Alexey Kutsenko of DDI Development, discusses five technologies that will transform Fintech in 2020: blockchain, RPA, AI, RegTech and conversational banking
Before we consider the five technologies that are set to transform Fintech, consider what Fintech is.
Fintech is the synthesis of technology and finance and the harmonic combination of two of the largest industries into a single field. Naturally, its impact is enormous. If five years ago, fintech solutions were still regarded as cutting-edge innovations, now they have become a daily reality.
According McKinsey’s, 80% of traditional financial institutions have been exploring innovations in 2018. Investments in the field are estimated to reach $30.8 billion – now compare this number to $1.8 billion in 2011.
Main users of fintech, according to McKinsey
Technologies that will transform the Fintech sector in 2020
We analysed new fintech projects, startups, and in-house innovations, and summarised this research in a list of top five technologies that will revolutionize the industry in 2020.
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Fintech technology number one: The growing number of RegTech solutions
Regulatory technology is benefiting from recent groundbreaking fintech software innovations, creating automated solutions to manage regulation monitoring, compliance, and reporting. Keeping track of new restrictions in a single database is a comfortable way of adopting a financial institution to legal requirements.
Global RegTech providers in various industries.
Benefits of RegTech
- ● cheap, fast, and simple control of vast data quantities;
● a precise automated search of a particular regulation;
● quick pre- and post-trade compliance;
● connecting financial institutions, regulators, and consumers, protecting the interests of all three parties.
- cooperation between financial institutions and regulatory organizations to facilitate RegTech development;
- government and financial organizations share their expertise in common projects, eliminating the skills gap. For instance, Monetary Authority of Singapore (MAS) and Financial Conduct Authority (FAC) provide banks with assistance in creating automated regulatory solutions. In 2020, similar practices are likely to develop all over the world.
At the moment, there are 150+ RegTech companies. Compared to 300 million pages of existing regulations, this feels like a small number. Non-compliance with mandatory governmental regulations leads to fines and crisis. Financial institution’s (FI) management wants to do everything in their power to avoid such problems.
The need for RedTech solution on the market is evident. It’s evident that this niche will soon be filled, and we are likely to see prominent startups by the first half of 2020. That’s why FI owners should consider becoming one of the primary RegTech providers in your financial sector.
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It’s an exciting time for the FS industry, but the hard work for fintechs has just begun. Now that fintech companies are mainstream, we have a key role to play, a duty to uphold. A financial fairness to fight for
Fintech technology number two: Embracing Artificial Intelligence, Machine Learning, an Internet of things
Artificial Intelligence (AI) has been surrounding fintech for more than five years now. However, while it speaks volumes about its popularity, the efficiency is still questioned by many. Let’s take a closer look at the dynamics of AI-solutions in the industry and analyze how to approach this innovation.
1. Standalone AI solutions have not shown groundbreaking progress, and so far, did not fulfill the expectations. However, this cannot be said for smaller AI-applications. Banking solutions successfully use AI for modeling techniques and analytics management.
2. AI holds a lot of unexplored potentials that keeps attracting investors. There is still a lot of room for never-done-before innovation.
3. Artificial Intelligence in fintech works best with the combination of big data and management solutions. AI analyzes the performance of a financial institution, creates insights, and automates essential organizational processes (team administration, documentation, client communication).
AI providers and its fields of application in the fintech industry.
A great example of AI application in the financial sector is an Alpaca Forecast AI Prediction Matrix , a price-forecasting solution, developed by Bloomberg. The software is capable of processing millions of deal records, record demand movements, define patterns, and predict future price changes.
Machine Learning (ML), one of the key AI components, is widely used in banking in the following areas.
1. Fraud prevention – ML tools analyze existing fraudulent cases, detect common, patterns, and evaluate whether a particular business doesn’t display similar behavior. This allows us to predict possible frauds and uncover questionable financial institutions.
2. Risk management – the software analyzes the company’s performance and detects potentially threatening patters;
3. Fund development prediction – by scanning investment records, an ML-powered tool can define the most probable future developments.
4. Customer service – the platform analyzes customer data and builds a smart client profile.
Internet of Things (IoT) increases the speed of financial processes, both internally (management and team organization) and externally (client management and communication). With an IoT network, it’s possible to connect smartphones to financial databases and send data directly from one device to another.
Retail banking is, so far, the branch that displays the progress of fintech IoT most clearly. A great example of such innovations is CitiBank and its beacon-based solution for unlocking ATM-entrances with smartphones during off-time.
Fintech technology number three: Blockchain will shake things up
Blockchain has been on its rise from 2018, and while it doesn’t make headlines that often now, the innovation isn’t going anywhere. Many Asian banks have already officially adopted blockchain to secure financial transactions, and European and American institutions will likely follow the trend.
This is how a blockchain transaction works.
Benefits of using blockchain in fintech
● Each transaction is encrypted, with no penetration possibilities.
● Each network stakeholder had to approve the transaction which makes a hacking attack very unlikely.
● Tokenization helps international businesses to use universal currencies instead of country-specific money.
Blockchain transactions are implemented all over the world from Australian CommonWealth Bank to Russian Alfa Bank, and new institutions join the trend each month.
Fintech technology number four: Robotic process automation will orchestrate workflows
To reduce the amount of used human resources, financial institutions can apply RPA to their business management solutions. RPA uses robotics to complete the task via GUI (Graphical User Interface). The work ranges from simple actions (selecting items, sending emails) to complex procedures (creating a report, organizing a database).
The most common RPA procedures are:
● collecting statistics;
● calculating numeric values on the company’s performance and managing transactions;
● extracting summaries from large documents;
● managing regulatory documentation;
● controlling emails and attachments.
Conversational banking will become mainstream
Developments in AI and language processing technologies naturally lead to active implementation of chatbots, and fintech is not an exception. The usage of chatbots in financial management and transactions is called conversational banking.
Fintech technology number five: How can conversational banking be used in finances in 2020?
● Responding to the client’s most asked questions. How do I find the closest ATM, how to regain access to the lost card, how do I know my password – these requests can and should be processed automatically.
● Account management: chatbots can walk clients through the process of registration, making a transaction, even taking a loan.
● Financial management: chatbots can become pocket financial advisers and keep track of budgeting, money streams, taxes.
An example of efficient conversation banking is the case of Erica, the chatbot, developed by The Bank of America. The bot processes text and voice messages and provides answers with text replies or voice memos, handling the most popular clients’ issues.
With the growth of technology and ever-changing demands of financial markets, the changes are inevitable. Each year transforms fintech in a new way. The way that those trends are incorporated into businesses is what determines companies’ success. Combining RegTech, Artificial Intelligence, Internet of Things, and Machine Learning with blockchain and conversational banking will play a crucial role in attracting customers and increasing the efficiency of the financial institutions in 2020. Banking enterprises are not required to work on each of these technologies simultaneously – that would require massive investments and tech expertise. Only by implementing several of these innovations into regular operations can they see the desired results shortly.
Alexey Kutsenko is the head of digital marketing of DDI Development. He is experienced in the development of the marketing strategy for companies in different industries. He knows how to do the right marketing and watches all current marketing and industry trends.
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