Fintech companies and businesses which deploy technology to offer financial services to their users, are now using robo-advisors, adopting apps and other tools intended to help customers develop budgets, creating more effective payment processing programs while using sophisticated technologies.
Some of the technologies being used in the financial technology sector include decentralized ledger tech (DLT), machine learning (ML), artificial intelligence (AI), low-code, edge computing, big data and data analytics, robotic process automation (RPA), blockchain, internet of things (IoTs), regulatory technology (RegTech), etc., and all these technologies show the massive potential to transform the fintech industry. Here is a list of technologies that will transform the fintech industry.
Presently, the use of application programming interfaces as a mainstream tech in fintech services and businesses is spreading like wildfire, and is majorly being fueled by regulations in the monetary services.
According to the new findings by Fintech 5x5 Report, about 90% of fintechs are using APIs and are ranked number one as the emerging technology being widely used globally, and is majorly being fueled by the flourishing of Open Banking.
APIs are expected to continue being dominant in the next five years and will make it easy, effective, simple and fast for the integration of fintech services - an API makes it possible for programs to interconnect and interact with each other (e.g fintech program communicating with a business' or bank's server).
Fintechs are using APIs in payment processing (help to expand the payment and transactions alternatives which various merchants can accept), peer-to-peer (P2P) programs (which help to facilitate currency exchange hence leading to lower costs for lending programs which let venture capitalists loan funds), investment management (they help to give access to portfolio info of customers and this make is able for financial advisors not to guess the networth of the client), white labeling, and regulation (it is a mandate of a business to verify and confirm that their clients are exactly who they claim or say they are).
Generally, APIs will help to increase cost-effectiveness, will continue to open up fintech, and will also massively future-proof the fintech services.
AI performs work better with the combination and integration of IoT, machine learning, big data and management solutions. Currently, about 70% of the fintech companies use AI-solutions. AI has unprecedented and unutilized potentials which keep on attracting venture capitalists and researchers to do new innovations. The technology is regarded by the majority as a future tech now and years to come and its reputation and hype is high. As per the findings, it is more likely that in the next four to five years, artificial technology will dominate the market.
Banking and Fintech solutions deploy AI tools for modeling techniques and analytics management.
AI also enables businesses to analyze the performance of a bank or any other financial business, helps to create insights and also enables the automation of crucial organizational processes.
When AI is integrated with ML, the network helps in fraud prevention, risk management, fund development prediction, and customer service. When AI is integrated with IoTs, the network helps to increase the effectiveness and speed of both the internal and external financial processes. The network also enables a customer to connect a smartphone to a financial database and directly transfer or send information (data) to another device - for instance, CitiBank uses smartphones to unlock ATM-entrances during off-time.
The hype for blockchain, the underlying technology being Bitcoin (the world's largest cryptocurrency by market capitalization) has flooded the fintech industry in recent years. The success for DLT doesn't only hinge on Bitcoin, but other Fintech services as well.
The report by Fintech five by five, shows that about 20% of the financial technologies are DLT and blockchain tech and will continue to be implemented and adopted more widely.
In the coming five years, blockchain technology is expected to be greatly used in smart contracts, and since the decentralized ledger technology is good for providing security, it will be mostly used for privacy and confidentiality solutions.
Several Asian (such as United Overseas Bank, Yes Bank), European (such as Russian Alfa Bank, LatiPay), American (JPMorgan, Citi Bank), Australia (like Australian Commonwealth Bank) banking and financial institutions have already adopted DLT to secure payments and other monetary transactions.
The good thing with blockchain is that every transaction is encrypted and no one can penetrate.
The technology also makes a hacking attack impossible since it is only the network stakeholder that approves the transaction.
Blockchain also enables tokenization which inturn enables overseas companies to use foreign currencies rather than state-specific currency that can be weak in value.
Generally, with the advancements in technology and the variations in the monetary markets, the changes in fintech to adopt these revolutionary technologies are inevitable and unstoppable. Integrating such technologies will be a big innovation that will increase the efficiency of fintechs services and other financial businesses.