23rd November 2017

How fintech is shaking up banking and making life easier for consumers, businesses and specific groups throughout the world

Just as there are plenty of game-changing developments continuously happening in the automotive and insurance sectors helped by technology such as smartphones, sensors and radars combined with vast amounts of data, disruptive financial technology or ‘fintech’ is equally seeing tremendous strides being made. Banks and other financial organisations are increasingly viewing fintech pioneers less as disruptors and more as beneficial partners.

With 61% of UK banking customers1 now using mobiles to access their current accounts, dwarfing branch visits by more than double2 and increasingly turning to apps for wider financial services3 such as savings and even mortgage accounts, automated personalisation is set to leverage the power of fintech. Dynamically changing what customers see on their phones and tablets based on usage will make them feel more connected to and cared for by their banks4. Personal details will increasingly become prepopulated across related apps, and personalisation could ultimately lead to self-service being the norm. At the same time, entirely digital bankswith no tangible branches are springing up, injecting a surge of competition into the market, particularly embraced by tech-savvy millennials.

Those visiting other countries, from individuals on short business trips to holidaymakers going away for a fortnight, are no longer faced with the hassle of physically exchanging currency thanks to the advent of multi-currency digital wallets6. With a person’s payment information stored securely, currency can be arranged efficiently and used to pay for goods and services at the growing number of businesses accepting mobile payments, from cafes and restaurants to hotels and shops. The tech companies behind digital wallets are often able to collect consumer data, helping them improve their offerings.

Microbusinesses and smaller SMEs have traditionally expressed cynicism over the appetite of mainstream banks to lend them money, and those that do get their feet in the door often have to submit themselves to lengthy application processes, holding expansion back somewhat. This is where a number of fintech pioneers have stepped in7, providing eligible organisations with overdrafts and loans that can be approved within hours rather than weeks, repaid in ways that suit the borrowers and with attractive interest rates. Scoring the underwritten credit is done by means of big data and one of the leading funding platforms has built a risk engine that processes thousands of bank transactions along with data points from Amazon, eBay and similar sites to aid deciding whom to extend instant working capital to8.

Security is more important than ever in today’s technology-enriched world and various biometric solutions have been and continue to be developed under the fintech umbrella, from refinements in fingerprint identification solutions, to those based on behavioural biometrics. Mobile and tablet interaction, mouse clicks and movements, keystroke and typing dynamics and other gestures and behaviours are used to seamlessly identify who is using a system. Rather than relying solely on a password, such continuous algorithmic authentication9 helps to ensure that only a device’s owner and other authorised contacts are able to use it.

Crowdfunding is rapidly becoming a key means for individuals and organisations to raise funds and a variety of fintech solutions are behind the trend, with platforms seeing a merit in targeting particular audiences, from the wine industry, athletes and artists, to musicians, video games creators, filmmakers and the retail industry10. Directly connecting projects and initiatives with investors is proving efficient and popular, with most major crowdfunding platforms helping tens of thousands of members so far.

Developing and emerging markets are also benefitting from fintech solutions, many aimed at people who don’t have a bank account, comprising a third of the world’s population. The fintech revolution is attributed to encouraging hundreds of millions of individuals to open digital bank accounts across Africa, Asia, India, Latin America and other regions. Employers are able to electronically remit wages to their personnel’s’ digital accounts directly, via the cloud, and account holders’ data histories are now enabling them to access previously unobtainable credit11. International money transfer is important for many people in emerging economies, which fintech is also facilitating by means of bitcoin and other cryptocurrency-based solutions.

Finally, back to banking in developed countries, and fintech startups have developed ‘plugin’ banking apps that dovetail with existing bank accounts and dynamically calculate how much a person can save each month before automatically transferring the variable funds to a savings account12. Artificial intelligence (AI) and most notably ‘chatbots’ are able to intelligently provide banks’ customers with tailored advice and will eventually become ever more widespread as an alternative to branch staff and even call centres.

Fintech is clearly bringing about major and positive steps in the financial marketplace, delivering ever more efficient solutions primarily based on technology that is accessible to many people, and we will look at further innovations on our blog in due course.

Sources:
1. https://www.applause.com/blog/mobile-banking-adoption-rates/
2. https://www.bba.org.uk/news/press-releases/mobile-phone-apps-become-the-uks-number-one-way-to-bank/
3. https://www.bba.org.uk/news/reports/an-app-etite-for-banking/
4. http://www.pcquest.com/top-10-fintech-trends-influence-banking-industry/
5. https://www.techworld.com/startups/ranked-uks-new-breed-of-digital-only-challenger-banks-3635411/
5. https://www.entrepreneur.com/article/303581
6. https://www.euromoney.com/article/b13vqcgbws3qqy/fintech-incumbents-and-disruptors-all-want-a-piece-of-iwoca
8. https://tamebay.com/2017/09/meet-company-iwoca.html
9. http://irishtechnews.ie/business-showcase-behaviosec/
10. http://www.growthbusiness.co.uk/top-european-fintech-firms-2017-revealed-2551170/
11. https://www.techbullion.com/fintech-trends-emerging-markets/
12. https://techcrunch.com/2017/04/12/chips-new-chatbot-app-points-the-way-to-plugin-banking/