The Finance and banking industry is seeing huge innovations in the application. “FinTech” – a buzzword for computer systems and other technologies that support and enable delivery of banking and financial services – is now ubiquitous.
PwC report reveals that 77% of financial institutions are investing in internal innovation. In North America, the banks’ investment on new financial technology hit $17 billion in 2015, and by 2017 it had risen to 2017. Globally, in 2017 the value of the investment on Fintech was valued at about $31.4 billion. In 2015, at its peak, investment in Fintech was $47 billion. The value of the annual global investment in Fintech businesses is increasing.
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How is Technology Impacting the Banking & Financial Sector?
The most effective and impactful application of Fintech in the financial world is in customer care. Excellent customer service has always been a critical part of financial institutions. Organizations trained employees to sort out customer problems as they present. Chatbots are, however, now replacing humans. Although chatbot may lack a human touch, they deliver a surplus amount of information to clients. Machines are also cost-effective.
Earlier, to withdraw, to deposit, or to transfer funds, you had to show up at the bank. And you have to interact with the bank staff. With online and mobile banking technology, now you can access your bank account on your phone, tablet or computer.
Investigation and detection of fraud needed collaboration of man and machine. The system would track potential fraudulent cases and the staff trained to detect fraud had to parse the data to ascertain whether fraud happened or not. But now AI-powered systems can identify fraud way faster than humans ever could. The machine can go through the past data, and accurately predict the likelihood of fraud based on the previous patterns.
In wealth management and asset management, the rise of tracker funds with low unit cost and huge scale has proved attractive to pension and individual funds. Tracker funds have rekindled the debate on the pros and cons of passive’ vs. active’ investment strategies.
The Forex Market
The foreign exchange market to has been massively impacted by tech. Trading is now not only conducted almost exclusively online, but it’s also now done through multiple platforms.
Trading used to be a brick and motor affair before the advent of the internet, and it seemed it would never change. But with new tech tools, it’s common to see traders who rely on mobile trading platforms for almost all of their transactions. Mobile trading platforms, systems, and tools are now widely accepted in the market. The forex market is now more vibrant and liberal thanks to technology.
Banks are exploring voice interfaces like Amazon’s Alexa skills, and so we’ll see of more voice assistants in banking in the future. For instance, Capital One in the US has built an Alexa skill that tells customers their balance and their expenditure.
In the UK, challenger banks like Monzo and insures like Aviva too have Alexa skills. More and more financial institutions are adopting voice assistants in their service delivery.
Retail banks usually have huge expectations to meet. Other than functionality and convenience, customers demand to 24-hour access to their accounts, and they also expect complete security. And yet they are not willing to pay for it.
A lot of people also don’t like paying for financial advice. And for some, their assets are too low for traditional wealth managers to serve them well. This has led to the rise of robo-advisors’ which supply financial guidance.
The financial sector is, however, vulnerable to the rising threats from people who want to intercept, amend, or disrupt communication, steal personal data, hold organizations to ransom, and misappropriate assets. Technology is ever evolving, at least up to a point when it becomes more efficient than its creators. Fintech solutions have proven to be smart, fast intelligent and economically viable.
The most critical factor though is to maintain the balance between the improvisation and intuition of humans with the benefits of Fintech because it’s their combined effort that will transform the financial world, both for businesses and for consumers.