Posted by & filed under Accelerator, Banking, Fintech, General.

It’s amazing how much the financial industries have evolved. The way we transact business has never been smoother.

Financial companies are known for not being particularly innovative. But fintech startups have forced the industry to catch up. And partnerships between financial companies and fintech startups open even more opportunities.

US Fintech Investment by Segment - 2018 US Fintech Market Report
Source: S&P Global Market Intelligence

Most financial institutions have realized the strategic importance of innovation. Their customer touchpoints need to improve. They must help their customers in their financial stability. They have to digitize risk processes. Customers require the convenience of flexible and mobile payments. And innovation needs to be connected to their strategy.

Cryptocurrencies struggled to meet the goals they were aiming for. But, other global trends – as innovative and exciting – are shaping the industry now. Let’s have a look at them.

Global Trends that will Affect the Fintech Industry

Global Trends that will affect the fintech industry. If adopted as fintech solutions, these trends can change the way financial institutions transact business.

Personalized Customer Services and Branding through Big Data

The digital age has made communication much easier. It has also raised the stakes on communication. Especially between companies and individuals. With so much data available, the old ways of treating the customer just seem shallow.

Financial institutions seek more and more information to make better decisions. They can make a better credit decision. Or they can offer the right products more often. Financial institutions need to be as close to their customers as possible and give them a seamless experience.

One example is Voxo. They make financial advisory seamless:

Voxo - provides information through voicesense.

Voxo identifies, compiles and visualises the valuable information in your voice conversations.

They analyze voice conversations, so financial advisors can focus on delivering a better experience. Meetings are automatically documented and searchable. And financial advisors can know on the spot what products they have offered and how.

Fraud Prevention through better Authentication and Cryptography

Security is critical in finance. Financial institutions often raise concerns about security when working with startups. But it can be the other way around. Some startups can make the financial institution more secure.

Let’s face it, data security and online privacy are one of today’s top talk-points. And there is a wealth of data you can use to detect fraud. We all carry mobile devices with us. And we leave a digital footprint on every move.

One case of a startup making financial institutions more secure is KeystrokeDNA:

KeystrokeDNA - adds additional authentication through keystroke analyzations.

Keystroke DNA is a behavioral biometric authentication service. They use keystroke dynamics by analyzing a user’s typing rhythm. The technology creates a unique biometric profile for giving access.

KeystrokeDNA knows who you are based on how you type (on keyboard or touch screen). Even if another person knows the password, their technology can keep them away. Biometric authentication is a very effective second factor authentication. This technology gives financial institutions extra security to protect their clients’ data.

Automation through Artificial Intelligence and Machine Learning

Artificial Intelligence in the workplace remains controversial. But it’s hard to argue its benefits: less costs, less time and less mistakes. Artificial Intelligence and Machine Learning can shift the nature of businesses. And finance is no different. Research states that AI can potentially eliminate half the jobs in financial institutions.

But the biggest potential is not with the jobs that won’t be done. It’s rather with the jobs that can be done better. We can do business more efficiently. And AI can help turn data into predictions. Asteria does exactly that:

Asteria - automate cash flow and forecasting.

Discover the new way to understand your business cash flow and make it smart.

Asteria uses machine learning and automation to help SME’s understand cash flow. They also help banks understand their SME customers better. Asteria’s services make sure that SME’s can solve cash flow gaps before they happen.

Hyperconnectivity through Internet of Things (IoT)

There is no doubt that we are more connected than ever. We carry and wear devices that communicate to each other. Information flows between devices, and they all provide us value.

Hence, people expect to be able to interact through any of those devices. You have additional information from your customer, but you have also new challenges. Each new medium is a set of technological opportunities to explore.

In this last regard, SmartCalling is a good example:

SmartCalling - personalises the customer call screen.

SmartCalling gives companies a unique opportunity to personalise the customer call screen. It allows companies to explain the purpose of their call on the call screen. And customers can engage through interactive buttons.

SmartCalling is bringing calls into the XXI century. In outbound calls, details about the purpose of the call display on the screen. And in both inbound and outbound, its interactive display lets customers take action right there. Like asking to be called later. By adapting to the customer’s situation, call centers can be several times more effective.

Efficient Transactions through Blockchain

Cryptocurrencies boomed in 2017. And then they crashed. Yet their underlying technology – blockchain – is still going strong. Many of the original cryptocurrency supporters are now becoming interested in blockchain itself. And many fintech companies adopt the much-hyped technology for practical uses.

A blockchain basically records transactions. The transactions are stored sequentially and with information about previous transactions. And they are stored in all the nodes of the network. This makes blockchain immutable, so hackers cannot change the information in it.

Most people still confuse blockchain with cryptocurrencies. But there are many more applications for it. One example is Alo Agri.

Alo Agri - uses smart contract to reduce risks in partnerships and trades.

Most farm trading partners use middlemen to draw contract and complete deals. This is due to language, law or distance barriers. Some contracts have been tampered in the process. ‘Smart Contracts’ can reduce the risk and increase the accuracy of execution of set actions.

Alo Agri is building an agriculture network to empower farmers, and help them find buyers for their produce. They use blockchain for decentralized agriculture transactions. And they solve the problem of trust in international agricultural trade.

But how will these global trends affect Fintech?

Being aware of these global trends can help you define your innovation strategy. Or your collaboration strategy. These trends will impact your business in one way or another.

Global Analysis of Investment in Fintech Solutions by Financial Institutions and Non-Financial Institutions
Source: Pulse of Fintech 2018, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) January 4, 2019.

What’s clear is that innovation through fintech startups is here to stay. Above you can see the total global investments in fintech from 2013 to 2018. The technologies these companies bring forward are strong and well funded. And they will probably become the new standard. Financial institutions need to learn how to work with these startups, before competitors do.

Some questions you might want to consider, if you’re in a financial institution:

  • What is your role as financial institution in regards to those tecnologies? Are you a user? A leader? A party in a bigger consortium?
  • How are you preparing yourself for those technologies? Which parts of your organization need to be ready? In which way do they need to be ready? How are you getting them ready?
  • In which areas are you open to collaborate with others (e.g. fintech startups)? In which are you not open? Is your organization ready (and open) for that collaboration? How fast can you collaborate?
  • What will your financial institution look like in 10 years? What is your vision for your core business considering these trends? In which areas do you need to invest more? In which do you need to divest?

Collaboration with a startup is not a trivial task. Fortunately, there are tools (and parties like us) to help you. Each organization is different. But for all of them, it’s important to plan these matters in your strategy. Of course, Nestholma is always happy to help, even in these early stages.