The merger of the banking and finance industry with technology was not an easier one. 70% of the leaders in the financial sector were concerned with the speed of change technology is bringing. Why? Let me elaborate it through an example. It took approximately 76 years for half of the American population to adopt telephone (landlines) but just less than a decade to adopt smartphones and even half to access banking services on them. People no longer want to visit banks for mundane tasks, like transferring money and getting cash. Another example is of blockchain technology which was introduced in 2008, and the distributed ledger technology has disrupted banking and financial industry within a decade.
The technology-driven changes are so persuasive that even the financial sector has not been immune to it. The figures beneath explain the same:
Not only FinTech start-ups have encroached the established markets, leading IT companies like Google and Apple have developed customer-friendly solutions. Customer expectations have been raised, and now they not only demand better services but seamless experiences regardless of channel, and more value for their money. Regulators demand more from the industry too, and have started to adopt new technologies that will revolutionize their ability to collect and analyze information. And the pace of change shows no signs of slowing.
The recent study done by Mckinsey and Company indicates that fintech investments are going to skyrocket in 2020 and is going to exceed $30 billion.
Let’s have a look at what’s shaping the fintech industry in the year to come:
According to statistics of the World Bank, more than 1.7 billion people across the world don’t have access to a financial system. One of the main reason cited for this non-financial-inclusion is that either they don’t have enough earnings to keep in the bank or the financial services cost a lot.
Last year in the second and third quarter, the fintech market decided to tap into this untapped environment. More than 23 deals were finalized in India itself to support financial and insurtech companies, whereas in Latin America and China reached around $400 million in funding to support these fast-paced financial service providers.
When you look at companies like Uber, Lyft and Airbnb and the kind of data (read financial here) they collect, it becomes easier for them to foray in the field. Like for example, when Uber realized that around 60% of its drivers are sending 25% of what they earn to their native countries by paying high fees, they found a new forte. Uber Money — a fintech division of Uber was launched to offer a wide range of services to a target audience offering them access to financial services not only much efficiently but energetically too.
#PSD2 and Open Banking
Much of 2018 and entire 2019, entire Europe, as well as Britain, was abuzz with Revised Payment Directive (PSD2) and Open Banking. The previous deadline of September 14th, 2019 for Strong Customer Authentication was pushed to December 31st, 2020. Therefore, PSD2 and Open Banking remain high on the list of fintech trends to be seen in the year 2020.
With banks opening their APIs and fintech getting access to data which was just limited to the banking industry, many fresh ideas and services will take birth. The industry is slated to see a lot of competition, and as a result, the financial services fee is likely to reduce.
The core message of these fintech regulators is to boost innovation and competition, provide individuals with a broader selection of financial products, and improve security. It is up to the banking and financial institutions to communicate the advantages effectively to drive the RegTech trends and extensive adoption among fintech companies in the UK and globally.
The PSD2 regulation not only boosts innovation and competition but is also going to offer the customers a wide range of financial services with enhanced security. It is up to the financial sector to effectively drive the RegTech trends and communicate the advantages effectively for mass adoption.
#Blockchain and Fintech
With cryptocurrencies, the world saw a glimpse of how they can use digital money to improve current systems and processes. With the massive fluctuation in cryptocurrency prices, they weren’t the right fit for governments and banks to adopt for mainstream transactions. This lead to the development of stablecoins (like JP Coin and Libra) whose value was directly linked to fiat money as well as Central Bank Digital Currencies (like Swedish e-Krona and China’s digital Yuan).
The fintech minds around the world argue that the central bank digital currencies are a safer alternative to privately issued stablecoins because they would be a direct liability of the central bank. Facebook’s Libra, as we all know, is facing a lot of challenges from the US government, and the Chinese government is also not looking forward to the launch of this stablecoin. The news is doing rounds that China has started working intensely towards the release of its own digital currency post-Libra’s whitepaper was released in mid-2019.
While these waters remain untested on a global level, 2020 is bound to be a deciding year which digital currency sustains the waves of regulations and which one of them crashes from the hardships.
#Artificial Intelligence (Chatbots)
According to a report published in Statista, it was estimated in 2019, 3.25 billion digital voice assistants were being used in devices around the world. Moreover, it is predicted that by 2023 the number of digital voice assistants will reach around eight billion units — a number higher than the total world population.
Voice assisted banking was adopted in the year 2019 by HSBC, JPMorgan, Morgan and Stanley, and Bank of America. Banking and Finance industry is using the AI technology to not only enhance the customer experience but also remove frauds and reduce the cost of back-office operations. Zion Market Research estimates that the intelligent voice assistance market is going to reach a figure of $19 Billion by 2025.
The world has fast moved towards cashless societies but does that mean that we are soon going to see the end of cash? We don’t think so! Despite countries and consumers of all ages adopting mobile wallets for peer to peer as well as commercial payments, credit cards and cash is nowhere near extinction.
There are going to be more specialized environments like shopping malls and stadiums being designed (intentionally) as cash-free arenas. To enhance customer satisfaction, these arenas would offer cutting-edge experiences that make payments effortless.