Intuitive Guide to FinTech – FinTech is the fusion of various cutting-edge technologies, such as AI, machine learning, advanced analytics,, blockchain, and virtual reality, employed to enhance the efficiency, intelligence, and security of financial systems“. We can’t ignore or forget to give credit to physics and mathematics, which are the backbone.
If you’re unfamiliar with the term “FinTech,” that’s understandable—it suggests you may not be well-versed in this realm. FinTech, short for Financial Technology, encompasses innovative technologies and solutions aimed at transforming traditional financial services. Technologies like Blockchain ensure secure and transparent transactions, while RegTech streamlines regulatory compliance. Robotic Process Automation reduces operational burdens, and APIs facilitate seamless integration. The focus on personalization enhances customer interactions, while cybersecurity measures safeguard sensitive financial data. Fintech Intelligence continues to reshape traditional finance as a rapidly evolving field, offering efficient, innovative, and secure solutions for businesses and consumers alike.
FinTech Intelligence – Introduction
Fintech Intelligence leverages cutting-edge technology like artificial intelligence, blockchain, and data analytics to revolutionize the financial industry. Through machine learning, it automates tasks, enhances risk management, and improves customer experiences. This article will provide you with a fundamental understanding of the FinTech term and familiarise you with it. Let’s continue reading regarding
- FinTech from beginner to advanced level and FinTech intelligence at a high level
- Why is it important for all entrepreneurs to know about and understand this jargon?
This fusion and integration empowering businesses to reshape finance, leveraging Payment Intelligence, Blockchain, AI and ML, Real-World Theories on back of Physics and Mathematics for limitless potential.
According to AILabPage, “FinTech, encompasses the innovative application of technology to provide financial services and products. Serving as a superset of Mobile Money and Mobile Financial Services, FinTech includes a diverse array of applications such as mobile banking, lending, wealth, savings, insurance, cryptocurrency, robo-advisors, and payment platforms. Continuously evolving, FinTech integrates advanced technologies such as AI, ML, Blockchain, and customer-centric innovations. Its primary aim is to enhance the efficiency, accessibility, and affordability of financial services, while concurrently improving customer experiences and meeting evolving market demands.”
Demystifying FinTech Jargons & History
Modern financial institutions are the main users of these technologies, and they follow their own set of standards while operating them. Numerous institutions offer financial services, such as banks, FinTech firms, and mobile financial service providers, yet it is their interpretation of our definition that determines their proximity to them.
‘FinTech’ is a term arguably coined in the mid-1980s. If you look at history, it has had relations since the 1800s. Between 1856 and 1966, finance and technology came together, and as a result, the first analogue financial technology was produced. Thereafter, the first trans-Atlantic cable For the first two decades of its use,
- Originally, FinTech referred to “back-end” banking technologies closely tied to back-office operations.
- The rise of digital banks in the early 2000s, driven by challenges faced by traditional banks after the 2008 financial crisis, spurred the growth of independent FinTech startups as alternatives to conventional banking methods.
The year 2014 witnessed the emergence of FinTech startups on a daily basis. This is the period when we observed a significant influx of major players, particularly those outside the financial services industry, venturing into the FinTech domain. There was a shift towards mobile devices for all payment and transaction processes.
Intuitive Guide To FinTech – Explained
Numerous companies, which previously lacked any experience in financial services, are currently engaged in the development of “financial technology,”, commonly referred to as FinTech. These entities are strategically establishing frameworks with the aim of providing innovative disruptions to current financial service systems and institutions. The aforementioned substances exhibit a preference for the employment of computing systems such as “Banking as a Platform” (Baap) and “Banking as a Service” (BaaS), as opposed to traditional banking methods.
The integration and adjustment of artificial intelligence and machine learning methods in the fields of finance, regulation, and central banking are considered essential prerequisites. Sadly, logical reasoning capabilities remain beyond the reach of most modern machine learning algorithms. All of these predictors rely on the assumption that previous occurrences will repeat themselves, as long as there are no alterations in other aspects of the business environment.
Financial Systems Transformation into FinTech Intelligence
Blockchain entered the FinTech party as a dependable digital ally at a later stage and soon created a lasting partnership within the industry. It is too premature to determine the methods by which blockchain and AI can be employed as components of FinTech solutions by startups and non-financial services institutions, given the recent resurgence of FinTech in 2014. The objective is to guarantee that embracing them does not impede the development of society. It’s possible that this won’t result in a complete overhaul but rather just a case of exaggerated expectations.
Looking at the current growth and trends of FinTech, one needs to admit its contribution to the global revolution. FinTech’s new joiners, i.e., blockchain and AI, in the financial services industry will bring extensive transformation in the coming years.
FinTech Ethics and Risks
A key component of utmost importance is the ability to communicate, understand, and assess the pros and cons of new and developing technologies.
- Comprehensive Financial Tracking:
- FinTech enables a thorough tracking of an individual’s financial transactions, creating a wealth of data with multifaceted applications.
