There are many ways technology is transforming the finance world, from automating long tasks, to a whole new monetary world called cryptocurrencies. In this article, we breakdown these changes into three main categories. Within each category, we explain the impact technology is having on the finance industry and how tech is shaping its future.
• Technology creates a new level of visibility and improves capabilities by providing better and more accurate financial insight and analytics
• Technology enables automation which saves costs and drive efficiencies to allow teams to focus on other key priorities
• Technology adds stronger, more secure foundations of financial transactions
Technology opens a new world of opportunity for companies, cutting out unnecessary costs and enabling an ease of processes. A great example of this is mobile banking apps, enabling customers to view their financial data on the go, removing the need for visiting a physical visiting a store and freeing up staff to focus on other customer needs and priorities.
Technologies such as AI and predictive intelligence, help users and finance experts create better educated decisions on cash flow and forecasting. Technology brings with itself a variety of data sets that would not have otherwise been available if it wasn’t for digital systems. These systems and algorithms bring a neutral, unbiased prediction based on the facts when it comes to data-backed prediction decisions.
In recent times, the term for financial technology is now widely known as FinTech. When a finance company introduces technology into its organisation, such as computer programmes and other technology used to support or enable banking and financial services, it’s known as FinTech. Blockchain technology and ATM machines are also included in this.
There are eight FinTech categories, with some FinTech companies spanning into more than one category:
1. Banking – Core products include personal current accounts, savings, and mortgages.
2. RegTech – Focuses on companies with technology and activities focusing on reimaging and streamlining risk, credit scoring and compliance.
3. InsurTech – Includes companies selling insurance digitally or introducing new digital business models or reinsurance software.
4. Lending – Companies focusing on innovating credit, including commercial to alternative and specialist lenders and platforms that facilitate P2P.
5. Business Banking – Primarily focused on supporting SME businesses with services such as accounting, payroll, invoices and expense management.
6. Payments – Businesses that provide money transfer, remittance and foreign exchange services.
7. Quote Aggregators – Provide online comparison systems for consumer quotes such as insurance and mortgages.
8. WealthTech – The largest category, focuses on investment and management platforms, sales and trading analysis tools, personal finance management and crypto exchanges.
FinTech’s crucial aspect is the price; customers and financial firms can save money on the transaction costs. The main advantages of this technology are the speed, security and accessibility it brings. Being able to prevent financial software from being attacked is crucial for all companies.
With the nature of the pandemic, the shift to remote working has required the need for Cloud technology more than ever before. Cloud adoption has been key to permissive home working and while this can bring many security and resilience perks, numerous of them rely on organisations constructing cloud environments accurately with security-built in.
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If you’ve used social media recently, you’ll have probably heard of the term, Bitcoin. Bitcoin is a virtual currency, each Bitcoin is a computer file which is stored in a “digital wallet” app on a smartphone or computer. Bitcoin and many other cryptocurrencies have become popular in recent times and this type of technology is called Blockchain.
Blockchain is a distributed digital ledger that stores data of any kind. A blockchain records important financial data such as cryptocurrency transactions. To break it down for you, the digital ledger is defined as a “chain” which is made up of singular “blocks” of data.
When new data is systematically added to the network, a new “block” is established and connected to the “chain”. The key to why blockchain is considered so exceptionally secure is how these new blocks are created. New data must be verified and have the legitimacy confirmed before a new block can be added to the ledger.
Blockchain is a much cost effective way of carrying out transactions. Blockchain is a sophisticated technology that dramatically decreases the chance of human error which makes it one of the safest and most secure financial transaction mechanisms currently available.
Another big change has been allowing customers to be at the forefront of ease and accessibility. As time goes on, customers are leading a more digital lifestyle that provides them with more options. And this is no exception for banking. Digital banking software creates a more unique and personalised digital experience for their customers.
When a customer opens an account with the bank, they are offered a free mobile app that allows them to manage their finances online at their fingertips. Mobility, instant service and reliability are the big advantages of digital banking services. Banks who are slow to adopt these innovative technologies will fall behind against their competitors if they don’t offer these now expected, modern services.
Finance firms are aiming to increase their growth and innovation by investing in digital solutions. The customer centric focus and speedy services are attracting new customers and in return, increasing the profitability of the finance sectors. It’s important for the finance industry to keep up with the digital world, but it can become an issue when technology is on a low budget.
As technology advances, the amount of customer data gathered continues to increase. From banks making lending decisions based on a user’s credit score to insurance companies reviewing your driver and health records before offering a policy; as people and technology devices become more unified, new streams of real-time data are apparent, and with them, innovators use that data to back their financial decisions.
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A US health insurer company, Oscar, offers its policyholders a free wearable fitness tracker, and in return, encourages their customers to be more active. As these analytic models and wearable devices advance, we will likely see more and more financial companies working to encourage their customers to improve their lifestyle and behaviours in return for monetary incentives.
The core way tech has transformed the financial industry, is through automation by simplifying the tedious tasks which provides a raft of benefits from cost and time saving which enables staff to focus on other key priorities and in turn provide a better service for their customers.
A brilliant example of this, is that people can now simply track and categorise expenses at the click of a button rather than manually entering and categorising expenses line by line. Another great example of this is computer systems and tools which enables users to instantly download and scan documents and receipts quickly and efficiently. which then improves machine learning meaning our devices are continuously learning and improving.
Machine learning is a powerful tool in our modern day, it‘s algorithms use statistics to find patterns in a mass amount of data, which embodies a number of things such as – words, numbers, clicks or images. If it can be stored digitally, it can be passed into a machine-learning algorithm.
All in all, technology is transforming the way the finance industry functions and operates for the better. Technology is constantly evolving and improving, which saves people the number one valuable thing in life, time. If companies don’t keep up with modern digital solutions, they’re likely to get left behind as more and more firms are leading with the customer experience and ease as their priority.
If your company needs advice or assistance in digitising your finance solutions, our expert team can help. From custom software, mobile apps or customer portals, we specialise in helping organisations understand and leverage the power of digital and technology to improve efficiencies, engagement, and drive true transformation with tangible results.