How does legacy cloud migration ensure business continuity in FinTech? Explore in this article.
Did everyone have Business Continuity Plans in place and protocols to follow during the pandemic? Yes, definitely. Did anyone expect a disaster of magnitude like this? Not in their wildest dreams or gloomiest forecasts! The pandemic forced hundreds of millions of employees to shelter in place, essentially moving all operations online. Not all organizations were equipped with the needed technological tools, and most businesses were caught off-guard. FinTech companies were not immune to the aftermath.
For example, pre-COVID-19, it is true that a few FinTech organizations began migrating to Cloud. But, conversely, there were many who hesitated to embrace the cloud migration strategy because of legitimate concerns over critical factors such as rising costs, managing complex business data and workloads, re-training existing IT staff, and more.
The pandemic was a wake-up call that helped businesses identify legacy cloud migration as a relevant and vital choice. Though most companies have realized that modernizing old, outdated business applications can boost productivity and increase efficiency; some are still hesitant about their cloud migration strategy.
This blog explains why FinTech organizations must consider legacy cloud migration seriously and what are some specific benefits of cloud migration strategy.
What is legacy cloud migration?
Legacy cloud migration involves moving on-premise applications, outdated software, or programs that a company has relied upon for years. These applications may include everything from sales or CRM applications to industry-specific applications. Some FinTech organizations may be reluctant to migrate to cloud just because legacy cloud migration is a daunting project. However, maintaining a status quo can be detrimental to your business growth.
Legacy cloud migration is the only light at the end of the tunnel
The pandemic has triggered a significant reexamination of FinTech businesses and their IT priorities. Gartner predicts that “by 2022 cloud shift across key enterprises IT markets will increase to 28%.” This era of economic uncertainty caused by the pandemic affected all businesses, especially, FinTech organizations. A report from Yellowbrick showed that 84.3% say cloud computing is more important than workplace disruption.
Thankfully, cloud migration strategy was available when it was most needed – a phase when maintaining business continuity has become a priority. Consider the most important reasons for legacy cloud migration.
Why FinTech Companies Should Embrace Legacy Cloud Migration
1. People matter more than premises
As the pandemic hit the world with one wave after another with no time to catch a breath, there was a dire need for remote self-service technology. The massive role played by people working from home is a clear indication that people matter more than premises. A year ago, cloud migration strategy was considered discretionary. Today, work from home has made cloud migration mandatory.
Hence, now is the time for FinTech organizations to plan for their business continuity to remain adept for future upheavals, disruptions, or even disasters. When your organization migrates to cloud, you ensure your teams’ effectiveness while working remotely.
2. Prepare for the next
Though the pandemic is wreaking havoc, it will recede in due time. However, what remains is a possibility of a similar recurrence of disruption in the future. Hence, FinTech organizations must prepare for future disruption by recognizing that the calamity to come may not be another pandemic but its functional equivalent. Legacy cloud migration will equip you to face any future disruptions and remain resilient.
3. Facilitate real-time payments
Banks are well aware of the advantages of real-time payments. The race is on for upgrades and integrations that allow organizations to leverage real-time payments. A survey of over 500 executives indicated that 71.9% are ‘extremely interested’ in such payment capabilities. Above all, cloud brings in scalability and agility to real-time payments. Cloud migration strategy can improve the speed and consistency of transactions. Besides, it can enable fast and frictionless transactions.
Legacy cloud migration allows banks to adopt digital payments. Banks can address many of their traditional payment pain points, such as spikes in demand.
Collaborating between payment players and cloud service providers can help your organization provide a more secure digital experience for your customers. This is of paramount importance in a world where contactless interaction is the key. According to a McKinsey survey, banks that adopt digital transformation were able to increase customer satisfaction by 15-20%, reduce cost by 20-40%, and boost conversion rates and growth by 20%.
While consumer expectations and payment preferences continue to evolve rapidly, cloud migration strategy will help FinTech industries to stay relevant and continue to grow.
4. Scalability and flexibility for an uncertain future
FinTech firms need an infrastructure that can grow with them and protect their business from future disruptions. Migrating to a cloud platform equips FinTech firms to adapt to branch closures while extending banking services to as many people as possible. Legacy cloud migration provides the agility to scale with speed while saving on on-premise infrastructure that is comparatively expensive to maintain and upgrade. Moreover, it can provide your organization the needed accessibility, flexibility, and scalability during economic downturns.
5. Manage risks and compliance
Efficiency, automation, and cloud-based delivery will be critical for compliance operations. It is vital to use next-generation technology and emerging digital approaches to optimize risk modeling. Since legacy cloud migration is agile, flexible, and low cost, it can solve many challenges in operational risk and financial crime compliance activities. Additionally, solutions deployed in the cloud can assist with operational challenges.
6. Data management
Acquiring large quantities of accurate data is a top priority for all FinTech firms. Their success depends on all the information they must collect, from onboarding to analyzing their spending habits. Cloud migration strategy enables your firm to gather and store data securely while allowing your designated employees to access it from anywhere when required.
The FinTech industry is at a crossroads now. How it responds to the current crisis will determine its future. The key to the survival of FinTech companies will be the rapid digitization of their business and the adoption of cloud migration strategy. Migrating to the cloud is as important as the historic move from typewriter to computer. Cloud migration has become a global force for business growth. It can reduce overhead costs and help your team focus on increasing productivity and performance.
Cloud migration strategy will become inevitable as the FinTech industry builds a more accessible financial world. By partnering with a cloud migration services provider like Fingent, you will be able to quickly and seamlessly migrate to the cloud without disrupting your business. We also help you build FinTech applications and platforms leveraging the latest technology in the market. So, give us a call, and let’s get talking.
