The Finance Industry is among those industries that constantly embrace new technologies to improve its products and services, the latest being the Internet of Things (IoT).
Consisting of a vast network of web-connected devices that collect and share data, IoT plays numerous roles in FinTech. Aside from simplifying debt collection through monitoring supply chain activity via networks and sensors, it improves fraud prevention through onsite security systems.
Here are the latest IoT trends in FinTech:
1. Artificial Intelligence (AI)
Artificial Intelligence (AI) has become a game changer in the industry of Financial Technology, helping companies improve their products and services. Aside from automating processes, AI can improve risk management and enhance customer experience. Of all the capabilities of AI, what stood out was its ability to detect fraud.
Many AI-powered algorithms can analyse vast amounts of data to determine fraudulent transactions to stop them in real-time. AI can also improve customer service through virtual assistants and chatbots.
Chatbots can handle routine inquiries, while virtual assistants can attend to many tasks, freeing up the workload of human staff and allowing them to focus on more complex issues.
Another way FinTech can benefit from AI is through automated data processing. By integrating AI-powered solutions, financial companies can streamline internal processes, freeing employees from repetitive tasks prone to errors. Some tasks AI can efficiently handle include accounts data entry reconciliation, invoicing, and analysis. Freeing up some of the employees’ responsibilities allows them to focus on the more intricate projects.
AI’s capabilities go beyond the usual routine tasks and answering common questions. They can also monitor financial regulations and transactions. As a result, employees will have more time to tackle more urgent responsibilities.
Blockchain technology, which supports cryptocurrencies like Bitcoin, is paving its way into FinTech. Offering a tamper-proof and decentralised way to record and verify transactions, Blockchain can minimise the need to increase security and intermediaries for financial transactions. In addition, companies can use Blockchain for various applications in FinTech, such as supply chain finance and cross-border payments. With Blockchain, financial companies can streamline processes, cutting costs and improving transparency.
Blockchain and FinTech interact in two ways. First, Blockchain plays a crucial role in cryptocurrency operations, a processing tool when you use Ethereum or Bitcoin as payment online. Secondly, blockchain technology is an upgrade path for financial operations using traditional currencies.
As a transformative force in the FinTech industry, the technology’s transparent and decentralised nature offers enhanced security, efficiency, and trust in financial transactions. In addition, Blockchain can revolutionise several aspects of FinTech, from payments to remittances, smart contracts and identity verification.
Blockchain in FinTech will most likely lead to promising innovations in the financial sector. The main reason stems from Blockchain’s unique characteristics, offering advantages to financial companies and their clients. One of these is its ability to enhance security. The decentralised and cryptographic nature of Blockchain can guarantee tamper-proof and secure transactions.
3. Embedded Finance
Embedded finance refers to the integration of financial services into non-financial offerings. Some common examples include e-commerce merchants offering insurance products or a food ordering app with one-click payments. When integrated successfully, embedded finance solutions aim to meet the customers’ financial needs, whatever they are, whether through a payment program, loans, or insurance plans. This also opens new opportunities for those pursuing a career in IoT as they require specialists who know how to integrate them.
Many embedded financial services have been around for a while, such as car rental insurance and airline credit cards. But nowadays, embedded finance services take hold online, such as e-commerce retailers offering banking services directly through their websites without the need to direct the customers to their banks.
Such an option is made possible through third-party companies that rely on API integrations for embedding financial services into the user experience of retail companies and other non-financial industries. Integrating embedded finance can improve overall customer experience and opens up a massive opportunity for many businesses. Because of this, experts predict that companies relying on embedded finance will dramatically increase in the coming years.
Embedded finance provides financial services wherever necessary instead of separating it from non-financial services. As more and more companies recognise the need to integrate embedded finance, you can now find various types of embedded finance products and services.
4. Open Banking
Many experts believe that open banking is the future of the financial system. It refers to integrating APIs to share financial data and services with third-party companies. These companies typically offer technology, such as an app that bank consumers use for financial services and contains financial data like bank transactions and statements. The data should not be made openly available but will only be available upon the customer’s request. Open banking provides the tools and legal frameworks for such to happen.
Open banking is a global phenomenon, but each country enforces different regulations. Others are still planning to introduce open banking, but countries like the UK are already at a stage of extending the scope of Open Banking.
One of open banking’s benefits is making life easier for bank consumers. However, every bank that uses open banking must comply with banking regulations to avoid the hefty fines imposed for non-compliance.
Also Read: Benefits and Applications of IoT in Fintech
5. Cloud Computing
Cloud computing is improving how FinTech companies provide scalable and innovative solutions to customers. By leveraging the security and flexibility of cloud platforms, financial companies can improve performance, enhance customer experience, and reduce costs.
Indeed, cloud computing has revolutionised how financial companies store, process, and analyse data. It enables FinTech companies to access cost-effective and scalable computing power without investing in expensive hardware and infrastructure.
In addition, cloud computing is improving data security, with many cloud providers offering sophisticated data encryption and other means to protect sensitive financial data. By integrating cloud computing, FinTech companies can increase agility, hasten innovation, and lower operational costs.
Cloud computing providers follow strict regulations and standards, providing security features like backup, encryption and data recovery. Some cloud platforms also enable testing, prototyping, and deployment of new features that can result in faster and smoother financial transactions.