As you probably know, we are in the midst of a technological and digital revolution.
The one sector that has undergone the most rapid change has to be the financial services industry. Technology has completely turned the traditional way to do things entirely on its head, and no part of the financial system has been left untouched.
From cryptocurrencies to big data, to machine learning, and the IoT, the future is looking increasingly bright.
But when it comes to FinTech in 2018, what are the biggest trends set to be?
Let us read on to find out more about what FinTech is, how it affects us, and how it is going to further infiltrate our lives as the year progresses.
What Is FinTech?
With all this talk of FinTech, you may be a little confused as to what it is.
The word itself is a portmanteau of financial technology, a phrase that encompasses all aspects of the financial services industry and the technology industry.
When the term was first applied, it was on the back end of already established consumer and trade financial institutions.
But since the early 2000’s, it has developed to include any kind of technological innovation and progression regarding the financial services sector, as well as changes that touch on financial education, retail banking, investment banking, and of course, the burgeoning world of cryptocurrencies.
Financial technology applies to any innovation that seeks to improve the way that individuals or companies transact business- this includes everything from virtual currencies to e-wallet applications for mobiles.
Since the explosion of internet use and the increase in the use of mobiles, financial technology, or FinTech has also experienced exponential growth and it is now estimated that one-third of consumers use at least two FinTech services in their daily lives.
The power of FinTech is such that most of the worlds FinServ companies are working towards increasing their use of FinTech since most believe they will lose a significant amount of revenue to other companies that are ploughing ahead with innovation.
Most of the world’s banks, insurers and investment managers intend to step up their adoption of FinTech solutions and are expecting a 20% return on the investments that they plough into it.
FinTech is the way of the future, and it is clear that those who are not ready to embrace it, are going to be left behind as casualties of the digital revolution.
How Does FinTech Compliment Banking?
The concepts of FinTech and banking go hand in hand.
In a world where we are demanding more efficiency, convenience, and accessibility to our funds, the banking sector needs to work hard to stay abreast of what their customers want.
Banking institutions are now, more than ever, being forced to disrupt their business models and to reimagine themselves with a distinctly digital edge completely.
Many frictions exist in the world of banking, between what banks offer and want, and what a customer needs.
FinTech is paving the way to overhaul this and to increase the levels of synergy between the two.
A prime example of FinTech in the banking world would be the development of applications for mobile and tablet that allow the account holder to manage all of their funds and services with a few swipes of their thumb.
Another example would be the use of e-wallets to facilitate payments and store different types of currency.
What Are The World’s Top FinTech Companies?
When it comes to leading, global FinTech companies, there is some stiff competition.
One of the biggest grossing FinTech firms is known as Ant Financial.
A spin-off off Alibaba, it was founded back in 2014 and was designed as an update to Alipay, the world’s most popular third-party payment platform.
Today, the company offers wealth management, credit checking and reporting, private banking, cloud computing and more. Business wise, it was valued at a pretty incredible $75bn back in 2016.
Another key player is Xero which is considered as one of the fastest growing “software as a service” companies.
Founded in 2006 in New Zealand it provides users with efficient and simple online accounting software designed primarily for SMEs.
It also offers a cashbook, automatic daily bank feeds, invoicing facilities, tax calculating and reporting functions.
Avant is another leading company that has made itself a name and a solid reputation in the FinTech world.
A US-based lending platform, it aims to lower both the costs and reduce barriers when it comes to customers wanting to borrow money.
So far it has helped more than 500,000 customers, and its portfolio exceeds $3.5bn.
Top 10 FinTech Trends
FinTech And Cryptocurrencies
One of the most significant challenges and sometimes headaches when it comes to the world of finance, s making transfers of funds.
Especially if these funds are of an unusually large amount or are cross-border.
This is where cryptocurrencies come into play. Cryptocurrencies can be transacted instantly, across borders, and with minimal or sometimes even no charges.
This is going to revolutionise the way that we bank and transact, and if traditional banks want to stay in the game, they need to seriously step up their FinTech efforts, as well as embracing cryptocurrency.
While there are different types of cryptocurrencies, the one with the most significant impact is Ripple which facilitates almost zero-cost and cross-border money transfers.
Blockchains Place In FinTech
When it comes to the blockchain, almost any kind of data can be encrypted and placed on the ledger. It acts as a sort of database that is ultimately traceable and linear.
As the transactions on the blockchain are available to be viewed by an entire community of users, rather than just a single entity, it means there is a lot more trust in the whole process, and there is no “weak link” or chance of failure.