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Smart Contracts to Streamline KYC: A Big Leap in FinTech
The advent of online transactions has brought in improved convenience, speed, and cost advantages across various aspects of our lives. KYC processes, online shopping, insurance premium payments, internet banking, and a host of financial functions have witnessed a drastic transformation with the adoption of FinTech solutions.
However, these digital advancements have also taught us that a person’s online identity is not always what it appears to be. Identity theft, phishing schemes, and money laundering are just a few examples of digital scams that have wreaked havoc in the finance sector. Shockingly, a report by PwC stated that “in 2020, the average US organization experienced six incidents of fraud in the last 24 months and customer fraud ranks first among them.” The total loss suffered by the US companies from the frauds is close to $6.5B (over the past two years).
As many of us know, the KYC (know-your-customer) process was designed to eliminate the risk of customer fraud. Various companies use KYC to verify their customers’ credentials with the ultimate aim to confirm that they are not fraudulent or engaged in any criminal activity. However, KYC is a labor-intensive, repetitive process that is prone to human error. This blog explains how smart contracts for KYC can solve problems related to customer fraud and identity theft. Before that, let’s consider what smart contracts are and how they work.
What are smart contracts?
Most industries are eagerly adopting blockchain technology for smart contracts. According to Statista, “in 2021, global spending on blockchain solutions is projected to reach 6.6 billion dollars and is expected to reach 19 billion US dollars by 2024.”
Investopedia defines a smart contract as a self-executing contract that entails an agreement between the buyer and the seller. A smart contract encodes the agreement/ transaction between two parties and exists across a distributed, decentralized blockchain network. Smart contracts eliminate the need for an external party or an intermediary to enforce the contract as defined. The decentralized blockchain network controls the execution of trusted transactions and agreements. All the transactions are trackable, irreversible, and impossible to manipulate because of the immutable audit trails created by blockchain.
In simple words, smart contracts are programs that run based on predetermined conditions. Participants engaged in a smart contract are sure about the outcome. The unique digital structure of a smart contract makes it super secure and resilient to any kind of data modification. What problems do smart contracts solve, though? Here are a few examples of real-world problems solved by smart contracts.
How does a smart contract work?
A smart contract is a blockchain application. Just as a standard legal contract, a smart contract outlines the terms and conditions between two organizations. It works on a condition-based principle, that is: ‘if-when-then.’ Smart contracts allow you to define as many conditions or terms as you would require. Moreover, a smart contract enables both parties to interact in real-time, saving enormous time and resources. Additionally, it allows for anonymity, if needed.
How smart contracts assist banks and financial institutions to solve KYC-related problems?
1. Identity theft
Clients’ identity includes data on where they live, their passport number, driving license, security number, and so on. These data points are stored in centralized databases. If a criminal gets hold of one of these documents, they can exploit certain security flaws and steal your client’s identity. Cybercriminals can use your customer’s identity to gain some financial advantage or steal money. There have been occasions when a criminal successfully stole a deceased person’s identity to commit crimes.
Smart contracts on blockchain offer a novel solution that may include a comprehensive electronic signature service. It allows access to a private key and a public key. While a public key provides access to your public records, it offers concrete security as no one has access to change or edit your data. However, a private key allows you to give access to those required. This simple method helps prevent and restrict identity theft. Best-in-class data encryption technology ensures the highest levels of safety standards.
2. Distributed user data collection
Smart contracts enable finance companies to uncomplicate the process of identity verification. It can make data available on a decentralized network. For example, claiming, verifying, and processing insurance has always been a labor-intensive task that frustrates your customers. Smart contracts offer a single source of truth, drastically reducing friction in the business process.
Here is how smart contracts simplify the process:
- Make data reconciliation easy
- Improve accuracy
- Minimize time spent in uncovering information
- Enhance improvements in speed and accuracy
- Improve customer experience
3. Automation and standardization of operations
Client data is collected daily. Name, address, and social security number are required for almost all transactions. Considering the recent progress achieved on KYC policy standardization, it is now possible to use smart contracts to control operations and execute agreements or transactions.
You can streamline the procedure across the industry by coding and standardizing the KYC workflow. It will minimize manual oversight and increase the effectiveness of the KYC system. It even allows you to implement multilingual solutions with the help of translation tools and smart contracts. Since smart contracts remove the need for a manual process for each document, decisions can be made quicker.
4. Comprehensive authentication process
It is crucial to verify the identity of individuals for data protection compliance and the prevention of fraud. A cryptographic verification solution is vital here. On the other hand, industries face another major challenge – allowing users to conduct online banking through apps. The glitch is that if a person loses her smart device, she exposes herself and the bank to a greater security risk.
Fortunately, the blockchain’s decentralized model almost eliminates the security risk by not allowing any edits on the data accessed by the thief or the fraudster. Once a smart contract on blockchain is formed, it remains immutable.
5. Communication and transparency
The smart contract will allow you to monitor everything from account openings to day-to-day transactions actively. Since the terms and conditions are pre-defined, it is recorded immediately, and remittance is raised automatically. This process avoids laborious approval workflows.
Since it allows for trust data to be stored on the KYC smart contract platform, banks or financial service providers can eliminate the secondary validation processes and cross-checking. Apart from this, when mistakes occur, they are quickly identified, reported, and solved. While transparency has to be dictated by the parties involved in traditional contracts, smart contracts always remain transparent. Such openness makes tracing transactions less cumbersome and could be traced right from the point of origin. Additionally, it automatically creates fully accessible history.
