As the world moves toward a cashless future, the FinTech sector is rapidly expanding. It’s changing the way we bank, shop, and invest. At the 2022 FinTech Festival Singapore, financial experts from across the world discussed how this transition will impact the sector and the opportunities it will bring for businesses of all kinds. According to speakers at the event, new developing technologies such as AL, ML, IoT, blockchain, and cloud computing will play a significant role in the evolution of the FinTech sector.
In this article, we will take a closer look at how emerging technologies are shaping the future of the FinTech industry and how they could benefit businesses and consumers.
Artificial Intelligence and Machine Learning
AL and ML are transforming the financial sector by helping to automate complex tasks. They can analyze vast amounts of data faster and more accurately than humans, making trading decisions much more efficient. Another reason why these technologies are so popular in the financial industry is that they lower expenses while increasing accuracy by eliminating human bias.
Here are some ways AI and machine learning are helping banks and FinTech companies.
- Credit Risk Assessment – AI and ML-based credit score is the most promising and relevant solution in the FinTech industry. It aims to help lenders make faster decisions while reducing risk. The scoring algorithm typically evaluates factors such as debt history, income levels, and spending habits. Once all this data is analyzed, an estimation is made of how likely it is that the borrower will be able to repay their loans in full and on time.
- Banking Fraud Detection – AI is faster at fraud detection. The data is analyzed using AI and ML-based algorithms and techniques to detect abnormal transactions that could indicate fraud. Users’ behavior patterns can be tracked, and their activities that deviate from the norm can be discovered. Once all this data is analyzed, it can be forwarded to human personnel for review, saving a significant amount of time.
- Increased Security – Data security is very important in the FinTech industry because of the sensitive information that companies handle. As a result, the sector has numerous security measures in place to give users the confidence they need. Banks, for example, have apps that can only be accessed via facial or fingerprint recognition. Artificial intelligence is primarily responsible for this.
- Automated Customer Service – FinTech organizations can now use AI to provide 24×7 virtual assistance via a chatbot to answer consumers’ questions swiftly. This contributes to improved customer service and relationship management.
- Analyzing User Behavior Analysis – AI can predict a user’s behavior by integrating multiple AI and ML algorithms through an interface, giving users precise insights into their data (like a past month’s bank statement).
- Financial Forecast – Machine learning helps to provide valuable insights into exchange rates, investments, and short-term or long-term trend predictions.
Internet Of Things
FinTech is an important part of the IoT, as it enables financial institutions to attract new customers through mobile payments and other digital services. By using IoT, FinTech platforms can also provide lenders with real-time data about customer behavior, so they can make better decisions about lending products or issuing credit cards. This information can also help banks target advertisements for consumers who may be interested in their products or services.
In the financial sector, IoT can be used to collect and analyze data to provide helpful information to consumers. It simplifies day-to-day operations by reducing the need for human labor. It can also be used to address financial issues such as analyzing savings and spending patterns, analyzing balance sheets, and budgeting for the future.
In the banking industry, IoT devices have the potential to increase employee productivity while also keeping them connected. Because of its multiple authentication processes, IoT may also provide excellent data security. By gathering real-time data on customer assets, it can assist financial institutions in improving risk management.
Blockchain is a digitized database that enables secure electronic tracking and management of assets. When used in FinTech, blockchain can enable one person to securely transfer money to another person (peer-to-peer) without going through a bank or financial services provider. Transactions on a blockchain are publicly visible and unchangeable, eliminating the need for third-party verification or deposit insurance. This makes it a more trustworthy platform than traditional financial institutions, as users have complete control over their data.
Also, since all participants are directly connected through the network, it is difficult to commit fraud. Blockchain is constantly expanding as new blocks are added, ensuring that all information is recorded and accessible. In short, blockchain helps make the FinTech sector more transparent, secure, and tamper-proof.
Cloud computing has proven beneficial in the FinTech sector. It allows these institutions to quickly deploy new applications or improve existing ones without worrying about the costs associated with infrastructure or software development. The cloud makes it easy for banks to test new product concepts before investing in full-scale development. By using cloud services, banks can expand their operations as needed without having to make dramatic structural changes. This technology helps store data and facilitates the transfer of that information across multiple channels.
The FinTech sector is entering a new era in which technology will alter how we manage our finances. We’ve featured 4 emerging technologies that will change the industry in the coming years. From blockchain to artificial intelligence, each of these innovations has made an impact on banking, insurance, and financial management.
We should also be on the lookout for new innovations in payments, cybersecurity, and big data analytics. Once in place, this will play a big role not only for financial services, but also for other industries like manufacturing, where profit margins for fraudsters are high.