Ritesh Jain, COO- HSBC
The finance sector always had a high barrier to entry for start-ups. Bucking earlier trends, the last decade saw many new entrants. Dubbed Fintech as their USP was being at the cusp of finance and technology, they are expected to grow at a faster pace in the coming decade. Starting with services that traditional banks found tiresome or less profitable, like mobile payments, they are now poised to take over even core Financial Services like banking.
Let us look at some Fintech trends for 2020, the start of a new decade.
All-digital banks are already quite popular as they allow the users to perform all their financial transactions without stirring out of their homes or offices. The trend will gain even more momentum in 2020. An Accenture survey found that UK based digital banks will have 35 million European customers in the next 12 months. But, they will have to collaborate with offline banks so that customers can also have the option of visiting the bank.
It is a Win-Win situation for both banks and Fintechs involved because each gets to make up for their drawbacks. Having an offline presence makes the digital banks more trustworthy whereas tying up with online companies expands bank’s reach as well as business. Collaborating with Fintechs will also enable the banks to underline their intent of digital transformation.
PERSONALISED INTERFACES FOR CUSTOMERS
Industries have been built and thrived on the notion of providing personalised services to their customers. Financial institutions like banks have operated on different principles due to the nature of their services and highly regularised environment. Fintechs brought about a paradigm shift in the finance market with an emphasis on user experience and customer preferences. In 2019 PwC Global Fintech Report, 75% of respondents felt that Fintechs will have an increased focus on customers.
With cloud becoming cheaper and its technology better, Fintech customers can expect to get tailor-made services as well as advice through highly personalised interfaces. Better analytics provided by cloud services at a cheaper rate, combined with machine learning and AI systems would allow companies to understand the behaviour and actions of their customers better. This will further enable them to make personalised advice and services available at the click of a button. Or tap on the screen!!
ROBOTIC PROCESS AUTOMATION
Over the past couple of years, Robotic Process Automation (RPA) has become an effective tool to perform automated repetitive tasks quickly and cost-effectively. An RPA adoption at Bank of America produced cost savings of $100,000 per code and $350,000 per code change. Machine learning is already being used by Fintech companies. In 2020 they will find it easier and more reliable to transition to robotic systems that can function without day-to-day supervision. This will lead to major cost savings and faster time to market.
In 2020 RPAs will become even more powerful by using machine learning to train AI systems and chatbots. Services like credit scores, credit card application assessment, financial statements, etc. are expected to be completely taken over by RPAs.
Cheaper cloud and better analytics will fuel this trend even further.
BLOCKCHAIN WILL BE THE MAJOR DISRUPTOR
Despite the recent issues surrounding cryptocurrencies, it is a well established and a well-accepted fact that blockchains are the most secure methods of performing transactions and sharing information about them in a decentralised way.
In 2020 blockchains will finally be implemented in finance software. They would be used to make payments and data transfer more secure through smart contracts. Once smart contracts are embraced by most of the players, blockchains can be used for user data management, user identification, transaction authentication, and more day to day functions.
The data sharing mandated by the Competition and Markets Authority (CMA) opens lots of opportunities for the Fintechs in 2020. In 2020 Fintechs are expected to tie up with banks to provide customer facing products in a bigger and better way. Access to data, albeit in a structured way, will also enable new Fintech startups to build their products. This will further reduce the barrier to entry into financial markets.
Customers will have complete control over their data and Fintechs will be able to pass on the profits to them.
OVER TO YOU
Fintech has always been looked upon by banks and traditional Financial Institutions as a means to bring unbankable people under the ambit of financial services. Initially, they were the unicorns, the Silicon Valley startups who had ventured into finance vertical. As the concept and the services caught up with digitally savvy customers, big institutions in both finance and technology fields are getting into Fintech.
2020 will see a rise in the number of Fintech companies, a better understanding of how to handle humongous amounts of customer data being collected, maturing of service offerings, and widespread addressing of security concerns around using these services.
What do you think? Where do you see these Fintechs heading towards in 2020 and beyond?