A thoroughly modern, hybrid fusion of Wall Street and Silicon Valley, FinTech – or financial technology – has often been hailed as the next big thing. Though the hype may have initially outpaced reality, the fledgling movement has rapidly evolved in recent years to become a force in the financial services space. Now, it promises to bring further disruption and fundamentally alter the way businesses grow, manage their finances and most importantly, meet the needs of their customers.
The FinTech Revolution
As the name suggests, FinTech represents a modern fusion of finance and technology. At its core are the power of digital currencies, sophisticated data collection and analysis and other emerging technologies, which can be leveraged to deliver financial services with greater speed, convenience and flexibility than ever before. By offering the promise of new avenues for growth and improved customer experiences, the FinTech industry has experienced a boom in the last few years, with total worldwide investments ballooning from $2.5 billion in 2011 to $20.3 billion in 2015.
Removing Transaction Barriers
One of the key opportunities for growth in FinTech revolves around a simple truth: completing transactions is a hassle. Whether it’s entering in usernames and passwords or providing 16-digit credit card strings and verification codes, consumers are presented with numerous barriers when it comes to making a purchase. These friction points add up to a $4 trillion problem, but tech-driven innovations like digital wallets, biometric security measures and integrated in-app purchasing offer clear solutions for streamlining the process and improving the customer experience – an integral factor in driving sales, boosting conversions, and winning the competitive battle for customer trust.
According to Eric Kant, innovation advisor at Kant Consulting Group, LLC, “Technology is driving an unprecedented customer experience transformation.” Digital innovations ranging “from biometric services for notary signing, through customer support backed by machine learning systems, through natural language processing to blockchain-enabled smart contracts”, help eliminate various roadblocks enabling a radical simplification of the customer journey. Ultimately, he says, “the key to customer satisfaction is convenience.”
Leveraging Big Data
It’s no secret that data is king in the modern marketplace, and FinTech has been a driving force in collecting and leveraging that data to maximize efficiency, track cash flow and analyze customer engagement and behavior. Businesses now have at their fingertips the kind of advanced software and managed services that were little more than a dream in decades past, providing exceptionally valuable insights that offer tremendous return on investment. Machine learning, in particular, is quickly becoming a vital tool for optimizing logistics, enhancing customer experiences and analyzing consumer behavior, even reducing the risk of fraud. Simply by leveraging the new streams of data at their disposal, companies can both improve their current services and explore the possibility of additional, broader offerings.
As commerce and finance move progressively into the digital space, cybersecurity has become an ever-growing concern. Considering cybercrime is projected to become a $2.1 trillion threat by 2019, FinTech’s ability to enhance cybersecurity, and enable customers to defend against the disruptive tactics used by cyber criminals, is game-changing.
Of particular interest is blockchain technology, which is already being adopted by many of the financial and tech sectors’ biggest players. Blockchain technology offers a promising method of decentralizing and securing the management of money and other assets, lending greater transparency without sacrificing convenience and flexibility.
According to Alex Momot, founder and CEO of innovative blockchain company REMME, “No matter how much money a company spends on security, all these efforts are in vain, if customers and employees use passwords that are easy to crack or steal. Blockchain takes the responsibility for strong authentication, resolving the single point of attack at the same time. In addition, the decentralized network helps us to provide consensus between parties for their identification.”
While it may be impossible to reduce instances of hacking and cyber fraud to zero, blockchain offers a chance to change how consumers engage in transactions, and continues to become a more powerful tool by which companies can avoid certain centralized weaknesses.
Driving the Future Forward
The union of finance and technology has already caused disruption across markets and industries, and that trend is unlikely to go away. As millennials grow to claim a larger stake in the global market, the ability to deliver highly personalized, flexible, convenient services will be key to remaining competitive. Whether it’s phasing out credit and debit cards in favor of digital payments or lending services employing sophisticated machine learning to analyze individual borrowers far beyond a simple credit score, FinTech represents fertile ground for innovation and growth well into the future.
Consumers today are flooded with more choice than ever, and it’s often difficult to stand out and compete in a crowded marketplace. By leveraging the power of FinTech, however, businesses can take up the tools needed to create a more responsive, convenient experience for customers and identify bold new avenues for growth and optimization. The world of commerce is changing rapidly, and in order to succeed, businesses must learn to adapt quickly and turn disruption into opportunity.
About the Author
Beth Kotz is a contributing writer to Credit.com. She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.