Electronic payments and various financial technologies have played a large role in helping us keep a safe social distance from one another during the Pandemic. But even as fintech has made our lives safer, there are also more dangers: Greater financial mobility (including working from home!) means more opportunities for cybercriminals. In the new normal, fintech will have to continue to evolve.
The following innovations in fintech will create long-term changes that can enhance the well-being of consumers and financial professionals over time.
1. Touchless Processes
The shift to digital processes is highly beneficial in the finance sector. By integrating touchless systems, account managers can reduce the use of time, paper, and stress through automation and seamless functioning.
Touchless invoice matching, for example, allows accounts payable departments to automate matching purchase orders to receipts and invoices. This cuts out the risks of contamination by sorting through paperwork while also saving massive amounts of time for accountants. Additionally, the more account management that can be done paperlessly, the more sustainable the business environment.
Fintech like touchless processing will be the new norm of the post-COVID world, bringing workers ease and safety.
2. Mobile Banking
Mobile banking’s user base grows all the time. According to MX data, mobile banking engagement increased by 50% from December 2019 to April 2020. The pandemic has driven the use of this tech to unlock the potential of fintech in consumer banking and finance.
Mobile banking provides accessibility and ease of use across broad swaths of the population. Rather than go to a banking branch to deposit a check, transfer funds, or open an account, all of these are becoming possible from a smartphone. Consumers can then manage their finances safely from anywhere.
This is great news for rural areas, where banking and finance opportunities have been previously hard to find. As technology continues to progress towards this accessibility, more banking business will occur on mobile devices, meaning more people can participate in digital economies.
3. Machine Learning and Cybersecurity
As a subset of artificial intelligence processes, machine learning is driving all sorts of tech innovations across industries. For fintech, there are many cases in which machine learning is bettering systems and driving innovation.
MasterCard’s Vocalink system, for example, uses machine learning to assess customer transactions from the beginning of the transaction lifecycle. This enables MasterCard to prevent fraud and notify financial institutions right away.
Machine learning makes this possible by analyzing data and making decisions without being explicitly programmed to do so. By analyzing instances of fraud, the system can recognize future occurrences. The AI scans millions of data points and access patterns, comparing them to models of fraud and data breaches. When the system encounters suspicious activity, it will automatically shut it down.
In a post-COVID world, more workers than ever will be working from home. This means more access points for potential hackers. Machine learning processes can stop potential threats, examine systems, and smooth communications across fintech platforms.
4. Cloud Data
The use and management of financial data are more difficult to secure in a widespread workforce. Fortunately, the use of cloud data systems is likely to grow as a result of the pandemic shift.
This technology allows for the secure coordination of information accessed from a network outside the typical office. This means better protection for finance data. Previously, businesses had to host their own company information on a local server. Now, small businesses can delegate their data system to the cloud with less fear and lower security costs. At the same time, cloud systems allow for easy management of system access.
Data services like NetApp allow for simple management and control of company data over the cloud. For small businesses, this can save time and reduce risk. With built-in back-up tools, cloud data hosting keeps financial data secure and compliant without businesses having to handle IT and cybersecurity solutions on their own.
In a world in which data security is essential, an effective cloud service will be a necessity. As workers log in and access data from everywhere, companies need the ability to regulate and disseminate data without confronting high costs and technical difficulties. Cloud data services make that possible and their use will increase in the wake of COVID.
5. Blockchain and Cryptocurrencies
You may have heard of blockchain systems relating to cryptocurrencies like Bitcoin. Blockchains are the highly secure, decentralized networks that host digital information like cryptocurrencies in data modules called blocks.
Even the biggest financial institutions are starting to adopt blockchain systems. Groups like Citi and Visa use these databases to connect financial systems and communicate data safely across the world.
Visa’s B2B Connect system uses a blockchain database to host secure payment information between businesses. This allows financial data to seamlessly cross borders, speeding the flow of business.
The future of fintech will likely see the integration of blockchain in all kinds of processes. From mobile banking to account management, blockchain offers security and accessibility not seen in many past innovations.
6. Digital Credit Guidance and Scoring
Fintech tools need to work for all manner of customers and their diverse situations. Post-COVID, safety elements need to be addressed in handling all manner of financial business. Luckily, the shift to finance digitization is making activities like credit guidance and scoring easier.
In light of COVID-19, many have lost their jobs or have even been evicted. Helping any individual restore bad credit and get back on their feet is essential in managing the pandemic fallout.
Previously, it might have required an appointment at a bank to speak about a credit score and learn how to build credit for renting a new apartment or purchasing a vehicle. Now, with fintech tools that can analyze and report back one’s credit, anyone can begin to better their situation. With virtual meetings and chatbots, consumers can also get useful, personalized credit-building advice in an instant.
7. Predictive Analytics
With the availability of big data, financial institutions are better able to make and provide predictive solutions and recommendations for all kinds of financial situations. This makes for more informed customers, reduced fraud, and better lending practices.
The use of predictive analytics in consumer fintech tools can help provide professional insights without putting anyone at risk of a face-to-face meeting. Rather than attending such a meeting, a digital AI can scan spending and budgeting information. By providing predictive recommendations right to a consumer’s smartphone, financial literacy is easier to achieve.
Additionally, the use of predictive AI to prevent fraud makes financial data safer. Big data provides AI information about where data has been breached, then the AI can make an informed guess about where a system might still be vulnerable. These insights mean safer data for everyone.
Finally, the use of financial data to predict the effectiveness of investments can assist in the lending process. AI can examine the likelihood of returns on a loan and make decisions accordingly. This could make qualifying for financing a faster, easier process for consumers.
8. Peer-to-Peer Lending
Shaking up the fintech industry is the technology responsible for improved peer-to-peer (P2P) lending practices. With the ability for borrowers to be paired up with potential lenders in a mutual marketplace, the ease and simplicity of lending are enhanced.
This allows for microfinancing potential that can help invigorate the post-COVID economy. With fintech enabling better borrowing connections that mutually serve a community, businesses and individuals can experience increased liquidity and easier credit-building options.
9. Money Transferring
Fifty-six percent of American adults used a smartphone to make a transaction in 2018. This demonstrates the reality and need for secure mobile money transferring procedures in fintech. COVID-19 has only highlighted that need.
People are meeting less face-to-face. Additionally, cash transactions present health risks. This makes the ability to transfer money digitally highly desirable. A post-COVID world needs highly secure, easy, and efficient mobile transferring processes. Fintech that makes these transfers more trustworthy and feasible will be a major focus of the industry in the years to come, changing the way we make payments.
Perhaps the most changes that will occur across fintech in the post-COVID world are the regulations surrounding digital currency and the use of fintech systems. Right now, not much legislation or major institutions recognize the prevalence of digital finance. This is likely to change as more tech is integrated into central banks.
The exact form that future regulations will take regarding items like virtual currencies or even digital banking policies is unknown. However, with the majority of Americans now banking through digital systems, such regulation is inevitable.
Fintech like blockchain systems in particular may be tricky to regulate due to their decentralized nature. The shift in digital currencies and technology is towards global accessibility. Regulations in a post-COVID world will have to make this accessibility both manageable and feasible.
The post-COVID world will see a host of fintech changes that will invigorate financial markets. Bringing accessibility to all consumers, fintech can ensure that business can be handled in any economy. Meanwhile, the use of these tools for intelligent predicting and better borrowing can assist the well-being of the market and the consumers that make it possible.
Powering many of these innovations is the use of AI and machine learning processes. Such systems make for a predictive and personal experience for the consumer. In the wake of the pandemic, such an experience will bring ease and safety into the way the average person manages their finances.