The role of technology – or fintech was traditionally limited to back-office functions for financial institutions’ execution of transactions and customer database management but recently it has transform the whole landscape of the financial industry. Today every digital transaction, shopping, currency exchanges, stock investment, or money transfer is just a click away and nature’s most unique key ‘the fingerprint’ provides security for these activities.
The digitalization of banks opened the way for customers to interact with banks, viewing real-time account details and making loan applications and the penetration of smartphone application in our day-to-day lives has fueled the need for more robust, faster, and smarter transaction capability.
A new publication by the World Trade Organization (WTO), Trade Financial Global (TFG), and the International Chamber of Commerce (ICC) highlighted the eight new technologies that could fill the financial gap for Small to Medium Industries (MSME), especially during the time of economic uncertainty. Diversity in global standards, unavailability of data, and a lack acceptance of e-signatures and e-documents and blockchain are categorized as challenges that restrict MSME trade finances. The adaptation of new technologies including cloud computing, optical character recognition (OCR), internet of things (IoT), application programming interface (API), distributed ledger technology (DLT), big data analytics, artificial intelligence (AI), and quantum computing for the financial industry could provide the road map and have the capacity to catalyze the solutions of all the above-mentioned challenges effectively.
The key benefit of innovation in technology for the financial institution during uncertain times is the reduction of overheads not just for businesses but for consumers as well thereby adding value to their offering. With algorithms proving their intelligence by behaving as judges to predict lending risk accurately, banks can today save the costs and effort deployed for the scrutiny of numerous loan applications in uncertain times. Even the emergence of banks that solely rely on their application with no real offices are saving on standard overheads, resulting in the ability to offer lower interest rates than their competitors.
Government control over state banks in many markets creates uncertainty as well, and the decision to adjust interest rates can often be seen as against free market strategies. Cryptocurrencies took the banking world by storm as they are more transparent, cheaper, and faster and are independent of central banks and the influence of few powerful individuals. A blockchain of digital transactions is a perfect platform for security exchanges which ensures transparency, thereby minimizes transactional fees and risk involved in transactions.
Moreover, during uncertain times the possibility of becoming a victim of fraudulent transactions and virus attacks increases so a combination of fraud detection software and timely human interaction secures against such attacks. Machine learning algorithms have the ability to determine attack patterns and therefore this reduces massively the need for human efforts.
Today, the adaptation of financial technology encompasses everything from machine learning algorithms for the detection of fraudulent activities to biometric authentication and blockchain. Increasingly, fintech is helping both consumers and businesses alike to run seamlessly. The conventional financial institutions are making strategic investments to upgrade their operations and deliver quality services for higher customer retention, realizing that the inclusion of technology is key to riding the wave of uncertainty.