In this digital transformation era, technology is helping every industry realize better efficiency and deliver customer satisfaction like never before. The same goes for the financial sector. Started by the birth of credit cards and ATMs in 1950 and 1960, respectively, technology has since been disrupting the finance industry.
There was a time when financial technology (Fintech) existed merely in back-office operations of trading companies and banks. The boom in internet connectivity, the mobile phone market, and cloud computing had propelled fintech’s ecosystem as the industry disrupter.
The Cashless Reality Is Near
The advancement of fintech in many of the finance industry verticals has paved the way for a cashless society. While cashless economies seem possible in the very near future, the reality is that a cash preference will last longer than expected.
However, the recent Covid-19 outbreak has fueled the growth of contactless payments. A study revealed that during the coronavirus outbreak, more than half of the payments in Germany are via contactless payment methods, as compared to 35% before the pandemic. Similarly, UK citizens also have reduced their cash usage to half after the nationwide lockdown.
Fintech businesses are playing an important role in shifting the world to a cashless reality. Considering the technology disrupting most industries, the future holds a lot of fortune for the fintech businesses.
Types of Fintechs
From insurance to investment, fintech is transforming the financial sector by changing how services are delivered to the end customer. The technological advancements have also opened doors for new financial services such as e-wallets.
While the technology is upgrading with each passing year, the financial sector has a wide range of technology-powered financial services. Here are some financial industry verticals where the technology has a significant impact:
Payment Gateways
Electronic payment systems were exciting even before the advent of e-commerce. These payment gateways have transformed the traditional payment systems and made economies grow faster. These payment gateways are the backbone of the current mobile payment infrastructure.
Payment gateways work as a middleman between merchants and customers or payer and receiver. It acts as a gatekeeper to the payer’s payment data and ensures the security of the transaction. Apart from mitigating the risk of data theft, the payment gateways also protect the payee from expired card payments, insufficient funds, and fraudulent activities.
Many technology service providers are developing blockchain technology-based payment gateways that are supposed to be more secure and cost-effective than existing ones.
Mobile Payments
If a completely cashless society isn’t going to be a reality in the near future, a physical card-less world is nearby. The advent of mobile payment systems has eased cashless transactions. It has become very easy to make payments via just scanning a barcode or connecting your e-wallets to the service provider’s application.
It all started back in 1997 when Coca Cola introduced mobile payments via some vending machines. This enabled customers to pay for their fuel by sending just a text message. In the very same year, an American oil company, Mobil, introduced Speedpass, customers had to pay for their fuel by using a key fob that was pre-loaded with electronic money.
Mobile Banking
In 2020, almost every bank had its own mobile app. And most of their banking services are also offered via apps. This has changed the way customers interact with the banks. Checking account balance, transaction history, managing bank account, transferring money has become convenient with 24*7 service availability.
The flurry of mobile-only banking apps has also made its mark in the finance industry. They cut down their operating costs by eliminating the need for physical infrastructure, unlike traditional banks that heavily rely on their physical setup and human resources.
Online Stock Trading
Days have gone when investors had to visit the stock exchange establishments to buy/sell stocks. With stock trading apps and online platforms,e stock trading has become decentralized, and now anyone can trade stocks at the flick of a finger using their smartphones. Similar to the mobile-only banking infrastructure, online stock trading services are cost-effective and convenient. They offer a low-minimum stock balance, making it feasible for everyone.
Robo-Advisors
Robo-advisors are the financial advisors that provide investment advice with minimal human intervention. These portfolio management / Robo-advising apps use smart algorithms to provide asset management advising. It helps financial advisers to analyze a large number of portfolios efficiently and in less time.
Insurtech
Insurtech is the use of technologies to bring efficiency to the traditional insurance industry. It is a growing phenomenon that is expected to help insurers interact with their customers in a better way. The advent of Insurtech businesses has brought new services into the insurance industry.
In the UK itself, the Insurtechs are emerging as a jewel of the fintech crown. The finding of $2.6 billion in 2018 implicates that the future of Insurtech is bright.
A Broader Outlook
From our savings to how we pay, technology has the potential to disrupt the finance industry. The financial sector has already entered the threshold of digital transformation. Financial institutions such as banks are undergoing massive changes to keep up with the changing demand of customers.
With this shift of customers from traditional financial infrastructure to mobile-only, it looks like the brick-and-mortar financial institutions will be a thing of the past. And who knows? Maybe the advancement in blockchain technology will bring security to the next level, and we might realize the dream of a cashless society.
