Ever since the financial services industry has allowed customers to make transactions online, there has been an innovation arms race between firms. Fortunately, increased competition has brought unprecedented growth to the industry as many cutting-edge, start-up technology firms partner with more established companies (Mastercard, Fidelity, USAA, etc.). From IoT devices to AI and blockchain technology, the way financial services firms deliver value to their customers is changing — and recent FinTech developments suggest this trend will only continue to accelerate.
Digital Innovation in Financial Services: Your Money, Everywhere
From the Apple Watch to virtual home assistants like Alexa, the internet of things (IoT) means networked devices surround us. And the financial services industry has taken notice: Fidelity, TD Ameritrade, Capital One, and Liberty Mutual have all partnered with Amazon to empower customers to make financial transactions using only their voice. Apple Pay is also expanding beyond tap payments, partnering with major financial institutions like Wells Fargo: in October, it was announced that more than 5,000 new Wells Fargo ATMs will become accessible with Apple Pay — no credit or debit cards necessary.
Of course, digital innovation in financial services like these are just the beginning. Over the next few years, sensors and other network-enabled IoT devices will provide banks and other financial institutions with more information about their customers’ spending habits than ever before. Although these technologies still require considerable up-front investment, IoT devices are becoming less expensive every day. And, these investments may pay off for early adopters in big ways: it has been reported that the combination of IoT and FinTech could see $25 billion in growth by 2020.
Innovation in Fintech: Revolutionizing Transactions with Blockchain
For many years, the financial services industry has handled monetary transactions the same way — but blockchain technology promises to significantly improve financial transactions by making them faster and smarter. Blockchain encrypts all digital transactions, using smart contracts to pass money from one party to another (for example, from customer to bank). When the specifications of these smart contracts are met, secure transactions occur instantly.
Major financial institutions like Deutsche Bank and HSBC have already partnered with IBM in order to implement blockchain technology ahead of their competitors. Fidelity is also hyper-aware of what blockchain is capable of: CEO Abigail Johnson has spoken publicly about just how transformative this innovation will be for financial companies and their customers. Secure, automated transactions would ultimately mean that we worry less about how and where we pay — not to mention lower (or completely eliminated) transaction fees for consumers and boosted productivity for financial services companies.
Innovation in Financial Services: Protecting Consumers with AI
The value of these FinTech advancements won’t always be manifested through direct revenue — innovations in fintech also promise to save financial services companies money and time. Take Fraugster, for example. This start-up, founded in 2014 by digital payment veterans Max Laemmle (formerly of Better Payment) and Chen Zamir (formerly of PayPal), wants to solve fraud detection using artificial intelligence. Their methodology is simple: analyze every transaction that takes place on a system and learn from them. Because AI is so much faster than a human being could ever be at analyzing this data, Fraugster’s system is already learning from a reported $15 billion worth of transactions every day. Fraugster has already partnered with industry giant Visa, and other financial institutions are expected to follow. Particularly in the wake of the Equifax breach, customers are more concerned about security than ever before; AI technologies like Fraugster will not only bring consumers added peace of mind, they’ll also save companies money and time by identifying fraudulent or suspicious transactions earlier than ever before.
It’s clear that recent FinTech advancements have made the financial services industry a testing ground for what consumers will one day expect. And no company wants to be left behind — which means more and more firms are adopting digital innovation in financial services. Has your financial services company begun implementing blockchain, AI, or IoT devices? If not, it’s not too late to become an early adopter.
To help you, Exadel stands ready with its own vast bank of expertise. We’ve been putting the Tech in FinTech for almost 20 years. Contact us and see what we can do for you. Find out more about our Financial Services practice.