As its name suggests, the fintech sector has always been technology-driven. However, with the global health crisis that led to wide-scale effects last 2020, the spur and acceleration that digital transformation brought about to the fintech sector are like never before. With the rising preference for digital services and cashless transactions, service providers had to adjust in order to cater to the market’s needs and stay relevant and competitive. This case is especially true in the fintech sector as well, leading those in the industry to upgrade their systems in order to offer more competitive services.
The rise and acceleration of digital transformation has led to the acceleration and revolution of several industries, including the fintech sector. There are several key digital transformation trends that have shaped and that continue to shape the entire sector today. Let’s look into 6 of these trends.
6 key digital transformation trends that are reforming the fintech industry today
1. Blockchain technology
The rising trends of non-fungible tokens (NFTs) and cryptocurrencies are all made possible by the blockchain technology that backs them up. This distributed database is strongly founded on digital transformation and it serves as a strong and hallmark infrastructure for these rising fintech trends in the age of digital transformation.
The technology’s potential is slowly unveiling but it has not yet reached its optimum. In the coming years, groundbreaking discoveries are bound to rise. Bitcoins, NFTs, and other decentralized finance (DeFi) are only some examples of blockchain’s capacities to reform the entire financial sector. Aside from those examples, blockchain can also be used in numerous other ways – many of which are yet to be discovered.
2. Digital banking services
The rise of digital banks or neobanks is one of the most well-known fintech services that is solidly grounded on digital transformation and that has disrupted conventional banking. Physical banks are still there. However, there are also those neobanks that are 100% online and that are developed with principles that prioritize mobile usage.
Hence, with such a setup, the banking experience would fully be in the app or website. Customers can register through an app on their mobile phones. They would not need to go to any physical branch nor would they need to undergo rigorous paperwork. Various features such as savings accounts, loans, and bills payments are also typically offered. Online and cashless transactions could be facilitated easily. Thus, the banking experience is made more convenient and more efficient both for the service provider and for the consumer.
3. Machine Learning (ML) and Artificial Intelligence (AI)
AI and ML are two noteworthy digital transformation trends. Because of AI, machines can not just function like humans but also think like humans. One of its subcategories, ML, enables machines to learn from data and go beyond it in order to address complex issues. In the fintech sector, ML can be used for functions like fraud detection and algorithmic trading. For AI, on the other hand, functions such as forecasting, automation, risk assessment, and several other activities can be done by the machine. The use of both AI and ML is quite well-established in the industry.
A noteworthy and popular fintech trend that is based on AI is robo-advisors. These robots are capable of independently managing investments and even suggesting a personalized portfolio based on individual preferences. In order to determine the optimal strategy for investment, they make use of big data trends as well as cognitive computing technology.
4. Autonomous finance
In this age of automation and digital transformation, development in technology has also enabled even financial transactions to be automated. Autonomous finance refers to a system of devices and machines that are able to automate financial transactions without any human involvement. These activities can range from paying premiums to managing investments. Because of automation, companies and consumers alike can be more efficient, reduce their costs, and manage risks effectively.
In order to boost engagement, gamification has become a digital transformation strategy used by several financial institutions. The gamification of services, especially services offered on apps or software, relies heavily on its development. Gamification involves presenting the products and services with game mechanics. Features such as badges and ranks are used. Such games encourage customers to monitor their spending behavior through the use of progress bars or events. At the same time, positive reinforcement is also granted to strengthen healthy financial behavior.
The use of gamification has become a rising trend in order to boost consumer engagement and loyalty. The niches of insurance, personal finance, stocks, and banking have all incorporated gamification. However, it is important for gamification to be used moderately and not exaggeratedly. When an app is overloaded with game mechanics, it may appear suspicious. It is important for gamification to be used in the right places. When done right, gamification could lead fintech companies to a whole new level of opportunities.
The pressing threat to the digital world is the threat to cybersecurity. As technology continues to evolve, hackers also continue to find loopholes in the security systems. Hence, it is important for experts to find more ways to be creative in order to effectively protect data and resultantly, the digital population.
This is especially concerning for the fintech industry, where money is concretely involved. Hence, fintech companies are incorporating the use of cybersecurity technologies in order to combat this threat. The use of blockchain technology, for one, is one strategy that companies integrate in order to keep information more securely. Other advancements in cybersecurity also include secure access service edge (SASE), multi-cloud data storage, and decentralization.
The rising trend of digital transactions is also coupled by the rising threats to cybersecurity. With this reality, companies are encouraged to evolve their security measures even more in order to combat this threat. Hence, the room for digital transformation in this specific area of this specific industry is still vast.
Traditionally, the cycle of money was strictly physical. However, thanks to ongoing digital transformation, the fintech sector came to be and has been continually evolving over time. With this evolution comes the spur of opportunities as well. Hence, those in the fintech industry must hop onto these trends and see what other terrains can be conquered.
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