By David Sewell, Chief Technology Officer, Synechron
Financial technology innovations continue to emerge as the digital revolution speeds up and gains traction. How will innovations like Artificial Intelligence (AI), digital payments, and other emerging digital technologies continue to revolutionize businesses? With proper understanding, we can assess what genuine business value can be expected from the digital revolution that is shaping FinTech.
Here are the top emerging technologies we believe will have the greatest impact.
Artificial Intelligence
We’re now entering the Artificial Intelligence-powered digital age. According to a study by Emergen Research, AI in banking will constitute a market value of $185.77 billion by 2028. This technology significantly reduces the costs and time associated with manual labor. It’s faster, more accurate in detecting fraud and checking the authenticity of payments, and can augment human tasks, making them more efficient.
Chatbots, for example, tend to deliver a high ROI and, as per Juniper Research, could save banks $7.3 billion in operational costs by year-end 2023. Payments through chatbots represent a growing opportunity as they will be linked to digital wallets and apps, allowing customers to make payments without leaving the conversation tab. Generative AI (e.g., ChatGPT) is an emerging technology that could enhance the chatbot experience by generating new and not just pre-programmed responses, making them seem more human-like.
The Metaverse
The Metaverse is an immersive digital network of 3D interactive worlds. Its mission is to transform lives by creating a more collaborative, decentralized and immersive world. It’s hoped that banks in the metaverse will be able to offer services available in the real world, like ATM withdrawals, deposits and customer service. This might mean virtual and augmented reality for financial services, such as video chats with advisors.
The Metaverse has the potential to completely alter how banking and fintech companies communicate with their clients, negating the need for conventional bank branches and service centers, and paving the way for new innovation.
Digital Payments
There has been a significant increase in digital payments among mid-to low-income families. According to a report by World Bank, globally, two-thirds of adults currently use digital payments. Developing countries accounted for an increasing share – from 35% in 2014, to 57% in 2021. One initiative that’s driving this growth is ‘India Stack’ – described as “national plumbing for the internet age.” India Stack has accelerated broad adoption of digital banking by billions of individuals and businesses in India, creating a unified API-
driven platform, delivering ubiquitous identity, payments and data governance services.
Additionally, Digital India is a flagship government program, aiming to transform India into a digitally empowered society and knowledge economy, while the Unified Payments Interface (UPI) is an instant real-time payment system developed by the National Payments Corporation of India (NPCI), facilitating inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It’s used on mobile devices to instantly transfer funds between two bank accounts.
Increased Internet and Mobile Coverage
Since the mid-1990s, technological innovations have paved the way for easy accessibility of the internet and smartphones – both of which are excellent facilitators of digital payments. We anticipate further developments with the continued evolution to 5G wireless communication and the Internet of Things (IoT). 5G provides greater bandwidth, lower latency and supports more simultaneous devices than 4G, which will create opportunities for new wireless services and improved customer experiences. We’re also beginning to see greater mobile phone access in remote locations.
Digital Assets and Decentralized Finance (DeFi)
Digital Assets are tokenized financial instruments that represent real-world financial instruments like bonds, securities, currencies and commodities. Ownership and transfer of ownership of digital assets can be recorded on a blockchain using a distributed ledger technology platform (DLT). Emerging regulations for market infrastructure regimes based on distributed ledger technology could pave the way for digital assets in financial markets.
Meanwhile, Decentralized Finance (DeFi) empowers individuals and businesses to utilize peer-to-peer digital exchanges and has the potential to eliminate the fees that financial organizations charge for using their services.
InsurTech
InsurTech is a technology intended for the insurance industry. It’s driving personalized policies, better risk assessments and more. As tech-driven insurers dominate the sector, they’ll offer enhanced services, tailored to specific customer needs and risk factors. These advances will be powered by ML and AI and will provide real-time analysis and recommendations.
RegTech
Regulatory technology (RegTech) aims to make regulatory and compliance processes more efficient. With rising concerns about data privacy and security, RegTech is now more significant than ever. Increasingly, financial services providers are investing in RegTech tools and integrating them into their everyday businesses. Existing issues relating to cryptocurrency and digital currencies, as well as emerging digital assets – as evidenced by recent notable failures, such as FTX – will need to be addressed in tandem with RegTech adoption.
Open Banking
Open Banking is a model whereby banks make certain data accessible to third parties, including customer account details, transaction data, and more. It’s gaining traction in the UK and Australia, with other countries introducing legislative changes to implement it. We expect Open Banking to provide financial clarity to customers, improve financial literacy and improve financial security. Customers will have full oversight of their banking transactions and personal data. Moreover, as it simplifies the process of building more widely accessible financial products, digital financial firms will utilize Open Banking for its convenience and affordability.
Data Monetisation
Data monetisation means using data to obtain quantifiable economic benefits. It allows banks and financial institutions to significantly strengthen their ties with their customers by learning more about them and their requirements. Merging data from multiple sources into a single, central repository can strengthen client relationships and provide key business intelligence, while proper data management tooling can ensure customer privacy and address data sharing concerns.
Conclusion
FinTech is driving financial services transformation. This revolution requires an in-depth understanding of top trends and evolving customer needs. Acting on these innovations will shape the future of the banking and financial sectors and transform the way we perceive technology. Preparing for change and these new technologies will benefit us all.