6. Heightened security
KYC banking processes can go on for weeks, highly increasing the maintenance of regulatory compliance as the industry struggles to dodge financial fraudsters and terrorists. Fortunately, a shared ledger will help adjust and monitor the KYC process for all those involved. This would allow all parties to view any changes or updates made to the clients’ data. Such direct access would save on the time-intensive process of identifying suspicious activity and reporting it.
Get smart with smart contracts!
As you can see, Smart Contracts are so much more than just an intelligent way of handling contracts. They are going to become the only way, and it’s time you get ahead of the competition by leveraging this technology. Talk to us and allow us to guide you through any questions you might have.
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Embedded finance, aka embedded banking, is transforming the financial services distribution model. E-commerce companies, Point-of-Sale systems, ride-sharing apps, food ordering apps, and other digital financial service providers consider it a revenue opportunity.
Is 2021 the Beginning of the Embedded Finance Era?
With over $7 trillion in revenue, embedded finance has generated a significant buzz in the FinTech market. Sadly, the financial services industry has not upgraded its core business model in years, and the COVID-19 pandemic has made the need even stronger than before.
While banks and insurance companies have spent exorbitant amounts of money digitizing their existing processes, it is high time that they invest fully in creating digital business models to recover the economic crisis.
Embedded finance helps businesses overcome digital adoption barriers and offer outstanding financial services to customers. While embedded finance will benefit the economy globally, its potential implication for the FinTech industry is massive.
Fingent’s FinTech application development services continuously provide financial service and technology innovations, valued by global financial services institutions.
What is Embedded Finance?
Embedded finance is the amalgamation of a non-financial service provider with a finance service. It allows enterprises to create new revenue streams and reinvent the services they offer their customers. It is beneficial to both the enterprises as well as users. In most cases, it is easier to buy products from one single source instead of interacting with many other businesses over the day.
FinTech is already growing at a significant rate, and the pandemic has caused more people to use day trading platforms from lending sites to stocks.
As the world will start incorporating FinTech in their lives, embedded finance opportunities will increase in the future.
What are the opportunities for Embedded Finance?
The most significant advantage of embedded finance is that it streamlines financial processes. Previously, there was a gap between a consumer and the service provider or seller. So, the consumer would often approach a lender or a bank to bridge the gap. However, with embedded finance, the need for a third-party bank or lender is eliminated. Here are a few examples to understand how embedded finance can help you.
Read more: FinTech Innovation: What Is In Store?
1. To make payments
For some consumers, paying with cash for a purchase hurts, making them reconsider a purchase. Embedded systems help eliminate this pain. A consumer using a mobile app with an embedded payment program can tap a few buttons and make a purchase instead of digging into their wallets for cash – for example, a ride-sharing app like Uber. So, when you book your ride, you don’t have to pay the driver cash or pull out your debit or credit card at the end. Instead, you complete the transaction in the app after you reach your destination. You can also use the embedded system to order your favorite cold brew or lip-smacking snack from Starbucks. The mobile app allows users to order and pay for their best-loved delicacies. Starbucks’ online ordering system also rewards customers with redeemable points for every purchase.
Before embedded finance, a person had to apply for a bank loan or open a credit card if he/she needed to borrow money. However, with an embedded system, a person can apply for and secure a loan at the time of purchase.
Klarna and AfterPay are examples of embedded lending. These programs split an online purchase into smaller monthly payments. For instance, a payment of $100 can be divided into four installments with $25 each.
The need to consult an insurance agent or broker for purchasing an insurance policy is eliminated with embedded insurance programs. In the past, buying insurance was needed to buy a car or a house. Also, it was a completely separate part of the process. Some companies have now found ways to speed things up and increase their bottom line by embedding the action of applying for an insurance policy into making a necessary purchase.
For example, Tesla offers an insurance program that allows people to purchase an appropriate amount of coverage almost instantly. Additionally, the insurance available directly from Tesla costs less than a policy from a third-party insurance provider.
Most people feel investing is a complicated process and prefer to stay out of it. However, embedded banking programs help simplify the investing program.
For example, Acorns is a program that invests your spare change by rounding up purchases, thus making investing seamless and touch-free. It doesn’t require you to manually pay back the money since the app takes care of that. They adjust their portfolio according to the market, and so you don’t have to pay attention to the values of mutual funds or stocks.
How can enterprises use embedded finance or banking in their products or services?
Organizations can embed finance or banking in several ways. Even companies that are not in the FinTech industry are seeking ways to offer financial services. For instance, Shopify is offering lending services and bank accounts to companies. Organizations like Udaan and Grab have also started financial services like Udaan Credit and GrabPay.
In some cases, companies can act as connectors between financial services and non-financial businesses. For example, organizations can use a data transfer network by Plaid to offer financial products.
Another option for companies is that they can work with businesses that embed the required infrastructure into their products or services. With an increasing number of transactions and payment processing, the platform ecosystems can expand quickly, giving rise to the need for external financial services.
How is embedded finance beneficial to companies?
1. A new revenue system
Most customers show displeasure when redirected to multiple applications or experience a failed transaction due to timeout. The best resolution to this issue is to have a single unified flow in the customer journey. Customers would stay loyal to a brand if they have an easy-to-use eCommerce website.
Companies can charge a small fee as a commission on such transactions. It helps companies to have a new revenue opportunity without investing in bringing in new customers.
