Financial technology is proving itself to be one of the most exciting areas of tech in the past few years, and this only seems set to continue. The market is changing at an ever-increasing rate, fuelled largely by innovation which has allowed smaller, more agile organisations to make great traction. As these lesser-known brands continue to successfully take on the traditional big banking incumbents, this trend will likely extend well into the next 12 to 24 months and the onset of a new decade.
As we navigate the beginning of a New Year, it makes sense to look at the upcoming developments in the industry that are likely to shape the near future. With this in mind, let’s look at which areas of FinTech are likely to see the most tangible change in this time-frame, and how can organisations use these developments get ahead.
We are forever hearing that we are moving ever closer to a cashless society. Taking this one step further, we can expect to see in the coming years that – with the onset of automation, AI and biometrics – these technologies will know so much about us that banking will become more about who we are rather than the cards that we carry.
Looking specifically at biometrics, increasingly banks around the world are looking at how this area of tech can help to improve customer service as well as mitigate the theft of both money and data. Fingerprint scanning has proven to be popular among consumers, with many opting to prefer the technology to conventional usernames and passwords. However, figures show that there is still a long way to go before we see the technology rolled out across all providers.
Areas where vendors may go vary from iris scanning to ear shape recognition or facial thermography. TSB, for instance, said last year it wants to be the first European bank to roll out the former. What is known for sure is that the advancements in using our bodies (‘who we are’) for authentication is providing a new way to look at the issue of security and may well lead to faster as well as more secure payment options.
With the popularity of cryptocurrencies amongst consumers so high over the past year, it makes sense that innovators look at ways to bridge the gap between traditional banking and currency models and these new financial ecosystems.
Technology already exists that allows crypto to be flipped into a fiat currency in a matter of seconds, but in 2019 and beyond it is worth watching out for how FinTech providers view and engage with the rise of security tokens – those quick to embrace the concept may reap rewards, but it’s likely that many of these cryptos won’t stay the course. It’s a risky new area of financial management.
Artificial intelligence (AI)
The fight against fraud is ongoing – in the first half of 2018 alone, UK bank customers lost over £500m to scams (according to UK Finance). While practical efforts as well as legislation (such as the Second Payment Services Directive, PSD2, and 3DS2.0 have made great advances in trying to alleviate the epidemic, more effective technologies are still required in order to protect both business and consumer finances from malicious threats. Tactics range from malware and phishing to personal identity theft and social engineering, all of which have the potential to put financial systems at risk through weak entry points.
As new strategies for prevention evolve, AI is likely to increase prominence in the fight; we’ve already seen high-profile use cases for implementing the technology in order to accurately process, verify, and authenticate identities at scale.
True innovators will continue to build advanced functionality that provides automated reaction to fraudulent activity without the need for human intervention. The progression of Open Banking APIs as well as the onset of the PSD2 means that third party developers will continue to benefit from greater insight into consumer behaviour in order to influence research and development tactics.
How to keep pace
The financial services industry has seen drastic technology-led changes over the past few years, and it can be expected that the next to come will follow the same pattern. As more businesses in this field look to empower their IT departments to disrupt the market in order to maintain competitiveness, there is also still the remaining challenge of how to ‘keep the lights on’ and move away from legacy systems.
In order to achieve these objectives, it makes sense that institutions look to technology partners that can offer fluid and adaptive infrastructure that is configurable to specific needs and budgets. Banking-as-a-Service (BaaS) providers can help alleviate the managerial burden by providing white-label services that cover bank accounts, transfer and card payment services, providing in-house IT teams greater time for more proactive and pioneering activities. Taking this approach will be key for those looking to disrupt during this defining time in both the financial services and FinTech industries, not only in the next two years but beyond too.