If you have not heard about the FinTech revolution that is happening right now, you need to get out from under your rock. These revolutionary advancements are not just impacting the financial industry. They have the potential to change the way we conduct transactions in all aspects of business.
Finance has been one of the last areas of business to see disruption, but it is catching up quickly. Let’s discuss the major trends that are driving the revolution and how they may impact your business.
FinTech Revolution Leader: Blockchain
You knew that was coming, didn’t you? Blockchain is making so many waves in the industry, but there’s still some apprehension around it. Will blockchain take over for banking in the finance industry? Even I’m not sure about that. But I am sure that it is set to improve it, creating a better and more impactful transactional system.
Currently, we rely on a dated financial system that depends on paper and outdated software. It is expensive and completely open to fraud and crime. Blockchain disrupts the current bank system by being a real-time updating digital ledger that cannot be changed. This takes paper and fraud out of the equation.
Wire and transfer fees will be decreased by using bitcoin, clearing and settlement can happen instantly, loans and credit applications can be assessed on the spot and consumers will have instant access to the funds they need and the answers they require.
What industry hasn’t been impacted by automation in some way? The banking industry should be no exception. According to McKinsey, a second wave of automation and AI will emerge in the next few years where machines will do up to 10 to 25 percent of bank work.
With simple processes being automated, bank employees and others in the finance industry will have more time to focus on higher-value tasks that take use more human brain power. What can consumers expect? A quicker bank experience and plenty of self-serve options—I can’t wait.
Improved Technology for Full Adoption
Before full FinTech adoption can take place within the banking industry, technology must be improved—that’s a no-brainer. Banks are now taking advantage of digital payments, cardless payments, mobile deposits and other self-service options.
I pay with my smart watch or my phone now more than my credit card and honestly, it’s hard for me to remember a time when I had to use a credit card. These easy payment options are convenient and ready to use at an increasing amount of locations across the country. However, banks and other financial institutions will need to follow suit, offering debit cards and other options for mobile use. Institutions that take advantage of this new technology will experience an increase in productivity and a decrease in overhead costs.
Data, Data, Data
Everyone knows that big data is big news throughout all industries. However, major changes are happening with the financial industry when it comes to data collection. One of the biggest changes is the evolution of lending data.
It has been stated that the FICO credit score, the number that determines your financial health, is outdated and not a great picture of true standing. With the use of data analytics and the IoT, banks will be able to curate data to replace the FICO score, giving consumers more financial options. Secondary investors will start to appreciate other lending data that will give way to better credit models. Could you imagine getting a mortgage or a car loan and having more factors considered in the credit decision? That would be amazing for almost everyone.
Increased FinTech Regulation
With all the changes come new regulations too. Finance is one of the heaviest regulated industries and as financial institutions begin to use new technology, data is gathered in droves and self-service becomes the norm, it is only natural for regulations to increase. I am on-board with regulations that keep money and vital personal data safe.
Regulations are not a negative thing. A stronger and secure finance industry only builds confidence between the consumer and the institution. And if we want the FinTech revolution to continue we need trust between consumers and institutions to continue to grow.
Technology has driven us to where we are. As an industry with a heavy focus on technology, it is obvious that changes will happen rapidly and frequently. With the FinTech revolution being the newest disruptor of choice, the banking industry and its consumers will need to hold on for the ride. It will take some time for this technology is gain enough speed to become widely accepted. However, it is definitely on the horizon. Only time will tell what we can expect when we visit our local bank for this is only the beginning.
The original version of this article was first published on Forbes.