2. Increased hit rate/footfall
Embedded finance products can boost footfall if they can provide an overall improved experience. Given the cut-throat competition, customer loyalty can decline when a better product is launched in the market. Consumers will not hesitate to switch their allegiance to a competitor as long as they get what they need.
Companies can expect an increase in hit rate and better scope of converting users to potential customers with embedded finance products. If the transactions are smooth, the conversion rate will improve.
3. Use existing resources
Organizations need not worry about the expenses and resources needed to acquire new customers or procure high-level infrastructure. By including a financial angle to create an embedded product, you can modify the current systems.
4. Improved customer experience
Embedded finance helps companies create a unified journey for their customers. Offering more services to the customers will eliminate their need to deal with a third-party vendor for completing their transactions. It will result in higher profits. The direct connection between the customer and the company will help improve the customer experience significantly.
How will embedded finance change the future of the FinTech landscape?
With the evolving nature of technologies, embedded finance will persist due to its customizable nature. It will give rise to new opportunities and reduce the gap between various industries and their interactions.
Companies must be open to collaborating to build a bigger market, survive, and stay ahead of the competition. Software solutions providers and technology companies like Fingent play a crucial role in boosting the financial services landscape. Contact us to know more about our FinTech software development services and solutions.
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Technology in Finance: An Overview of the 2021 Landscape
Technology in finance, along with evolving consumer behavior and regulations, are transforming the financial services industry. The COVID-19 pandemic is accelerating the industry’s focus on digital offerings. Government payment schemes, emergency loans, and personal finance management are the need of the hour.
With several bank branches shut and long waiting hours for phone assistance, financial institutions are forced to invest in better IT infrastructure, relevant automation, and technology in finance to deal with the growing consumer demands.
Read more: The impact and significance of digital transformation in financial services.
A study of financial institutions (FIs) by ISMG and OneSpan in North America revealed that providing customers with a top-notch experience is their main priority. 49% of the respondents feel that legacy and manual ID verification are the biggest obstacles to digital opening for FIs, while 35% found that knowledge-based authentication tools were obstacles to onboarding.
Some general FinTech statistics worth knowing are:
- By 2022, the global financial sector is expected to be worth USD 26.5 trillion with a CAGR of 6%.
- 49% of banks and 60% of credit unions in the US believe that FinTech partnerships are worth it.
- Digital payment is one of the most significant FinTech products and holds about 25% of the FinTech market.
That said, many banking and financial institutions are adopting the latest technologies such as artificial intelligence, blockchain, etc., into their operations to benefit their customers, stay competitive, and improve business growth.
Here are the top five technologies that transform the financial services industry currently.
1. Artificial Intelligence
The most crucial advantage of Artificial Intelligence in the finance industry is cost savings, which is anticipated to be worth $447 billion by 2023.
AI systems are a game-changer for the finance industry as they can examine vast amounts of data and find patterns and trends that people may miss, and even predict future trends. AI technology makes it possible to automate processes and manage tasks such as comprehending new rules and regulations or generating personalized financial reports for individuals. For example, IBM’s Watson is capable of understanding complex regulations, including reporting of markets’ requirements in the Financial Instruments Directive and the Home Mortgage Disclosure Act.
Chatbots in banking are helping automate simple tasks such as opening a new account or transferring money between accounts and are proving to be a great money-saving tool.
Many financial institutions such as Bank of America and JP Morgan Chase use AI to streamline customer service. Additionally, AI facilitates mobile banking that allows 24/7 access to customers to conduct banking operations. AI is also helping financial institutions boost security and detect and prevent fraud.
Blockchain is a promising technology that will impact financial systems significantly. Blockchain technology is inspiring to create several P2P (peer to peer) online financing platforms that help monetary interactions happen in a more decentralized way. Blockchain technology can improve existing systems and processes and create cryptocurrencies.
Five typical applications of blockchain include:
- Make cross-border transaction processes faster, more accurate, and less expensive
- Banks can leverage trade finance to create smart contracts between participants, increasing transparency and efficiency
- Clearing and settlement procedures
- Protect against fraud and speed up the verification process with blockchain-enabled IDs
RegTech is a regulatory technology that uses cloud computing technology through SaaS (software-as-a-service) to help businesses comply with regulations efficiently and lower costs.
The various areas of RegTech intervention are:
- Data management
- Reframing regulations and implementing new governances
- Real-time reporting
- Data- analytics and decision
- Fraud and risk management
Non-compliance with mandatory government rules leads to fines and crisis. So most FIs want to do everything in their power to avoid non-compliance.
The need for RegTech solutions is growing as FIs grapple to stay compliant with new and existing regulations. RegTech solutions will create a layer that companies will rely upon significantly. Its high accuracy, single dashboard, data analytics, alerts, and insights will help companies optimize resources allocated to compliance and achieve better results.
4. Machine learning
Similar to AI, machine learning helps create a marketing campaign around the consumer. It enables you to understand what kind of services will attract your target market. For example, how people find a financial website, what page they clicked, and what services they need.
Machine learning algorithms and their capability for sentiment analysis will impact trading significantly in the future. It involves using enormous volumes of unstructured data such as photos, video transcriptions, social media posts, presentations, webpages, blogs, articles, and business documents to understand the market sentiment.
Sentiment analysis will transform the future financial markets, and many believe that machine learning will be central to developments.
5. Big Data
According to the IDC Semiannual Big Data and Analytics Spending Guide, currently, banking is one of the top investors in big data and business analytics solutions. Credit card transactions, ATM withdrawals, credit scores, etc., generate massive amounts of data. Deriving actionable insights from this data is crucial to optimize financial processes and make effective business decisions. It will increase the competency of financial institutions in the future.
