2019 promises to be an interesting year for financial technology: artificial intelligence is finding its place, blockchains are going mainstream, open banking measures are starting to show results, and the 53% of the world that remains financially excluded is gaining new opportunities. Even as fears of another recession mount and the cryptocurrency markets are taking a dive, technology is moving steadily forward. Here are a few of the picked out trends we can expect to see a lot more in 2019 and beyond.
AI: Machine Learning/Natural Language Processing
There aren’t many fields that will remain unaffected by AI, and fintech is no exception. Financial services deal with massive amounts of data on a routine basis, which means Machine Learning is a game-changer. Making accurate, evidence-based business decisions is never a bad thing, and AI promises to make everything from loan decisions to fraud detection much more efficient.
The human end of things will also be getting an upgrade in 2019: improved natural language processing technology means that we’ll probably start to see “voice banking” heading to take off in 2019, and chatbots are already starting to provide highly usable customer support solutions. Tools like FINMATEX aim to make financial services more accessible and accurate for customers and streamline the diagnosis process for companies.
“Blockchain” has been one of the biggest buzzwords of the 2010s, and for good reason: it’s kept a high profile in the markets and inspired near-religious levels of fervor. It’s been on track towards a decidedly more conventional future for the past few years, though, and in 2019 a lot of that work will be quietly implemented behind the scenes. It’s a very efficient, low-cost way to settle transactions and handle data, which is why the vast majority of major European/North American banks have made some sort of research commitment to it.
Blockchain tech is already being applied to enable faster cross-border money transfers, smart contracts in supply chains and real estate, banking services for the financially underserved, improve data security, manage user identities, and much more. For better or worse, it’s been the most high-profile fintech innovation in recent years, but 2019 will see it continue to transition from a disrupting technology towards a more stable, less exciting role as a backend technology.
“Open banking” is sort of a catch-all term for a whole set of policies and trends that are set to start decentralizing the financial landscape in the near future. In a nutshell, banks will be open-sourcing their data and their APIs, enabling developers to build new services around them. The two biggest policy drivers behind this movement, the General Data Protection Regulation (GDPR) and the Payment Services Directive 2.0, both went into effect throughout the EU in the first half of 2018.
The GDPR is trying to establish a framework for user data ownership and privacy, while PSD2 is aimed at opening up the financial services market by requiring existing banks to provide access to their data. Third-party developers historically haven’t had much of a chance in the financial sector — even neobanks and challenger banks are typically partnered with a larger traditional bank — but the open banking trend may change that. Ultimately, the financial ecosystem may come to resemble the tech ecosystem over the course of 2019, which may set off a cascade of innovation both from startups and established institutions. These won’t come without challenges, especially in privacy and security, of course, but banks that lag behind now may find themselves trying to catch up later.
Regulatory technology — Regtech
The open banking trend, tightening KYC/AML requirements, and ever-increasing regulatory oversight (a 500% increase since 2008) means that financial services have to devote a lot of energy (about 15% of their workforce) to compliance. This not only makes it more difficult for large companies to work efficiently, but serves as a high barrier to entry for new firms, so the market for efficient, scalable regtech is huge.
Regtech is a term that encompasses any technology meant to streamline the process of dealing with regulatory requirements, like identity management, compliance checks, anti-fraud operations, regulatory reporting, customer due diligence, risk management, and more. This goes hand-in-hand with most of the other technologies mentioned above: it uses AI and Big Data analysis, robotic process automation, blockchain solutions, and more to help banks more efficiently monitor a variety of areas and keep the bank in line with regulations.
Mobile payments and Banking help increase financial inclusion
It’s been clear for a while now that the future of banking and payments is slowly shifting towards mobile platforms, but one thing that perhaps hasn’t been quite so obvious is how this is affecting the 53% of the world’s population that currently doesn’t have access to stable financial services. Traditional banking doesn’t travel very easily since it requires physical locations and typically a lot of paperwork on both ends, but mobile banking, especially when combined with advances in regtech and blockchain, can go anywhere that people are. Fintech startups all over the world are making financial inclusion a priority.
So even as the developed world continues its trend towards a more tech-centric financial system (there might be the Google/Amazon/Facebook/Alibaba forays into finance), the developing world will reap some benefits. We’re increasingly moving towards a cashless economy, and improved fintech is helping to overhaul outdated banking infrastructure for everyone.
The future is all about data
A common theme in most of fintech’s current trends is that they revolve around data. Artificial intelligence, robotic process automation, blockchain, regtech — they’re all designed to either use data to improve services or come up with ways to process it more efficiently and securely. Humans have historically been limited by a finite attention span, limited memory, and an inability to deal with large amounts of information. In fintech, then, as in other fields, the future is all about figuring out how to do something with the intimidating amounts of data we suddenly find at our disposal.
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