Fintech remains one of the most-often-referenced components of a modern digital transformation strategy. Many markets are experiencing a powerful transition, placing greater pressure on financial institutions and opening doors for out-of-the-box fintech startups.
What is Fintech?
Fintech is industry jargon for financial technology and refers primarily to the latest advances in consumer banking, investing, and financial management services.
Because financial advancements evolve, so does the term “fintech.” Ten years ago, fintech experts praised the latest developments in securities trading platforms, crowdfunding, and person-to-person payments (Venmo, Paypal, Cash, etc.).
But today, fintech is more aggressive as it seeks to identify new value items, such as blockchain hashes and loyalty programs, thereby complementing the fiat currency and exchange system around the globe. Furthermore, fintech innovators are creating secure, efficient bypasses to traditional banking institution constraints, allowing unbanked regions to do business and create emerging markets with tech-friendly investors.
Leading Factors Driving the Future of Fintech
As the world of fintech evolves, new tools and methodologies introduce new solutions and problems. These solutions and problems rise among the following recurring factors:
- Data/information management
- Web services integrity and efficiency
- Blockchain technology and cryptocurrencies
- Mobile banking
- Loyalty currency
- Lifestyle product-service bundling
As developers and marketers make ongoing improvements in response to each of these factors, fintech growth will accelerate and achieve more sustainability for greater populations around the world.
Financial data management is a highly-regulated industry in most countries. That said, financial information is also critical to providing prompt, personalized financial services. Most fintech systems – however modest – typically store vast amounts of consumer information.
But there is a critical difference between collecting the data and interpreting the data into actionable information. On this matter, most fintech organizations must invest as heavily in compliance and security as they might in analytics.
That’s why fintech experts are intent on developing more efficient ways to secure consumer data, organize it, and then improve operations to better acquire and retain clients. Additionally, these concerns have led to some overlap among financial data management, cybersecurity, and blockchain technology.
Cybersecurity is separate from consumer privacy. While consumer privacy laws address the lawful collection and use of consumer data, cybersecurity focuses on protecting personal and proprietary information from malicious actors operating outside the law.
A critical component of fintech is developing better intrusion prevention, detection, and response protocols. Data breaches among financial institutions result in millions of dollars in penance projects and lawsuits. In recent years, cybersecurity agencies have operated as independent contractor businesses to fintech startups and web services. This arrangement allows the financial services provider to focus on improving the customer experience while the security agency remains on the cutting edge of intrusion prevention.
Web Services Integrity and Efficiency
Implied in the term “fintech” is its dependence on web service and cloud computing. Clients can do more online than ever before, and web service capabilities improve the overall customer experience.
The focus now turns to making these services faster and more efficient. Fintech startups are developing critical financial activities at fewer clicks and better identification techniques, such as biometrics and device verification.
Improving web services integrity and efficiency places further dependency on data analytics. Consumer behavior dictates consumer demand, as well as signalling shifts in that demand over time.
Blockchain technology is to fintech consumer privacy and security what the Internet was to humanity in the early 1990s. Experts recognize its potential, and programmers are working tirelessly to increase usability across multiple industries.
Blockchain not only allows fintech clients to do more while remaining anonymous in the marketplace (thereby minimizing consumer privacy concerns), but it also creates more value from which investors can recognize new currencies. The value exchange byproduct of blockchain technology is the growing selection of cryptocurrencies.
As more fintech clients invest and exchange in cryptocurrencies, there is increased pressure on financial institutions and fintech engineers to recognize those cryptocurrencies. This advancement further empowers unbanked nations to participate in global markets.
Mobile Banking and Digital Payments
As the world increases its dependence on smartphones and mobile devices, fintech developers recognize mobile banking as the more efficient and secure way to do business. Thanks to LTE connectivity in more parts of the world, customers quickly adapt to shopping and managing accounts online.
The coronavirus tragedy has placed greater demands on retailers to accept contactless payments and eCommerce features, including mobile-friendly stores, shoppable social media ads, and social commerce. Mobile shopping and banking has been so successful in 2020, that most people use the Internet from their phones before they do so from a computer.
Vendors are recognizing the long-term value in rewarding customers that keep coming back. Efforts to increase customer lifetime value means rethinking loyalty programs. The rise of loyalty ecosystems raises the value of customer loyalty.
As such, fintech plays a role in monetizing and securing loyalty ecosystems for retailers and service providers. Developers must help these vendors standardize loyaltybacked currencies, as well as provide reliable platforms from which consumers can acquire, store, and redeem loyalty currency.
Lifestyle Product-Service Bundling
Fintech is also helping organizations cross industry lines to offer consumers relevant, value-driven product-service bundles. In the transportation industry, for example, mass transit providers, rideshare apps, and hospitality vendors are working together to provide seamless bundles.
The end result of lifestyle product-service bundles allows consumers to find better value for their money. These bundles also increase efficiency, such as the case with transportation integrated with mobile wallets. Digital wallets in certain urban centers help customers find the best route using the best transportation provider, all the while managing reservations, event tickets, etc. from their mobile devices.
These capabilities require intuitive programs from fintech innovators. Fintech supply and demand is creating more opportunities for customer satisfaction, so long as providers are willing to digitally transform.
In Conclusion – Disruptions of 2020 accelerate fintech growth
2020 is a year that will long be remembered for a global pandemic and historic natural disasters. But the silver lining to the trials of 2020 is that experts developed new, digital solutions for which there had only been analog tools.
That’s why economic experts declare that more than ever before, fintech improvements are here to stay – the new normal. Despite sizable investments on the front-end, embracing fintech solutions amid a broader digital transformation strategy prove more lucrative for organizations in the long run. But for those businesses that ignore the current fintech trajectory, sustainability will be arduous and questionable, at best.
The disruptions of 2020 force organizations everywhere to embrace digital solutions in an effort to keep employees and consumers safe. Furthermore, accelerated fintech growth has empowered consumer spending to shift rather than decrease in most parts of the world.Elena Volkovskaya
Chief Strategic Marketing Officer