Big data can help FIs learn more about customers and make business decisions in real-time. Big data analysis allows FIs to identify market trends and streamline internal processes and reduce risks.
Read more: FinTech Innovation: What Is In Store?
The Future of FinTech Adoption
82% of traditional financial organizations plan to collaborate with FinTech companies in the next five years as they fear losing out. 88% of established FIs believe that they may lose to standalone FinTech companies in the next five years if they fail to adopt FinTech innovation.
Financial companies will have to work towards providing a seamless digital experience for their consumers. To avoid the risk of losing out in the market, many FinTech startups, incumbent financial institutions, and technology companies are entering into new partnerships.
Technology in finance is no different than other disruptive technologies across various industries. It would be wise for even small businesses to consider FinTech as an investment for the future. Fingent has developed end-to-end disruptive technologies and innovative FinTech solutions that will help your business thrive and stay relevant. Contact us for more details.
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The Future of FinTech Looks Promising: Here’s Why!
The COVID-19 pandemic has caused significant disruption and has also cast doubts on the future and growth of the FinTech industry. Despite the devastating impact of the coronavirus pandemic on the global economy, FinTech leaders remain cautiously optimistic about the industry’s growth. They forecast that as people, businesses, and leaders tackle the ongoing outbreak of the pandemic, market fluctuations will experience stability. As soon as the crisis situation is settled, the market is forecasted to start experiencing growth. FinTech solutions are foundational to how we transact in the current scenario and tackle the future market. It is vital for financial institutions to up their game to deliver smarter, quicker, and safer solutions.
What are the upcoming FinTech opportunities that will impact everything in the financial ecosystem?
The ‘Digital-Only’ Era
1. Digital payment services
The coronavirus crisis has brought the significance of cash management to the forefront. There are massive technical and fundamental shifts taking place that are quickly becoming the new normal. Digital-only banks are one of the many such shifts and they increase efficiency and convenience. Nobody is expected to visit the bank physically, stand in long queues, and go through a lot of paperwork. With digital-only banks, you can create an account or transfer money at a location and time convenient for you. Some of the amazing features of digital-only banks are a quick review of account balance, account transaction history, bill payments, and real-time analytics. They offer P2P payments with no transaction fees. They also offer Ethereum and other cryptocurrency transactions. Digital-only banks have a deep connection with technologies such as blockchain.
2. Digital lending
Digital lending is one of the FinTech opportunities that’s prospering while shutdowns and layoffs across the globe resulted in a cash crunch for most individuals and households. Governments have provided some help. However, it is largely left up to financial institutions to provide loans to individuals and businesses. Fintech companies perform better than their traditional counterparts in the lending segment by leveraging AI technology. They can use AI to screen applicants and rate their credit-worthiness. It allows loan applicants to secure loans quickly and conveniently.
Financial institutions must partner with FinTech application development service providers to leverage self-service, multi-channel digital lending processes. This includes loan processing, screening, collection, and credit scores. As an end-to-end process, it will provide customers with a smooth onboarding and approval lending experience.
3. Digital investing
Retail investors around the world are more active in the stock market now than ever before. Access to information that was previously restricted to more advanced investors, has fueled an exponential increase in retail investing. This trend will continue.
Read more: FinTech Innovation: What Is In-Store?
The Era of Blockchain Technology
Identity theft and fraud have been the bane of financial institutions for many years. Blockchain technology plays a crucial part in saving the industry from these problems. The rapid growth and adoption of blockchain is making it an integral part of financial institutions’ operational infrastructure including digital payments, trading shares, smart contracts, and managing identities. Blockchain features such as global reach, speed, and security are motivating its faster adoption among financial institutions.
Companies must build trust and display transparency in contracts and the supply chain. Using blockchain helps them gain visibility throughout the supply chain. It also takes care of quality control and performance benchmarks. It is crucial that financial services quickly adopt blockchain into their systems and search for opportunities to increase FinTech partnerships.
Impact of Regulation
Regulators are needed to balance innovation with customer interests. Regulators have been proactive in helping businesses deliver greater customer value by defining data privacy rules. This has fueled a massive shift in how people spend, buy, save, borrow, and invest. Given the enormous innovation in this sector, the FinTech arena is divided into five broad categories:
- Deposit, lending, and capital raising
- Payments, clearing, and settlement
- Investment management
- Market support
We know that compliance with regulations will become mandatory for banks. This makes it important that banks adopt a flexible and robust digital strategy in order to solve regulatory challenges. Leveraging digital transformation and FinTech innovation will help banks to evolve as a modular body that becomes highly responsive to political and social pressures.
Robotic Process Automation
Robotic Process Automation (RPA) can automate repetitive processes in banking, insurance, and other financial services. This will lower the risk of common errors and inefficiencies while increasing productivity and ROI. RPA does not require programming. Efficiently programmed software robots can automate repetitive processes. Intelligent automation technology goes a step ahead to observe human actions and automate directly, the entire process. IA can be effectively used in the administrative section for the customer onboarding process, risk assessment, data analysis, security checks, and more.
What must you do to take advantage of these opportunities?
Here are a few things you can do to leverage the massive opportunities made possible by the digital-only era:
Financial institutions must invest in the right technical infrastructure. With multiple technology options available in the market today, it is imperative for financial institutions to make the right decision based on the company’s needs and objectives.
2. Market proposition
Develop a clear market proposition. You must partner with FinTech companies to develop robust and scalable apps. Having them as trusted advisors will help you retain your customer base.
