The financial and banking sectors are no exception to this trend, as technology advances at a fast rate. Digital transactions are becoming more and more popular, and the fintech industry is showing no signs of slowing down. Traditional banks are no exception to the norm that innovation and adaptation are the keys to success today.
Firms that have opted to design their products to meet those wants and requirements have seen their profits soar. Businesses that provide low-cost and straightforward funds methods have generated a market value of $400 billion. Market capitalization increased by an additional $600 billion from those proposing ways to cut expenditure.
FinTech businesses now hold sway in these areas. On the other hand, traditional financial institutions fear losing the new generation of clients, particularly in developing economies, if they don’t step up to the plate and innovate more. The economic foundations are firmly in place. As technology becomes more powerful and accessible, its influence on banking will continue to expand. Taking a deeper look at new technological developments such as eNote, eContracting, eAsset management, etc in financial services may be an excellent time to “future-proof” your organization.
Listed here are the most notable FinTech inventions, which significantly influence the financial sector and offer considerable returns to institutions that choose to invest in them.
1.Consider Biometric Authentication
Digital financial services need a new level of protection. Customer preference for a single identification credential for a range of banking-related verification purposes is overwhelming. 23% of US customers, 26% of UK consumers, and 40% of German consumers choose biometric authentication methods. An opportunity to improve customer service while reducing fraud control expenses is for banks. Innovations such as eVault services can prove helpful where security and safeguarding data are necessary.
2.Assessing creditworthiness using data and psychometrics
Small businesses must first demonstrate their ability to repay a loan. Big banks sometimes reject or provide punitive interest rates to start-up enterprises, particularly those in their initial few years of existence. It is partly because banks often base their choices on information from credit bureaus or corporate accounts. It indicates that they are confined by a tightly defined data set that restricts their options. Fintechs, on the other hand, use a far broader set of criteria to make their selections.
In addition, there’s the psychometric evaluation. An online platform assesses applicants’ capacity to grow a company, their attitude toward credit, and how they stack up against their competition. Creditworthiness may be better understood by using qualitative, non-numerical data.
3.Making lending a long-term relationship by using AI
Automation and personalization are only two examples of how artificial intelligence (AI) is revolutionizing the financial services industry. Financiers can develop a more responsive and flexible connection with small enterprises using AI in SME loans.
Observing a company’s long-term trends allows a lender to forecast future credit requirements. For example, if Q4 sales fail to meet expectations, this might reduce capital expenditures in the following year. As a result of AI’s potential, lenders may give proactive, personalized advice to SMEs on better managing their cash flow and propose customized solutions, such as a low-interest installment plan for financing business significant investments, to help them succeed.
4.Setting a link between repayments and actual performance
Loan repayments usually give a strong sigh of relief. Their occurrence is often more rapid than anticipated, and they always appear to conflict with other obligations. Collecting a percentage of each sale is a method to spread misery around. In the event of a sluggish month or two in sales, the platform does not begin to put pressure on the consumer. Due to the original loan being connected to sales history, this procedure is unlikely to spiral out of control.
Many people are excited about the FinTech business these days, and conventional financial institutions are feeling the heat to stay up and develop at a similar rate. Because of less regulation, FinTech start-ups can’t go too far on their own. As a result, bank-startup collaborations are expected to be shared in 2021.
Changes to current software architectures, business processes, and new implementation/deployment issues are all part of the price of implementing new technologies in banking today. Confusion abounds in the world of finance. As a result, most banks are unable to simply “plug and play” a new disruptive solution into a legacy system without carefully evaluating implementation choices.