The global fintech market is expected to grow to $31.5 billion by 2026. This growth is heavily dependent on the technologies used to build financial products and services. In fact, technological progress is the mainspring of fintech development, continuing to drive disruptive business models in financial services. The financial industry has already experienced many changes and disruptions caused by fintech. Technologies such as open banking, mobile payment, and biometrics have changed the way consumers interact with their financial service providers. Fintech in the areas of Software as a service (SaaS), RegTech, Big Data, and AI will bring a fundamental change to how regulated entities such as banks and NBFCs operate. Trending technologies such as Blockchain and Cryptocurrency are yet to realize their real disruption potential fully in the financial services market.
To build efficient fintech platforms for superior customer experience, the top 5 technology trends to watch out for are:
- SaaS (Software as a Service) and API (Application Programming Interface)
It is increasingly hard and time consuming to build the software that is required to run the fintech business from scratch considering the competition. Instead, companies should focus on adapting to the readily available solutions in terms of SaaS. It is equally important to build the systems with API first approach as fintech companies are likely to integrate with a large number of partners.
- AI/ML (Artificial Intelligence/Machine Learning) and Data driven models
AI is expected to become a defining technology for the industry. AI will create huge value in banking and financial services through factors like automated identification, machine learning, and smart virtual assistants. Since AI studies customer behavior to identify patterns and generate predictions, any anomaly or fraudulent activities can be easily detected.
Artificial intelligence gathers and analyzes data to understand or predict the typical behavior of platform users. If a fraudster gains access to an application platform, the AI warning system generates an alert on the fintech platform. Specifically, AI based smart virtual assistants in the form of chatbots can be created to help solve problems that customers face on a real time basis. AI technology analyzes user habits to offer personalized financial products and services to its users. AI also helps to predict business results and improve operational efficiency to realign fintech growth strategy. Therefore, Fintechs need to be prepared to churn down the information available and use machine learning models to make better decisions with superior outcomes.
- Automation
Automation in fintech is the driver behind efficiency and ease of services such as loan approvals, money transfers, payments etc. In a fast paced, highly competitive industry, failing to serve the customers quicker means losing the market share. Rather than depending on human input, automation helps in simplifying financial transactions, which then become more affordable, accessible, and inclusive, thereby bringing a larger part of the population under the credit umbrella. All operations, especially those in the back-end, should be automated using the latest software technologies whilst ensuring compliance.
- User experience
Traditional banking practices have a reputation of being either clumsy or lengthy. Compared to other non-regulated, compliance critical industries, in consumer banking it is increasingly hard to keep the user experience simple and short. With rising competition, stickiness of the customer is equally important thereby helping to keep the customer engaged. Failing at it means an increase in customer churn rate. Gamifying the flows can solve this problem. Fintechs need to do more research in understanding the customer segment, understand their skill set and design the flows so that customers are hooked to the service.
- Biometrics
The global biometrics market is expected to be $68.6 billion in 2025. With most users considering the protection of financial accounts as a priority issue, Fintech is becoming a prime industry for biometric authentication technology. Biometric is often seen as the ultimate technology for data safety and security. The features used are physically unique to an individual such as fingerprints, face, voice, retina, and other forms of recognition to enhance security and identity verification. Biometric devices can increasingly help safeguard users, prevent cybercrimes and identity theft. In fact, Biometric authentication is considered to be more secure than regular passwords and PINs. Users dislike multiple passwords and consider biometric authentication to be the best form of identity verification. They do not need to remember combinations of letters and numbers, and change their password periodically. Confidential information remains safe even with theft of personal devices such as smartphone and/or laptop.
Conclusion
Technologies have enabled mobile and cross-border payments, software development for quick and easy integration of new products/partnerships and super-apps. Owing to development in technology, financial institutions are able to widen financial inclusion goals, improve user experiences and create contextual products for their user segments. Technology helps Fintechs save money, improve operational efficiency, and protect customer privacy. By adopting cutting edge technology, Fintechs can maintain a competitive edge, be resilient to adverse external factors and achieve scale to serve wider segments of their customers.
Advances in artificial intelligence and machine learning will allow companies to scale, as operating costs become more cost-effective and services more user-friendly for consumers. As adoption increases, AI technology will become more affordable, and therefore more accessible. These technologies have the potential to disrupt the financial services industry in India, making financial transactions more secure, efficient and convenient for customers. Banks and other financial institutions need to adapt and keep up with the latest technological changes to remain competitive and stay relevant in the future.