Trends in Fintech Technologies

Trends in Fintech Technologies

What is Fintech

Fintech is short for ‘Financial Technology.’ Fintech can be an intimidating term that conjures images of young and tech-savvy finance professionals utilizing algorithms and software applications to trade stock and model financial market performance. The good news is that Fintech is a simple team involving the use of emerging technologies to enhance traditional banking and finance services and create new ones (Mayor, 2021). Fintech is not new. It has been around since ATMs made their first public debut in the late 1960s. However, FinTech became a household term in the 2010s when digital technologies started infiltrating the banking and finance industry. Today, Fintech encompasses all new technologies used to create, automate and improve banking and financial services. 

Understanding the Fintech Landscape

The current Fintech space is broad and evolving rapidly. It is characterized by using the Internet and connected devices to offer consumers innovative financial products and services. Notable areas defining the Fintech landscape include mobile payments, digital lending, digital investment management, distributed ledger products, bank-as-a-service (BaaS), digital-first or neo-banks, and API platforms and ecosystems. The range of offerings and models keeps expanding as newer technologies emerge and existing technologies mature. These Fintech models and offerings fall under three main categories: banking, wealth management, and payments. The graph below shows the main areas served by Fintech transactions and their growth over the last 8 years.

Latest Trends in Fintech Technologies

These four technologies continue to shape Fintech trends as outlined below: 

1. Artificial Intelligence – AI drives massive value creation in banking and financial services. AI applications are penetrating the financial industry’s front, middle and back offices. AI enables the tailoring of customer-facing applications like chat interfaces for personalized user experience, while middle- and back-office AI applications help identify patterns in complex financial networks and data sources (Fong et al., 2021). AI will continue to unlock new value propositions as it matures. 
2. Cloud Computing – Cloud computing technologies continue to improve the speed, scalability and embedded security processes for banking and financial services. New offerings in banking, including digital payments, rely on reduced overheads and improved efficiency of container technology on cloud platforms. Cloud technology keeps spawning new BaaS offerings because of its flexible storage and low-cost computing services.  
3. Internet of Things – Finance-oriented IoT systems encompass sensor technologies and wireless communication networks that automate the identification, tracking and monitoring of assets and properties. IoT technologies shapes the insurance sector through IoT-based inventory, property financing, and management. IoT solutions are also shaping banking by embedding banking services into wearables (Fong et al., 2021). IoT continues to create a new system of trust, allowing finance companies to develop new offerings that were not possible previously. 
4. Low-code and No-code Platforms – The allow general banking and finance staff without prior knowledge and experience in software programming to develop applications. These technologies have eliminated the need to hire expensive and scarce software engineers and allow banks and finance companies to respond to market shifts quickly and deploy new digital offerings cheaply. 

Getting Started with Fintech Solutions

There are hundreds of Fintech solutions in the market today, and more are still emerging. The best way to get started with Fintech is to identify your need. There are several Fintech solutions to increase efficiency, reduce costs, improve customer experience, and even stay ahead of the competition. Next is to decide whether to develop a Fintech solution in-house or purchase off-the-shelf solutions. Both scenarios come with pros and cons worth considering before adopting them.

Challenges in adopting Fintech Solutions

Incompatibility is a common challenge when adopting off-the-shelf Fintech solutions. For example, cloud-native Fintech applications may not be compatible with in-house IT and legacy infrastructure systems. 

Also, Fintech solutions for banking and finance must be secure, compliant and regulated. Fintech solutions are in a cat-and-mouse game with existing and emerging cyber threats. Poorly encrypted solutions could undermine data integrity and fail compliance tests.  

Conclusion 

The Fintech landscape is evolving rapidly, and new trends and technologies emerge yearly. Understanding the latest trends in Fintech is necessary to stay competitive. Follow us to stay up-to-date with these trends.    

References 

Fong, D., Qu, J., Shek, A., Han, F., & Liu, L. (2021, Nov 9). Seven technologies shaping the future of Fintech. McKinsey & Company. https://www.mckinsey.com/cn/our-insights/our-insights/seven-technologies-shaping-the-future-of-fintech

Mayor, T. (2021, Feb 4). Fintech, explained. MIT Management Sloan School. https://mitsloan.mit.edu/ideas-made-to-matter/fintech-explained