While traditional banks are not going anywhere in the near future, more than three-quarters of respondents still seek financial support and advice from their primary bank, according to World FinTech Report 2021. They have a serious opponent, FinTech. As stated in the report, FinTech-powered solutions thrived during the black swan events of 2020: digital asset exchanges, payments, savings and other services saw an average YoY growth of almost 20%.
The massive shift to digital is not the only driving force. Advocates of AI-driven digital transformation choose FinTech solutions because of faster delivery, personalized services, swift query resolution and accessibility. The demand provoked a recovery of the overall deal volume in Q4 of 2020, for the first time after four consecutive years of decline. The trend is expected to boost the emergence and development of FinTech startups seeking to serve clients only.
5 FinTech Solutions Reducing the Burden on Workers
The emergence of tech solutions has ramped up the competition in all industries and financial services are no exception. A decade or two ago, making a transaction or getting a loan was a lengthy and tiresome process, where banks were in charge, not clients. However, financial technology shifted the focus to a user, whose comfort, convenience and security have become some of the top priorities. As the technology has matured, we have seen more and more FinTech companies serving not only regular users but also enterprises.
As a result, financial management has become simple and accessible like never before. Here are the top five solutions that make our life easier:
1. Financial Management Tools
Financial management is the backbone of prosperity. But, the manual calculation of assets and liabilities can often take up too much time and effort. Not to mention the human factor that can lead to duplicates or discrepancies. All these processes take a lot of time that can be spent on much more important tasks, plus you are not guaranteed any good or accurate results.
The stakes are not as high for personal financial management compared to business resources. When it comes to companies, not only can they face problems with legal offices but have their business operations disrupted.
That is where FinTech comes into play and does all the tough work. Financial management applications take on the task of tracking and analyzing income and expenditures. Some even provide valuable insights about budget optimization or customized loan offers.
Enterprises of all scopes often automate bookkeeping to minimize manual data entry and analysis, transaction pattern identification and expenses categorization. The task is delegated to RPA (Robotic Process Automation) software that helps boost productivity.
2. FinTech Cards
While banks are still hesitant about adopting technologies and becoming flexible for the sake of the client’s comfort, FinTech is not. One of the leading FinTech innovations is brand-new cards that offer a better cashback rewards program or facilitate loan approval.
FinTech cards are created at the intersection of banks and tech, where the former, is responsible, for the financial side, while the latter, for the customized offers. These cards provide the same banking services that you normally receive when issuing a credit/debit card in a traditional bank but with better terms.
While the majority of products focus on financial perks only, some allow you to complete transactions faster. For example, Chime Bank reduces the fees as well as sends you the paycheck two days earlier than usual. Aspiration offers a debit card with up to 10% cashback and plants a tree for every purchase round-up into your savings account, helping you to reduce your carbon footprint.
3. Electronic Payments
Cash is slowly but surely going away, paving the way for electronic payments, especially after the COVID-19 pandemic shaped new consumer habits. According to ResearchAndMarkets, the transaction value for the Global Digital Payments Market reached $5.44 trillion and is expected to grow at a CAGR of 11% up to 2026.
Indeed, you no longer need to leave your premises to shop, book tickets or order services. Online payments have become even simpler thanks to the mass adoption of mobile apps. According to PwC, more than half of financial institutions have a mobile app, and 18% of respondents are developing one. Banks offer mobile banking services powered by FinTech for clients to pay taxes, book flights, pay bills and complete many other operations in a single application. There are also FinTech projects like Paysend or Paysera that facilitate instant transactions at lower costs.
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Whether you represent a business or you are a single user, such tools help you do more in less time. In other words, you can cover all your expenditures without leaving your home or office, saving a lot of time while doing so.
4. Online Borrowings
While 73% of financial sector executives perceive consumer banking as the one most likely to be disrupted by FinTech, according to PwC’s findings, online borrowings seemed unrealistic until now. Once the problem of online client verification was solved, the world saw the dawn of e-borrowings.
Banks and FinTech companies have established a mutually beneficial partnership, where financial institutions turn to tech to assess customers’ creditworthiness. Banks can expand their client base thanks to alternative data sources for evaluating a person’s ability to repay loans. As for clients, they enjoy quick request processing and consumer-friendly lending terms, for example, no collateral requirement. Therefore, you can quickly get yourself a loan on platforms like Kiva or Proper to cover your business or personal expenses almost immediately.
Insurtech is one of the FinTech trends that is going to evolve in the near future because of its customer-centric approach. Acknowledging the power of personalization, major insurance companies started to adopt financial technologies and tailor their offer to the current market demand: custom products.
With the help of AI and machine learning, you can now get predictive underwriting, personal offers and pricing based on your risk level. It means that if a consumer has a healthy and safe lifestyle, their policy will be cheaper than for those who do not.
For instance, a business can get coverage online from Next Insurance. In addition to quick processing, you can choose from several options regardless of your location and tailor the end product to your needs to get maximum benefits.
What Drives FinTech Forward?
FinTech is maturing and getting more and more advocates that leave traditional banks and insurance companies for custom offers and quick processing time. All this became possible due to technology that powers the FinTech evolution:
- AI. FinTech and Artificial Intelligence are indispensable. AI software is among the major drivers that allow detecting fraud and ensuring transaction security. For example, Alipay (a payment system by Alibaba) relies on proprietary AI software to prevent security risks. Besides, AI technology improves customer support via chatbots, target clients’ acquisition based on their behavioural patterns, data analytics and many more.
- ML. Machine learning usually accompanies AI when processing data for advanced analytics or security. ML algorithms are capable of analyzing tons of data points within seconds and identifying abnormal transaction patterns that are later inspected by AI algorithms. Thanks to predictive analytics powered by ML, Mastercard managed to reduce declined card transactions by 50%.
- Big Data. FinTech has been founded on different types of data, including transactional records, user habits and preferences. As cutting-edge financial solutions analyze this data, they can make a unique offer that drives user flows. Businesses can now harness the power of Big Data and make informed decisions about new products, services or offers.
- IoT. Internet of Things acts as a mobile point-of-sale system and a cybersecurity tool that processes and encrypts payment information securely. For example, Kontakt.io provides low-energy Bluetooth beacons for mobile payments. They replace traditional point-of-sale technology by streamlining and speeding up the shopping process, as well as by generating valuable data for business.
While there can be other drivers like blockchain technology, the ones discussed above are key FinTech boosters. Nonetheless, not all of them are equally important. Nothing compares to the power of machine learning to personalize everything and anything, from analysis of credit score factors to users’ spending habits. AI-driven insights gathered from non-human interactions via chatbots allow businesses to tailor their offers and establish better connections with users.
That is why the future of FinTech depends on the development and advancements in AI and ML. These two technologies combined allow startups to take full advantage of data and reach a new standard of customer service in the financial industry.
Timothy Partasevitch, Chief Growth Officer at Smart IT.