Financial Technology (FinTech) represents both a highly disruptive challenge for incumbent financial institutions as a transformational opportunity for new market entrants as well as currently entrenched constituents in the ecosystem.
All indications point towards the need for substantial change in the financial sector, driven by major macro forces such as the complete digitization of money (e.g. paper and coin money to become nearly extinct) as well as cultural changes such as the general acceptance of online and mobile banking, alternative banking providers, and peer-to-peer payments to name a few.
Over the course of 2018, which of these technologies will impact the financial sector the most? Here, we take a look.
Mobile Banking & Payments
Technological innovations and rapid technological advances are changing the way people connect with each other and manage their finances. With the advent of mobile banks, users are able to conduct monetary transactions with ease. Mobile banking is an affordable alternative to the traditional banking ways.
Cloud-based mobile payment solutions offer new levels of convenience. Analysts expect the global mobile payment market to grow at a CAGR of 35.55% during the period 2017-2021.
Mobile banking is already very popular among consumers. At present, there are approximately 53 million active users of mobile banking in the United States.
Artificial intelligence will have a big impact on the banking, insurance, payments and wealth management industries, according to a new report from Marketline. It says:
“Robo-advisors are a new category of financial service product that can offer some unique benefits to those interested in wealth management services. From start-ups to the biggest incumbent players, most institutions in the wealth management industry have their own services. Companies offering these products are capturing the desire for cheaper monthly rates, advice more heavily based on mathematics and fully impartial advice.
"Essentially what these companies are trying to provide, or what is the long term aim of this type of product, is an AI wealth management service and the robo-advisor market today is a kind of halfway house between a traditional human advisor and what will eventually be the norm, when full AI tools roll out in the future.”
Vikram Pandit, former chief executive of Citigroup, believes developments in artificial intelligence will lead to 30 per cent of banking jobs disappearing in the next five years. In an interview earlier this year, he said artificial intelligence and robotics reduce the need for staff in roles such as back-office functions.
Analysts are still viewing blockchain technology as one of the most disruptive technologies of present days. For banks and other financial institutions, it reduces the cost of online transactions while simultaneously offering improved security, transparency, faster processing & greater flexibility.
IBM recently announced it had developed a blockchain platform that would allow banks to rapidly clear and settle payment transactions around the world. The company said it was working with a number of international banks including BBVA, Bank Danamon and National Australia Bank.
However, many in the financial sector remain skeptical of cryptocurrencies; seeing their trading volatility and resistance to normal financial regulation in a dim light. In September, JPMorgan CEO Jamie Dimon labelled the cryptocurrency a “fraud” during his speech at the Delivering Alpha conference in New York.
Augmented reality (AR), virtual reality (VR) and mixed reality (MR) have the potential to eventually bring the face-to-face experience of banking into a customer’s home.
BNP Paribas launched a VR-based app in May, which will allow consumers to consult bank transaction records and go through the various steps of a real estate purchase in Virtual Reality mode.
Bertrand Cizeau, Head of BNP Paribas Group Communications, said: “Virtual Reality and Augmented Reality tools will gradually become part of our customers’ daily lives, providing new kinds of interfaces between our various publics and our services.”
In a new report, analysts forecast the global virtual reality market to grow at a CAGR of 48.89% during the period 2017-2021.
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