Before partnering up with FinTech companies, you must examine their needs and plan on how they want to execute them. This will help you derive greater benefits from the partnership.
4. Product hierarchies
Incorrect product or service information can damage the good reputation of your company. Have a clear definition of products and services and outline their use and cost. This will minimize reputational risk and maximize the opportunity to retain and acquire customers.
Most bank customers may want to switch their accounts. You must allow switching and help your customers to switch seamlessly between products.
6. Educate your customers
Your customers may not be aware of the digital services you provide. Hence, it is important that you educate your customers regarding the use, safety, and implications of your digital technology.
Read more about our Case Study: How Fingent enabled NEC Financial Services to take advantage of the FinTech revolution?
Access to data presents new opportunities for growth. With continuous technology penetration, financial services will see steady growth resulting in the expansion of FinTech. In many ways, FinTech contributes to the revolutionization of the financial sector and the way customers interact with your business. It offers your customers a hassle-free experience and helps your employees to be more productive.
FinTech will help you keep your focus on customer experience and personalization that can drive user loyalty. For a technology partner who will get you to reach new heights in this new era of Fintech, call us!
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The inevitable role of FinTech in improving your financial systems and outcomes
The COVID-19 outbreak has affected every aspect of the economy including financial technology or FinTech. Postponed events and conferences mark missed opportunities for FinTech companies, which could have been a great time to build relationships and focus on new businesses. As investors and customers retreat to more cautious positions, FinTech companies may find fundraising a challenge. Those who seek consumer investments are hit harder. Consumers may be reluctant to invest during such volatile times. Even those consumers who are relatively insulated from economic fallout may choose to invest in safer options for the present. FinTech innovations can improve the efficiency of the financial system and financial outcomes for their customers. This article will discuss how FinTech can safeguard customers’ interest in the post-pandemic world.
What is FinTech?
FinTech is a combination of Finance and Technology. It is used to describe new technology that can improve and automate the use and delivery of financial services. It also enables people to live upgraded lives through innovation. FinTech includes many sectors such as fundraising, education, retail banking, and more. It plays a major role in the development and usage of cryptocurrencies. FinTech also covers various day-to-day financial activities including money transfers, check deposits, and investment management.
Read more: FinTech Innovation: What Is In Store?
Why protect customer interest?
Customers are the primary source of growth, so they must be handled with the respect they deserve. Any product or service which is customer-centric offers the potential to attract and retain customers. Since FinTech provides advantages of speed and convenience, customers are looking at FinTech as a viable alternative. People want streamlined services with applications that are easy to adapt to. Hence, FinTech companies are outlining measures to make their services less complex and more transparent. They are focusing on creating better digital processes that their customers can personalize easily.
Customers’ convenience and requirements are paramount for FinTech start-ups. To that end, they are designing products and solutions to ensure customer satisfaction. Delivering a top-notch customer experience is the goal of FinTech companies globally.
Measures to protect customer interest
Here are some cutting-edge technologies that are protecting customer interest now and into the future:
1. IT foundation for better customer experience
FinTech startups are usually smaller in size and have a technological edge. They have a fresh canvas, allowing them to migrate easily from legacy technologies. The younger digital-first audience is attracted to their services. Larger FinTech enterprises must adopt a new IT foundation with modern technologies. Currently, FinTech customers prefer startups over established brands because they can reap the rewards in the form of better digital experiences. Though startups have a technological advantage, they must continue to focus on their capital reserves to make it through these unprecedented times.
2. Digital communication tools
The FinTech sector is based on understanding the needs of their customers. It is crucial for these companies to strategize the manner in which service providers communicate with their customers. This gets customers locked onto their services with relative ease. Communication through online media or through the content on your site can draw in new leads and build customer trust. When customer interest is protected, they will most likely return to you. In turn, they will recommend the service to their relatives and friends. These parameters are crucial if you want to keep your business afloat.
3. Embrace digital transformation
While your staff may be susceptible to coronavirus, technologies like ML and AI are immune. The financial services system must address customers’ demands swiftly and efficiently. Smart devices and the integration of artificial intelligence are a great way to achieve this. Virtual assistants and chatbots can deliver a customized experience to your customers. They perform all the activities that are usually done by customer service personnel and other executives. However, these digital solutions are faster and reflect sophistication. Digital transformation provides holistic 24/7 monitoring and automated remediation.
4. Digital banking
Previously, a customer’s confidence in a financial company depended mostly on physical infrastructure. However, COVID has changed that momentously! The new generation banking system is going all-digital to reach mobile-first customers. Digital-only banks do not need sophisticated infrastructure or higher human resource management. Digital banks are able to deliver cost-effective, robust services that match the high standards set by traditional banks.
5. P2P Transactions
P2P digital payment is quickly gaining popularity. Customers are adopting such technologies for daily use. P2P eliminates the middle layer and drastically reduces transaction costs. Digital transactions help FinTech enterprises expand their footprints and customer base.
6. Security and privacy
FinTech is an industry where the risk of financial crime is high. It is vital for FinTech companies to think over customer security while designing their consumer experience. Apparent security measures make customers feel comfortable. Customers expect rigid security from FinTech solutions along with reliability and FinTech is practicing stringent security measures to beat the competition. They are making visible efforts to handle customer data with care. To gain the attention of your customers you can make your privacy policies visible enough on your website or app. Remember, it can reflect on the confidence a company has in its security measures.
