Ask any finance or technology expert and they’ll be the first one to admit that 2020 is a big year for fintech. The technological infrastructure has improved to a point where significant changes can be ushered into action. The key is whether or not the marketplace is ready to embrace these developments.
Finding the Pulse of the FinTech Industry
FinTech – short for financial technology – is used to describe the convergence of the financial sector and new innovation. But what started as a small niche has now expanded into a massive industry of its own.
“When fintech emerged in the 21st Century, the term was initially applied to the technology employed at the back-end systems of established financial institutions. Since then, however, there has been a shift to more consumer-oriented services and therefore a more consumer-oriented definition,” Julia Kagan writes for Investopedia. “Fintech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management to name a few.”
Business leaders who take more time to learn more about fintech will have more relevant knowledge of their individual industries and niches in the coming years. In particular, you’d be wise to educate yourself on the following trends:
1. Data-Based Hyper-Personalization
Personalization is, without a doubt, the key to success in the financial services industry – particularly when it comes to customer-facing applications. But until now, personalization has been cumbersome and clunky. Businesses have had to spend massive amounts of resources gathering data, interviewing clients, and making subjective assumptions. Sometimes it works and sometimes it doesn’t. However, that’s all changing.
Businesses now have access to rich reservoirs of social data, browsing histories, and purchase behaviors that can be cross-referenced in real-time to help banks, insurance providers, financial advisors, etc. provide more valuable product offerings. Throw in artificial intelligence and hyper-personalization is the result.
2. Robotic Process Automation
One of the latest trends in the industry is something called robotic process automation, or RPA for short. RPAs are beneficial in that they don’t have to be programmed to perform specific tasks. They use artificial intelligence and machine learning to observe what humans do and then provide suggested improvements to enhance business processes and make them more efficient or profitable.
RBA is commonly being used with things like risk assessments, client onboarding, security checks, data analysis, compliance processes, and other repetitive administrative tasks. The time it saves can then be reallocated to more creative and personal tasks.
3. Tokenization of Assets
Currently, only certain people and organizations with deep pockets have the resources to invest in certain assets. But as blockchain and digital currencies expand, tokenization of assets becomes a very real possibility.
“Asset tokenization refers to the process of converting real assets into digital assets,” blockchain consultancy LeewayHertz explains.
You can think of it like taking a birthday cake and turning it into a digital birthday cake that’s representative of the real thing. This cake is then divided up into a bunch of individual slices that people can buy or sell in real-time on an immutable ledger that’s securely stored in the cloud. Except instead of birthday cakes, we’re talking about commercial real estate developments, businesses, securities, commodities, and physical goods. The owners of the tokens are the owners of the real thing.
4. Expansion of 5G
Consumers have heard a lot about 5G lately, but it’s yet to enter the mainstream marketplace. When it does, the fintech industry – like other industries – will be completely disrupted for the better.
Just how fast is 5G? Well, pretty damn fast.
On a 3G network, it takes roughly three minutes to download a podcast. On 4G – which is what most people are using – it takes roughly 15 to 30 seconds (a pretty big improvement). But on 5G, you’ll literally click and it’ll be downloaded in one second or less.
As 5G is implemented, many of the aforementioned technologies will finally have high bandwidth and low latency to perform as they’re intended.
Prepping for the Future
While it feels as if the fintech industry has already exploded, the truth of the matter is that we’re still in the infancy stage. Ten years from now, we’ll look back at 2020 as the early days of financial technology. Having said that now’s the time to brush up on your understanding of technologies like data-based hyper-personalization and tokenization of assets so that you’re better prepared for even more advanced trends that are coming down the pipeline. Stay informed!