Fintech is revolutionising the financial sector. Last year, the financial industry erupted with Fintech companies reportedly making $7.6 billion in investments, a 69% increase on 2014 and a 407% increase on 2013. With Fintech threatening to profoundly shake up traditional business models in industries ranging from insurance and banking to investment management, its soaring success and popularity is posing imminent challenges and opportunities for many existing players.
It is an exciting time for Fintech as we start to see some interesting patterns emerge for the future. Let’s explore some-must watch trends for 2016.
Blockchain has become a buzzword of the financial sector in the last 12 months. Steve Norton gives the perfect layman’s definition of Blockchain as being a ‘data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to then manipulate the ledger in a secure way without the need for a central authority.’
A recent report from the World Economic Forum predicts that Blockchain will eventually occupy a central role in the global financial system. This is one of the strongest endorsements yet for the new technology.
Utilising open APIs for financial services is on the rise. It is thought that APIs are one of the principal reasons that start-ups are able to build their products at a faster rate. With open APIs, developers are able to build custom applications that are versatile for any type of user. They can be used by any developer in order to provide a quick and proven solution to any software diagnostics. Not only are Fintech start-ups benefitting for open APIs, but banks like Capital One, Citigroup and the Bank of America are also acknowledging the fact that open APIs are a method of retaining and engaging digital customers.
The insurance sector is screaming out for Fintech in a way unlike any other sector. Tech solutions can allow providers to target the right customers, cut the cost of their claims, price efficiently, and referee risky behaviour. A key instance of Insurtech feeding into our everyday lives is a home security system global insurance giant Aviva backs. Cacoon is a home security system which tracks any sound made by intruders, and then videos them. Users of this technology benefit from traceability of intruders, and increased security. Most importantly, insurers can monitor how frequently a house is left unattended, allowing companies to provide more accurate pricing. Elsewhere, a London-based start-upfocuses on targeting millennials through their chat-bot automated digital insurance agent which uses personalised user data to provide a tailored conversation. Their platform allows users to communicate with the chat-bot in the same way they would with a friend on Whatsapp, Skype or Facebook Messenger.
Approximately $27 billion is expected to be spent through global mobile payment transactions in 2016 alone. On an individual level, it is expected that each user will spend an average of $721.47 annually. Users across the globe are increasingly drawn to online-enabled banking due to its convenience. Mobile and online banking is the first time customers can take their banking into their own hands, without having to enter into a financial institution. Not only is mobile banking extremely accessible, it is becoming more personalized every year, allowing financial services to interact with their customers and users to receive the best experience.
Artificial Intelligence (AI)
One of the biggest technology trends in 2016 has been artificial intelligence in various forms. Google have announced using AI systems in 2016, particularly in order to return the most accurate and reasonable results for users’ search queries. This AI trend has no doubt spread to Fintech companies too. AI in the Fintech industry is not used in order to eradicate human intelligence, but rather to encourage us to make more informed decisions, more efficiently and faster. Barclays have even claimed that they think AI is the future of banking. Artificial intelligence can keep costs down while enhancing customer experience. AI comes in the shape of robo-advisors or automated online investment platforms in the financial industry. Leading banks, like Deutsche Bank for example, have already launched their robo-advisor services.
Consumer demand for wearable technology is not slowing down in 2016. This is why it is more important now than ever for the banking industry to expand their strategy in order to keep up. According to PRWeb, 82% of financial professionals have confidence that smartwatches will facilitate financial transactions in the future. What really interests the financial industry in embracing wearables is proximity payment and greater fraud protection. Recent studies have shown that 15% of banks already have or are in the process of rolling out wearable apps for their customers.