Changing for the better
It may be difficult to predict how the payments landscape will emerge in the next few years and what will be the long-term impacts on the FinTech industry. Nevertheless, it is likely to witness a transformation that can dwarf what has been achieved thus far. At such times, it is important to gain the confidence of your customers to retain them and enjoy their loyalty.
Thus far, FinTech has only been in the shadows as it were, but now it has found a home in the innovation economy globally. Millennials are more reliant on their smart devices to accomplish their daily tasks. They want the world and its conveniences at their fingertips anywhere and anytime. Given that, perhaps the future might see more interesting innovations in customer experience.
Let’s look at some opportunities for FinTech in the future:
- Companies with remote workforces are better positioned to thrive during and after this difficult period.
- FinTech gives an impetus for greater adoption of contactless money transactions.
- FinTech companies are well-positioned to find new ways to incorporate better digital solutions.
In order to capitalize on all these opportunities, you will need a technology partner to help guide you through the latest innovations. Give us a call and let’s discuss how Fingent can help you guide your business and customers to success in the post-pandemic world…
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How AI and Machine Learning are Driving Cyber Security in FinTech?
Being a subset of the financial services domain, FinTech is targeted by hostile cyber villains. Industries thus require secure mechanisms to keep their data safe and secure. Preventing data losses are critical for Fintechs.
The World Economic Forum states that cyber-security is the Number One risk associated with the financial services industry.
Cyber Security Risks Associated With FinTech
Cybersecurity has remained a pressing concern for FinTech. Ever since the global financial crisis of 2008 that challenged the traditional financial institutions significantly, technology-driven start-ups have started evolving increasingly to cater to finance, risk management, digital investments, data security, and so on. Presently, we are in the FinTech 4.0 era.
The major cybersecurity risk that enterprises implementing FinTech face are from integration issues such as data privacy, legacy, compatibility, etc. Hackers target FinTech as they handle large volumes of customer data that include personal, financial, and other critical information.
FinTech offers a multitude of easily accessible services via its APIs. For instance, API banking. Here, the APIs are developed for the banks to access the FinTech platforms. It becomes open, API banking when open APIs enable third-party developers to build banking applications and services.
Let us walk through the major cybersecurity challenges triggered by FinTech.
Data Integrity Challenge
Mobile applications deployed for FinTech services play a predominant role in cybersecurity assurance. FinTech services require strong encryption algorithms to avoid integrity issues that can arise while transferring financial data.
Cloud Environment Security Challenge
Cloud computing services such as Payment Gateways, Digital Wallets including other secure online payment solutions are key enablers of the FinTech ecosystem. Though it is simple to make payments via cloud computing, it is equally crucial to maintain the security of data as far as banks are concerned. Appropriate cloud security measures are thus critical while dealing with sensitive information.
Third-Party Security Challenge
Third-party security challenges include data leakage, service challenges, litigation damages, and so on. Banks should be aware of FinTech service relationships while associating with third-parties.
Digital Identity Challenges
Major FinTech applications are web apps that have mobile devices working at the front-end. Banks and other financial institutions need to learn about the security architecture of the electronic banking services offered by these applications before implementing the FinTech application.
Money Laundering Challenges
The use of cryptocurrency for financial transactions makes FinTech-drive banks prone to money laundering activities. Thus, the FinTech ecosystem needs to be formally regulated based on global standards.
Private keys can be stolen in case of weak security in blockchain architecture. Cryptographic algorithms need to be strong and transactions need to be confidential.
The increase in the number of FinTech implementation of interfaces will cause a rise in the number of cybersecurity challenges as well.
How Artificial Intelligence And Machine Learning Enables Cyber Security For FinTech?
Artificial Intelligence is both reactive as well as proactive or preventative. AI reinvents FinTechs by bringing in behavioral biometrics solutions. These solutions are used to monitor customer and device interactions that take place during transactions that enhance security and authentication. BB or behavioral Biometrics with AI provides problem-solving capabilities for FinTechs. FinTechs utilize Artificial Intelligence is an expert system that enhances decision-making abilities using deductive reasoning. Big Data analytics is used here to focus on quality data.
The underlying technology in using Artificial Intelligence involves reasoning, learning, perception, problem solving, and linguistic intelligence to provide critical insights. It helps in understanding business in real-time operations.
In this digital era of increasing cybersecurity attacks and malpractices, AI can be used effectively to prevent risks and attacks. The following are major ways of how AI and ML protect FinTechs:
1. Fraud Detection
AI and machine learning algorithms are used to detect frauds in FinTechs by being able to identify transactions in real-time accurately. The traditional strategy of fraud detection involved analyzing large volumes of data against sets of defined rules using computers. This process was time-consuming and complex. Unlike this traditional method, more intelligent data analytics tools for fraud detection such as KDD (Knowledge Discovery In Databases), Pattern Recognition, Neural Networks, Machine Learning, Statistics, and Data Mining have evolved.
2. Controlling Access
Access control to critical data is crucial when it comes to security. Machine learning is used to derive critical insights from previous behavioral patterns such as geolocation, log-in time, etc to control access to endpoints. The risk scores are fine-tuned by combining supervised and unsupervised machine learning methods to reduce fraud and thwart breach attempts as well.
3. Smart Contracts
Smart contracts are coded in a programming language and stored on the blockchain. With blockchain, new contracts can be added to existing ones without having to change the individual contracts, in case of agreement expansion. Artificial Intelligence has become an integral part of FinTech as more traditional banks are teaming up with FinTechs to leverage the benefits of both worlds. For instance, when customers face issues with a poor credit history while applying for loans.
