consumers, businesses, financial service providers and regulators
all interact.
It’s important to understand potential shifts to know how a
business can be ready and react. Let’s take a look at a few questions
surrounding how fintechs can keep up with the future.
Why should fintechs take an interest in developing
technologies at a broad level?
There’s great value in tracking shifting trends across the
industry, and in keeping a watchful eye on new technologies that have the
potential to shake things up. In highly competitive markets, there’s a lot of
pressure on both young and established businesses to focus on refining and
diversifying their current products and services rather than looking too far
ahead.
But we have to be honest about how fintech stole a march on
incumbent businesses. Many of those incumbents either didn’t have their eye on
the future or couldn’t move quickly enough to adapt and adopt mobile
technology, cloud-based services and agile development structures (amongst
other things). Even now, many are still playing catch-up.
One day the fintechs will be the incumbents. We all need to
know what’s about to change the industry, even if it’s not affecting our
businesses right now or in the short term. Otherwise, we risk being the
disrupted rather than the disrupters.
What technologies are set to change the immediate future?
APIs are already here – and many fintechs have built their
businesses on the new ways we can use customer data as a result of APIs. PSD2
and Open Banking have played a big part in this change, but we’re still at the
beginning of the opportunities this technology can open up.
As an industry, we do also need to think carefully about
what a more integrated fintech sector means. Will fintech continue to be
fintech, or will APIs mean that any brand can integrate what fintechs offer?
Are there potentially negative consequences for consumers when payments become
more and more invisible?
APIs are an example of where we need to not only look at
what opportunities the technology presents, but also what their implementation
could mean for the competitive landscape, for social responsibility – and a
range of other implications.
That same line of thinking applies to artificial
intelligence (AI), though science fiction has done way more to warn us of the
dangers here. AI is far from fiction though – and it’s already changing
fintech, with half of fintech businesses already making use of it. AI can help
us make more reliable, safer decisions, significantly reduce human error and
power more personalised services. Any fintechs who are not making use of AI
should take a very close look at what it is already capable of today.
Blockchain is the other big technology that’s making waves,
though in unexpected ways. While it’s known for its use underpinning
cryptocurrency, its application in “confidential computing” (a way to ensure
privacy and identity) and in smart contracts are also interesting and
potentially just as valuable. It’s probably the most difficult technology to
predict, however, as its sceptics and enthusiasts are equally as passionate in
their views of where blockchain will lead.
What technologies will affect fintech in the longer term?
While many fintechs understand the potential of low-code,
some parts of the industry are missing an opportunity here. It has the
potential to radically change how new products are developed and brought to
market. It certainly won’t replace developers, but it will give fintechs the
ability to supplement and enhance their development capabilities.
Low-code enables employees who understand what the customer
needs, but have limited coding experience, to get way more hands-on with
product development. It’s never going to solve the industry-wide shortage of
developers, but it will alleviate it and offer a more collaborative approach
that brings fresh ideas to the table through broader participation in the
development process.
Another technology that many people are underestimating
right now is edge computing. It may not be as exciting as AI or have as much
passion behind it as blockchain, but it could shake the industry up more than
people realise.
There was a great deal of cynicism around the cloud, even
while it was completely changing the infrastructure that underpins financial
services. The “micro clouds” that edge computing makes possible may be less
revolutionary than the move to cloud, but the lower latency will give some
businesses the edge they need to offer something truly differentiated.
Not only that, but worries over data sovereignty regulation
disappear when businesses know exactly where data is held and where it has
travelled.
How should fintechs avoid getting distracted by overhyped
technologies?
People complain about hype, but it’s often incredibly useful
as a signpost. Often a “buzz” around something is a good way to find the best
film, the best restaurants or even the best fintech technologies.
The key is to use hype as just that – a pointer towards what
might be interesting. If fintech influencers and media are breathlessly talking
about a topic, it’s neither a reason to fully embrace it or reject it. Cut
through the hype and you may find substance or you may not.
Technological change is never done, and the fintech sector
needs to keep this in mind with its approach to new technologies. “Looking
beyond the hype” is more than a simple platitude.
There is a need to look at the merits of technologies and
their applications with an eye not just on today but on tomorrow. There needs
to be an understanding of not only the technology but what it can enable. And
there has to be an openness to change as technologies become cheaper, more
practical and more sophisticated.
It’s important to keep in mind that fifteen or so years ago,
some people would ask – how could a start-up compete with a bank with more than
a century of history? None of us want to be that guy.
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