Every single block within the chain is cryptographically signed as well as being timestamped so any process within finance that would require these two features could be transferred to the blockchain.
For more detailed information, visit our guide to What Is Blockchain Technology.
How Machine Learning Is Impacting Business
Machine learning is a branch of computer science that allows a computer to learn without the need for to be individually programmed or instructed.
It is based on the theory of pattern recognition as well as computational learning theory which is a component of artificial intelligence.
Through the study and construction of algorithms, a machine can learn from and also make predictions based on data.
When it comes to the impact of machine learning on business, it is expected to have a massive effect during 2019.
It is anticipated that machine learning will allow businesses better insights into the behaviour of their customers, will increase the efficiency of human labour and will facilitate better data visualisation and tracking of KPIs.
AI And Chatbots
Over the last 12 months, chatbots and AI integration into businesses through social media and web platforms have become increasingly common.
The technology has also come on leaps and bounds, and it is now so efficient and “life-like” that studies have shown that over half of those that interact with a chatbot, don’t realise they are not speaking to a person.
They have also become more affordable and readily customisable, ready-to-go chatbots can be up and running within minutes at minimal cost which means they are accessible to both SMEs and larger businesses.
Chatbots can not only respond to customer queries, but they can also make recommendations, process transactions, and gather valuable data from each conversation and user.
One of the largest demographic group that already prefers this type of communication are Millennials.
Big Data And Businesses
Through an increase in the uptake of chatbots and other methods of collecting masses of data, the tech industry has had to respond with new ways of interpreting, processing, and analysing the data, or big data, that is collected.
The significant consensus is that AI and big data concepts are becoming more inherently intertwined and businesses are starting to understand the necessity to be able to analyse information to reveal trends, patterns, associations, and preferences.
This information can then be regurgitated in a way which will aid business decision makers and help them to make choices when it comes to strategy, pricing, marketing and more.
The March Of Mobile Technology
The smartphone that you hold in the palm of your hand is probably as powerful as your laptop or home PC.
The features and uses of today’s mobile phones are truly astonishing, and during 2018 we can expect to see more and more tasks and services being facilitated by our phones.
Mobile Banking – A New Frontier
Applications will entirely manage anything to do with finance on your mobile phone, and the need to call, email, or visit the website of your bank, let alone in person will diminish completely.
All payments will be facilitated via mobile phones, and we could see the concept of bank cards be replaced or gradually phased out.
The best example of the modern bank that is facing a rapid expansion is Revolut.
The bank doesn’t follow traditional practices – it doesn’t have brick-and-mortar branches, and everything can be done through a mobile app.
Oh, and you can also have one bank account in 25 different currencies, including Bitcoin, Ethereum, Litecoin and Ripple.
Banks are already looking at blockchain technology as a way to drastically improve their processes. While once they viewed the technology with scepticism, this attitude has done a complete 360 in recent months.
Blockchain has become the biggest buzzword in the sector, and the implications of this tech are huge.
It is expected to be utilised to help simplify the processes of clearing and settlement and could even save investment banks up to $10bn in the process.
Banks are also looking at the technology to assist with payments, trade finance, identity verification, syndicated loans and more.
While the banking sector is dragging its heels a little, it is expected to pick up the pace in 2018.
While this is not the most glamorous or exciting part of the list, the world of accounting is going through a fascinating change.
Cloud technology has already provided us with cloud accounting, but it has also given us a new way of collaborating.
This new system has resulted in a dramatic shift away from stacks of paper and excel spreadsheets and has seen us move towards more dynamic digital ecosystems that are beneficial not just to the business, but to the client as well.
Instances of p2p lending are already cropping up on cryptocurrency exchanges.
When an individual wishes to engage in leveraged margin trading, they have the opportunity to do so by borrowing the funds from another user of the network.
Various other platforms are sprouting up that connect borrowers and lenders and cut out the traditional intermediary, who usually takes a cut.
This gives both parties the chance to focus their money in a particular direction, and it gives borrowers an extra source of funding.
These are just some of the ways that FinTech is going to revolutionise the way that we do things in 2018.
It is such a dynamic and changeable industry, that there could even be quite a few surprises waiting in store for us over the next 10 months.
One thing is for sure and that is, at the rate we are going, we are going to see some huge changes in every aspect of businesses, finance, the economy, and our everyday lives and this is due to the advent of technology and the new digital age.
From artificial intelligence and machine learning to peer-to-peer lending and mobile banking, 2018 is going to be a very exciting, and even revolutionary year and we can’t wait to see what happens.
For more information, read about the Ways Blockchain Technology Will Change The World