Last year saw a series of technological breakthroughs in the FinTech sector. These breakthroughs acted as a gateway to many opportunities for FinTech companies. The pandemic helped FinTech companies accelerate their processes to try and implement these technologies. These technologies are also highlighting some problems related to the financial sector. These problems were the driving force behind many financial players investing in improving their functioning, optimizing costs, and implementing new solutions.

What is Fintech?

The term “fintech” combines the terms “finance” and “technology.” Despite being a general phrase with a variety of meanings, it generally refers to the development of an industry when new technology use cases are created and implemented to streamline more conventional-looking finance activities.

Although the general public frequently identifies “fintech” with extremely innovative new ideas like algorithmic trading and blockchain, the term actually refers to a very wide range of considerably more “boring” applications. They include routine banking, insurance, and other back-office risk management tasks without being confined to those.

5 Trending Technologies Used in Fintech

Here are 5 technologies that have contributed to the shift from the traditional banking system to a more tech-driven financial system.

Artificial Intelligence (AI) and Machine Learning (ML) technologies

Before the pandemic, the adoption of AI and ML technologies in the financial industry was slow. But today considering the tough times we are in digital transformation of the FinTech industry is now important more than ever. Modernizing banking systems without disrupting the existing system is extremely important and also a major challenge. Enter, AI and ML technologies.

AI and ML have majorly helped in making digital transformations hassle and risk-free. By implementing AI/ML technologies financial institutions can reduce costs by increasing productivity. Artificial Intelligence and Machine Learning algorithms can spot anomalies and fraudulent information instantly and help achieve improved customer experience.

Robotic Process Automation (RPA)

Robotic Process Automation technology helps FinTech markets to speed up procedures by automating manual interventions. RPA uses software robots (bots) to free up human resources and allows automation of the manual repetitive and mundane tasks. Robotic Process Automation is not dependent on APIs, it notes the user’s actions in a graphical user interface (GUI) to repeat those actions on the same platform. It enables greater work efficiency with minimal investment.

For financial institutions, RPA is already in use across middle and back-office activities, automating financial processes and accounting reconciliation. Process automation for payables and receivables, fund appropriation at shared finance and accounting service centers, work hour modification and review, automation of financial recording, reporting, and treasury processes, as well as period-end accounting and settlement, are all areas where RPA is being used.

Automating manual tasks lowers human error, increases productivity, and enables firms to adjust to demand variations. Although RPA is currently well-established among major financial firms, we anticipate that it will spread more widely throughout the sector. For instance, account payable procedures could be automated to the extent of 60% by deploying robots that mimic human decision-making and fundamental paperwork tasks.

Blockchain technology

Blockchain technology has taken the financial sector by storm and is responsible for reshaping the financial space. The growing acceptance of blockchain to help create a secure digital ledger is unavoidable. Today, it is the most significant financial innovation for digital transactions. Blockchain technology has a distributed management system. It cannot be controlled by a specific individual, government, company, or bank. However, there are still some security issues of this cutting-edge FinTech that need to be worked upon.

Cloud Computing and Big Data Analytics

Cloud Computing and Big Data Analytics are the next big thing in FinTech. These technologies help in reaching remote markets and audiences. It is a complete transformation. The financial services industry has to deal with tonnes of data. Implementation of cloud computing in finance has numerous benefits such as assessment of information, efficient storage, and data management.

Cloud computing allows efficient storage of large data sets which results in better data analysis. As the banking and financial sectors further develop and progress with the adoption of mobile technologies and IoT, the need to shift to Cloud Computing and Big Data Analytics technologies will increase.

Financial institutions are going to keep relying on the cloud as they implement more agile capabilities and introduce new ventures that call for high market and customer responsiveness as well as flexible scalability. The demand for cloud-based elastic computing, which enables computer resources to be dynamically modified to meet shifts in demand, will increase as a result of the at-scale deployment of big data analytics.

Banks will also see the potential for adopting cloud-based microservice architecture at scale in the coming years, where application programming interfaces (APIs) open up machine-to-machine communication and allow services to scale independently without having to increase the overall offering’s coding base. The forthcoming generations of core banking applications will lead to a change in banking architecture that is driven by microservices.

The Rise of NEO Banking

In 2023, and in the future, the meaning of digital banking will not be limited to going paperless or cashless. The financial services industry is moving toward the next stage of evolution and we are about to witness the rise of digital banking. The first stage of evolution involved a rise in digital payments and online infrastructures. However, the second stage is not just about going online, at this stage, we will see the emergence of virtual banks. This is where the rise of the Neobank begins. Neobanks are like financial institutions that can potentially give customers a cheaper alternative to traditional banks.

Conclusion

These important trends and technologies are entwining and integrating more and more, providing fintech and finance industry innovation with a huge boost. It is now a specialized financial industry.

the subsectors that are best at using technical advancements to introduce applications, produce value, and alter the competitive environment. Conventional banks will need to use their significant resources in the future to remain ahead of the growing wave of disruption in the financial industry.