Artificial Intelligence is yet to be transforming the face of FinTechs in a multitude of ways. Drop-in a call right away and our strategists will guide you on how to leverage the benefits of AI and ML to secure operations and prevent breach attacks.
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What Is Next For Financial Technology Innovation?
User Experience is the King. The more demanding UX gets, the higher is the rate of fintech innovation. Until recent years, the FinTech industries had seen growth in mobile banking and increased technology investments. For instance, Mastercard is a rapidly evolving FinTech innovation, and its overall investment is estimated to be $16.6 billion.
In this regard, it is required that Governments take up a holistic approach to create business environments to enhance FinTechs. FinTech firms not only provide new market solutions but also increase the efficiency of the banking and financial industry verticals.
Regulatory Barriers For FinTech Innovation
Hedge funds, personal loan providers, and many other firms in the financial sector can be developed by preventing regulatory barriers that slow down FinTech innovation. In the recent past, the following were some of the potential barriers to the growth of FinTech innovation:
- Technology – For a company to be successful, it needs to know which technology would be beneficial for them. For instance, online trading provides people with access to their profile from their smartphones or computer systems. This is an example of a trial and error method in technology solutions that can be a potential barrier to some industries.
- Capital – Emerging markets need good investors. Top investors hesitate to invest in new markets. The market in which you operate is another key factor. There must be a streamlined system of funding to disrupt this barrier.
- Degree of Market Play – It is important to get a significant level of trust in the market in order to get close enough to banking institutions. Such high entry pressure is another potential barrier.
- Numerous Mobile Banking Services – There are multiple mobile banking applications on the rise that allow account management and other financial transactions online. This becomes difficult to choose between the lot.
- Increased Technology Investments – According to recent research on FinTech Global, the investments have doubled from $19.9 billion to $39.9 billion. FinTech attracts numerous investors who are interested to invest in the latest technology trends.
FinTech Innovation: What’s In Store For The Future?
The future of FinTechs largely relies on technology breakthrough ideas. Let us look at the major drivers for FinTech Innovation:
‘Regulatory Sandboxes’ To Understand Regulatory Boundaries
The idea of a ‘Regulatory sandbox’ was initiated back in 2015 in the UK. The purpose was to speed up the product development of FinTechs. The purpose also included establishing quick launch cycles. Companies allow testing of their solutions in a controlled environment. These regulatory sandboxes allow testing for a specific duration, say 6 months and is performed without the regular imposing of regulatory costs and difficult procedures immediately.
With this, the innovators can test their solutions and see the possible regulatory boundaries that evolve. This can also help firms make critical decisions on regulating new solutions and services in the future.
Some countries like the UK promote additional environments for sandboxes such as tax policies for creating business solutions, tax deductions, training, regulation, protection of rights to do business, etc.
Right Solution: Enabling FinTech innovations, need the solving of numerous challenges by market governments. FinTech can be supported directly. Early adoption of FinTech and incorporating policies, improving digital connectivity, implementing payment channels, etc., can be done to create a FinTech enhanced environment.
Customer Service With Better Technology For Increased Value
Firms that provide global services require the help of technology to increase their efficiency and largely reach their customers. Financial establishments require a medium for easy communication with their customers to provide a better user experience.
Different industry verticals can look up to technology for operating with reduced costs and better business processes. This brings upon good prospects for FinTech innovations.
Right Solution: Providing good customer experience requires technology implementation. It can help streamline various business workflows and also increase business value.
The best solutions that can be leveraged from technology is as follows:
1. Artificial Intelligence: Customers need better UX. Businesses have realized that chatbots and other AI integration in their services increase value. In addition to reducing the workload of employees, optimizing expenses, managing resources, and many other huge benefits, it also gathers large volumes of data to provide critical insights for businesses to make important decisions.
2. Blockchain: To be able to record transactions without the intervention of a central authority is the power of most of the cryptocurrencies. FinTechs on Blockchain has been the most disruptive technologies in the financial industry verticals. Blockchain is the most suitable medium in which (AML) Anti-Money Laundering can be applied. Blockchain technology offers faster transactions, greater anonymity, and better data management.
3. BigData: There is no bigger tool than BigData that banks can leverage to provide a better service to customers. There is approx. 2.5 quintillion bytes of data being generated across the globe. FinTech companies can leverage BigData for use in customer segmentation, managing risks, detecting fraudsters, better compliance and by offering personalized services.
Digitizing Industries For Increased Value
FinTech Digital Revolution provides new innovations with the digital offering for financial services. Current technologies have proven to be very effective and powerful to safeguard transactions. Another benefit is that the transaction costs are considerably lower with the decentralization of blockchain which has made FinTechs reasonable.
Cryptocurrency along with the evolving FinTechs shape the whole economy by building layers of new business models.
According to the latest Statista reports, FinTech adoption rates were as huge as 69 percent back in 2017 which is 2018, the total investments touched $111.8 billion.
Sharing Of Technical Know-How Among Various Industry Verticals
Financial Institutions and FinTechs can both benefit from sharing of technical knowledge. Financial service companies can scale and traditional banks can improve innovation and also reduce costs out of leveraging technology trends.
Traditional banks can leverage their huge data assets which in many cases remain unutilized. Data sharing can be performed with transparent terms that can help manage risks, provide enhanced customer service and provide cost-effectiveness. Banks thus obtain the chance of increasing revenue and FinTechs get access to a huge customer base.
There are many more strategies that FinTechs have to improve their customer base and operating efficiencies. To find out how many more aces FinTechs have up their sleeves, drop a call to our IT experts and strategists right away!