The world is continuing to become more digital with an increasing amount of our everyday lives being conducted online. Emerging financial technologies are helping to revolutionize our personal and global economies, giving consumers and institutions greater convenience than they have ever experienced before.
Emerging financial technology, or Fintech, is making purchases faster and easier and speeding up several processes including lending, assessments, auditing, and regulatory demands. Here is the low down on some of the highest value Fintech developments that are set to revolutionize the way we use banking, make purchases, and assess risks in the financial sector.
Blockchain Tech
The future of finance is undoubtedly digital. Governments and financial institutions worldwide are now focusing on digitizing their economies and financial practices to speed up commerce. Blockchain technology is a massive part of the plan, utilizing digital ledgers to create easily auditable trails and decentralize financial information. The success and popularity of cryptocurrencies have demonstrated the value and convenience of blockchain tech, and the big financial players have taken note.
Knowledge is always power in finance. To prepare for the digital economic future anyone interested in finance or working in the industry needs to develop their knowledge and skill set to stay on top of this emerging tech that is going to disrupt the industry. The MIT Sloan School of Management has a blockchain technology online course that can help you expand your knowledge of blockchain tech and understand the impact it will continue to have on every financial sector.
SaaS Platforms
Software as a Service (SaaS) is revolutionizing every sector of finance. By utilizing the internet to deliver applications and customer service, SaaS is freeing businesses from the shackles of complex hardware and software installations and management. This is helping to make financially focused businesses more efficient and creates more of any company’s most valuable resource; time. Whether as a provider or a consumer, SaaS technology provides a smoother and speedier user experience.
The efficiencies and convenience of SaaS have contributed to its huge growth over the last few years, with the SaaS industry experiencing an 18% annual growth over 2022. This growth will only continue as more and more financial businesses begin to take advantage of the cost and time-saving attributes of the technology. In the near future, we can expect an even greater expansion and adoption of SaaS, including micro-SaaS products, and no-code or low-code software solutions.
Artificial Intelligence
The financial sector is continually embracing Artificial Intelligence (AI). It can enable the automation of several complicated and valuable processes, saving time and money. This is true for both commercial and investment banking. In the investment sector, AI is being used to help predict market trends and shifts and even pick stocks. As AI advances in sophistication, it will become an even more valuable asset to financial institutions as well as governments.
Artificial Intelligence is going to be used to make many financial decisions in the future, including determining the creditworthiness of applicants for mortgages, loans, and other financial instruments. AI has massive potential for identifying fraud. It can be utilized at both a commercial level, for identifying fraudulent acts perpetrated on a small scale, as well as on a larger scale for spotting suspicious trading on stock markets. The role that AI plays in the financial sector will increase even further in the next few years.
Alt Finance
Alternative Finance has been around for a long time, but new technologies are enabling its unprecedented growth, and it is estimated to grow 20% year on year over the next decade. The Alt Finance industry has brought new funding sources to borrowers and is changing the commercial banking sector. It is being used to provide people with loans for products and services without the use of traditional banks or methods, creating more flexible and accessible credit options for consumers.
Main street banks have taken note, and are actively looking for partnerships with retail outlets to help finance purchases of everyday products. The potential for Alt Finance is huge, and there is increasing consumer demand for flexible payment options that allow them to spread costs over longer periods. The software that underpins this finance is growing in sophistication and is allowing more people to use alternative financial options.
Embedded Finance
This type of finance is similar to Alt Finance but uses more traditional funding sources paired with seamless and convenient consumer experiences, typically in eCommerce. The ecosystem of software and payment services is expanding all the time, with many of the financial sector’s largest institutions getting involved. Embedded finance is growing rapidly, and is set to surge to $7 trillion by 2026.
By using embedded financing systems companies big and small can offer secure financing options on purchases, even if they only amount to a few dollars. Consumers are using embedded finance services to pay for all kinds of goods and services in a buy now, pay later (BNPL) or lay-away-like scheme. The total sum is split into smaller and more manageable amounts that are usually paid over one to three months directly from their checking account. Now eCommerce sites can offer their customers a seamless and convenient payment plan to finance their purchases in the same way as larger brick-and-mortar retailers do.
RegTech
With the introduction of Alt Finance, Embedded Finance, as well as blockchain tech and AI, the financial sector has an increasing amount of compliance issues to address. Emerging tech will solve the issues it has created with RegTech. It utilizes artificial intelligence, machine learning, cloud computing, and other modern technologies to speed up and manage regulatory compliance requirements. This allows the existing regulatory infrastructure of financial institutions to be used elsewhere, as the software can run almost autonomously.
RegTech will expand massively in the next few years. The ability of artificial intelligence and machine learning to manage and assess risk has proven to be more accurate and efficient than a human workforce. This is allowing financial institutions to reduce the costs of regulatory compliance and their level of risk simultaneously. RegTech is going to be a major disruptor in the financial industry, and software developers and artificial intelligence engineers are ready to reap the rewards.
The future of commercial banking, investment banking, commerce, and lending is digital. Soon, most banking activities and currencies themselves will be digital-only. Artificial intelligence and algorithms will be making important decisions for both consumers and providers, speeding up several common banking processes and giving more people more access to funding sources for common purchases.
Software developers and computer hardware engineers that turn their attention to Fintech will be able to reap huge rewards from the digital future of banking and commerce. These technologies are growing at rates not seen since the early days of the industrial revolution. If you are looking for an opportunity to grow a new business, take a long look at the opportunities financial technologies are presenting. Over the next decade, these technologies will take over much of the financial services sector and be major disruptors to the industry as a whole.
