Financial institutions are aware of how tech innovation can transform their business, should other industries be taking greater note? Whatever the industry, keeping an eye on the latest trends in the fintech space is important for your business. Financial institutions are the heart of the economy – there would be no business without money, access to banks, loans, funding, long-term investments, capital (cash) requirements to meet day-to-day financial needs.
This blog will define fintech and technological innovation as well as identify some of the top fintech trends that are prominent today.
What is fintech?
Fintech, or moreover financial technology, describes an ecosystem of companies that apply technological innovations to disrupt or improve the financial services industry (Axa, 2021). For example, innovations could be things such as data and analytics, software, artificial intelligence or mobile technology. Companies range from existing financial firms to emerging technology firms developing in this area, or companies specifically created to focus on financial technologies.
Companies can also capture financial innovations to disrupt their markets, better serve their customers and gain greater market share compared to peers. Why not take advantage of what other industries are doing and implementing it within your business? This could improve the experience for both customers and team.
What is technological transformation?
Technological innovation is a new or improved product or process using technology. A technological transformation refers to changing many aspects of how you live and work, especially true today when it comes to finance. The link? At the forefront of technological innovation within the financial service sector is fintech. Furthermore, fintech relates to things such as mobile banking, digital payments, blockchain, artificial intelligence, biometric security, robotic process automation, voice payments and more. Let’s take a deeper look into what we really mean by this.
Examples of Fintech Trends
1. Cashless Society
A cashless society centres around an increase of digital payments.
2. Innovative Leaders
Many established companies are disrupting the financial service sector by using technology to serve their existing client base.
3. Digital Banking
Digital banking relates to aspects such as global payments, peer to peer, contactless Mastercard, no transaction fees, cryptocurrencies. Customers save with online banking, however, safety and fraud concerns are more prominent.
4. Biometric Security
In response to the privacy, security and fraud concerns that technology has brought upon the industry, biometric security has been the solution. Biometric system guards counter this issue against security threats. For example, voice recognition, fingerprints and facial recognition provide additional barriers when it comes to online banking and fraudulent activity concerns.
5. Robotic Process Automation
Robotic process automation (RPA) automates tasks using robots so that humans do not have to. Think back to Ford’s moving assembly line. This truly changed the ways factories worked. Instead of assembling a single car and then moving onto the next car, there was an assembly line. This meant that workers would be assembling the same car part over and over and over again. In some instances, this could be mundane for workers. This is where the robots come in – they take over the mundane tasks so humans don’t have to. Not only does this reduce costs, but allows humans to focus on more productive work. RPA refers to things such as customer onboarding, security checks, payment reconciliation and account maintenance. It’s not just the financial service institutions that require such work, why not look to robots to help you in your company.
Blockchain, simply put, is a system of recording information. However, it is nearly impossible to change, hack or cheat that system. Blockchain is a digital ledger of transactions that can be distributed across computers on the blockchain. It is secure as it is decentralised and distributed. Cryptocurrencies are supported by blockchains, making them hard to hack and hence why a growing adoption of crypto assets can be seen throughout 2021.
Bitcoin has the largest market capitalisation among cryptocurrencies, having risen 60% this year alone, Bloomberg reports. Digital currencies, like Bitcoin, remove the bank or government intermediary within their peer-to-peer transactions. This means that cryptocurrencies can be cheaper, quicker and a more private way to execute financial transactions. A payment transfer using Bitcoin can be completed in 10 minutes, versus an average of three days for traditional currencies.
Crypto assets will become mainstream (KPMG, 2021). As ledger technologies evolve and banks take more of an interest in digital currencies, this presents an opportunity within the cross-border payment space.
7. Artificial Intelligence (AI)
AI Is another fintech trend. AI reduces financial services’ operating expenses significantly. Moreover, AI can identify fraud and threat risks and record customer transactions accurately. For example, expert systems, natural language processing, speech recognition and machine vision all fall under AI. A common AI is voice recognition and voice-powered payments using biometric data for authorisation.
8. Virtual Cards
Similarly to a cashless society, virtual cards are becoming increasingly more adopted.
9. Embedded Finance
Growth in embedded finance is prominent (KPMG, 2021). For example, “buy now, pay later” programs, embedded insurance options and banking as a service are becoming increasingly popular.
10. Financial Literacy
It only makes sense that the final trend is financial literacy. Consumer financial literacy influences their finances positively or negatively. Younger people appear to be less financially literate according to Bankrate. If consumers were informed about their finances this could prompt them to make different decisions when it comes to their money (Jorner, 2021).
Why should HR professionals care about fintech trends?
Payroll fintech. Payroll fintech could provide additional perks at work for employees. For example, salary on-demand fintechs partner with corporations, HR software providers and payroll systems to enable flexible access to earned wages. Furthermore, salary advance fintechs can provide short term credit to employees so that they avoid exorbitant payday lender rates. Additionally, another aspect is direct deposits. This feature enables account holders to receive paychecks up to two days in advance from their payday! Finally, there’s crypto payroll. Crypto was mentioned earlier, firms make wage payments through multi-cryptocurrencies.
All these aspects tie into a financial wellness perspective. Coupled with financial literacy, they could transform how employees view their employers. Employees want to feel valued. What better way to show this than with rewards and recognition. Recognising the value employees give the business and rewarding them with some areas of financial support to make their lives a little easier. How is this financial support provided? Fintech.
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