FinTech has brought about deep-rooted in the field of the bank over the last few years, and especially due to the pandemic. While 2020 was a year of remarkable disruption, this is the time for unprecedented transformation with several FinTech trends doing the rounds in the banking industry.
At the core of these trends is the power of the digital medium, which has enabled smarter solutions for customers in terms of ease of use, lower transaction fees, heightened security and so on. According to the Global COVID-19 FinTech Market Rapid Assessment Study, the total number of digital transactions and new customers in Europe has seen an annual increase of 21%. Clearly, the future integration of FinTech and banking services has a bright future.
With this spirit, let us look at some of the top FinTech trends of the banking industry in 2021.
Customer-Centric Products and Services
The banking industry is charting a more customer-centric path when it comes to developing products, such as applications, or services. A high-quality consumer experience is at the core of developments in the banking segment, focussing on customer connectivity across channels and powerful solutions to help them save time, money, effort and hassles.
As a result, the banking experience is seeing large-scale digitisation to eliminate the need for manual processes, unwanted travel and delay in outcomes. At the same time, digitisation has helped forego the need to fill length forms repeatedly or run around with documents to different departments for verification. Unified digital platforms covering all banking functions are now taking shape, with customer experience at their centre.
Even before the pandemic, open banking was on its way to wider acceptance, though largely in the UK. These days, thanks to regulatory developments and advanced technology, global regions such as the EU, Asia-Pacific, US and Oceania are kicking off innovations in the open banking segment.
The Nordic region, for instance, is emerging as a global leader when it comes to open banking solutions. An array of startups in the Scandinavian countries are shaping the future of FinTech and Banking with the introduction of open-system, digital financial solutions.
For instance, Nordic FinTech Axo Finans is acting as a digital broker, facilitating easy personal lending in the region. The startup helps customers fill out and send loan applications to multiple banks with ease, saving them time, money and the complexity of handling multiple applications. Axo Finans, which was founded in 2008 in the wake of the global financial crisis, has garnered a revenue of 250+ MNOK with proven results, establishing the growing might and demand of open banking globally.
Artificial Intelligence and Machine Learning
Banks are now trying to adapt their functions and services to customer needs by extracting relevant customer information through the digital medium. This data, however, is being put to use through AI/ML-driven systems.
AI and ML are spearheading the delivery of highly personalised services using augmented services instead of human ingenuity alone. Areas such as customer queries, fraud detection, banking chatbots, implementation of policy and regulations, KYC verification as well as algorithmic trading are benefitting from AI and ML especially, because of the reduced scope of human inefficiency.
Compliance and Cybersecurity
The digital world has brought on both rewards and challenges, especially for the banking industry, in the form of security threats. Worldwide, developments such as Know Your Customer (KYC) and Anti-Money Laundering (AML) is assuming importance for greater compliance and cybersecurity.
At the same time, startups and FinTech innovators are coming up with technology-led security solutions that can help prevent complications arising out of cyber attacks on financial services. Apart from smart automation and AI, banking models are also seeing an advanced focus on multiple layers of security checks, which makes it difficult for cybercriminals to invade the personal financial spaces of customers.
The evolution of FinTech for the banking the industry owes its rapid development to microservices, allowing the former to come up with agile inventions that can easily adapt to dynamic circumstances and competitive forces.
Microservices rests on the concept of evolving away from the existing code-based monolithic systems which, over time, sees the addition of customised technology based on the changing needs of the bank and its customers. These integrations are interdependent, and therefore do not allow for core changes without altering the entire architecture.
Contrary to this, microservices are independent applications that call for discrete development, deployment and maintenance based on specific requirements. Besides adding the benefits of speed and scalability, microservices are also supporting continuous testing, regular changes and customer-centric development without having to affect the entire structure. This allows banking enterprises to stay innovative with minimal risk.
Decentralised Finance or DeFi is all set to become the next big thing for FinTechs in the banking industry due to its emphasis on transparency, decentralisation and speed. Based on the much-talked about and fast-developing blockchain technology, DeFi operates independent of any centralised regulatory financial structures, bringing much-needed democracy and speed to financial services that have to, otherwise, go through multiple rounds of checks and balances.
DeFi eliminates the need for banking, payment and investment intermediaries completely. These get replaced by services operating within the same blockchain network, thus granting unprecedented transparency and simplification. This robust alternative interface of the future is disrupting the banking ecosystem.
Big Data and Analytics
Predictive analytics is shaping banking services, especially small- and medium-sized players with the help of big data, algorithms and machine learning to predict future probabilities based on current and past behaviour.
Big Data and Analytics are enabling the development of multiple financial applications that are helping in various segments – monitoring and measuring customer behaviour, combating fraud, improving customer experiences, assessing spending and purchasing patterns and so on. This technology is helping detect problems even before they happen, thus helping banks and FinTechs optimise their services for maximum effectiveness.
The Way Ahead
Operational processes of the banking industry are benefitting from these major FinTech trends that focus largely on improving customer experiences and simplification of processes. Besides helping enhance customer intelligence initiatives, these trends are also helping service providers join forces, “share technology and expand their networks,” which is the need of the hour for the wholesome development of the banking industry worldwide.