The Future of Fintech

Open banking is at the heart of the technological changes affecting the financial sector. Every week more and more individuals and businesses utilise products and services powered by open banking, from making payments and applying for loans, to managing multiple bank accounts in one app and making investments. However, it’s not the only global initiative disrupting the industry. As controversial as they are, cryptocurrencies enabled by blockchain technology are always in the news. They might be volatile but they’ve gone from having a cult following to becoming a viable investment for millions of people worldwide. Cryptocurrencies are at a tricky point in their evolution. On the one hand their popularity stems from the decentralised and multi-jurisdictional nature of them. On the other hand their lack of stability is a huge risk factor which cannot be improved without them having a valuation basis and proper regulation. That said, they’ve been around for more than a decade, so will continue to be a factor in the financial world and as such will see major changes affecting them in the coming years. 

Digital only banks are another technology led concept that’s been around a while but its popularity is now increasing exponentially especially amongst younger generations who are more comfortable handling their finances online. Memes may joke that millennials and generation z prefer to message rather than call, but it is a reality. Face-to-face and phone banking are both time-consuming and require a certain amount of social effort that these individuals would rather avoid. At the same time, older generations have had to adapt to using online services from their banks due to Covid-19. With digitalised products no longer being as formidable to them as they once were, there’s every chance they might switch to banks that are fully online. Open banking is enabling  this trend by helping people to manage all their bank accounts in one place and apply for new services quickly and easily.

In previous articles, the many use cases of open banking have been discussed. Since the initiative means the financial data of an individual or business can be shared securely with third parties, analytics have taken on a whole new meaning. Companies can now offer products and services that better match a customer’s requirements. For example, an app which aggregates the spending habits of an individual across all their bank accounts might see that they are paying too much for telecommunications and recommend a different supplier. These analytics are enabled by the open banking initiative but they are a separate technology driven by artificial intelligence. This type of machine learning has many benefits for the consumer and is less about pushing adverts and more about saving them time and money. 

Leaning into this is the internet of things (IOT). Wearable devices can feed data back to insurance companies on fitness levels helping to reduce an individual’s health insurance costs. A drone can fly over a wind farm and feed back data on maintenance levels, also helping to create a dynamic insurance scheme. A fridge can order milk automatically when a household is running low, searching for low prices and getting it delivered. All these technologies promise a lot but what they all have in common is the need for regulation and security. Underpinning the entire fintech industry right now is more technology. Cybersecurity projects and regulation technologies are helping to prevent hacks, enable a streamlined compliance process and mitigate risk. The new fintech world is a multi-sector, fluid ecosystem. It’s about waste reduction, it’s about efficiency and it’s about speed. But at it’s very core it’s about interconnectivity.