- This data has the potential to be harnessed for various beneficial purposes, contributing to improved financial management, personalized services, and enhanced user experiences.
- Commercial Exploitation and Global Impact:
- The collected financial data, however, may also be susceptible to commercial exploitation, raising concerns about privacy and data security.
- Despite these concerns, FinTech has the undeniable potential to significantly elevate the standard of living for people globally by fostering financial inclusion, streamlining services, and driving economic growth.
- Dual Nature of FinTech Technologies:
- The same technologies underpinning FinTech, including AI, ML, and Blockchain, hold both transformative and controlling potential.
- It is crucial to recognize that while these advancements can empower individuals and societies, they also have the capacity to exert control over personal information and financial interactions.
- Examination of Potential Consequences:
- Thorough examination of the potential consequences is essential when implementing FinTech technologies.
- Understanding the broader implications, both positive and potentially restrictive, ensures a balanced approach to the deployment of technologies that shape the future of finance.
- Autonomy and Ethical Considerations:
- As FinTech continues to evolve, the ethical considerations surrounding user autonomy become paramount.
- Balancing innovation with ethical standards is crucial, emphasizing the importance of responsible development and implementation of technologies to safeguard individual freedoms.
It is essential to understand and apply regulations to ensure the appropriate use of technologies and tools. Adequate regulation is vital to avoid hindering societal progress caused by their adoption.
Trends & Opportunities – FinTech
FinTech in this era is not what it used to be. FinTech is changing, and it will bring too many changes in the next 5 years that will shape the future of FinTech further. Since early 2017, banks have shown an indisputable interest in blockchain and Artificial Intelligence technology. Those banks that adopted and made use of it now fall into the challenger group based on their capabilities and digital offerings.
The biggest hurdle for any startup today is fund-raising, so a lot of FinTech companies have come up with innovative ideas and processes to support the same. The biggest tweak or process bypass idea is the ICO, which is now used by start-ups to bypass the rigorous and regulated capital-raising processes.
How FinTech has Transformed Consumers
The outlook for FinTech benefits has trickled down to consumers through faster, more transparent, and more secure products and services. The future of FinTech services is bright and demanding. Siri is able to do financial transactions just by voice command. Such development and business applications that use embedded AI and other emerging technologies have a clear transformation agenda.
- Tech Absence in Banking Inception:
- In the early days of banking, technology was virtually non-existent, relying on manual processes and interpersonal interactions.
- Tech Evolution Challenges Traditional Banking:
- The continuous evolution of technology poses a significant challenge to traditional banking, prompting rapid adaptation to stay relevant. Milestones like the introduction of ATMs and the advent of internet and mobile banking have transformed consumer experiences and altered the banking landscape.
Mobile banking and now mostly mobile app banking have transformed the customer experience, i.e., transact anywhere, any time, from anywhere.
The Rise of Wallets and Lifestyle Apps
Mobile as a primary communication or operating method is already 10 years old. This advancement has helped the customer change their lifestyle in a better way. FinTech is one of the top beneficiaries of this advancement and has made an indisputable change in thought processes. Mobile, now with financial apps and other social media app functionality, has become a must, not a plus, in the eyes of customers. The mobile channel also brought inclusion change in a big way.
Emerging Technologies For FinTech
A succession of FinTech, a new user-oriented service that combines finance, IT, and consumer needs, has led to the biggest disruption in recent times. Some of the actors behind the scenes acting as enablers for creating innovation are listed below:
- Blockchain – Also known as “The Digitisation of Trust“. The rationale of blockchain in FinTech is to uncover the limitations and opportunities. The blockchain is also known as a core technology in FinTech of today.
- Distributed Ledger – A database that is consensually shared and synchronised across different institutions or geographies networks. This is done to make the cyber attack more difficult. The blockchain is one type of distributed ledger.
- Hyper Ledger – A multi-project open source collaborative effort hosted by The Linux Foundation. This technology is an emerging platform with applications and enabled by blockchain. This is created to advance cross-industry blockchain technologies.
- Cryptocurrencies – The original design of blockchain was focused on the cryptocurrency “Bitcoin”.
- ICO – Lot of ICO’s pop up in recent times. Though blockchain is not bitcoin but its an underline technology. Biggest successful use case under FinTech with crypto is “Cross Border Remittances”
- Automating The Automation – AI got prominence after huge computing power made available in recent times. Almost every tech company got into AI and its sub-technologies. Either claimed or actually started putting AI ability to their existing products; hence I call it as automating the automation.
- AI-based Chatbots – Chatbots with AI got attention especially in the banking industry. The first idea was to cut cost.
- Security & Compliance (Fintech VAS – Revenue Protecting Services) – AI & Blockchain made a revolutionary change in FinTech in the area of info-security & compliance. Below are a few examples where it has made a greater impact.
- Cybersecurity
- Identity security
- InfoSecurity
- Threat hunting
- Security Intelligence
- RegTech
Case Study – WeChat
WeChat is a classic example of a beautiful transformation from a messaging application to a profitable ecosystem? It’s like a “Swiss army knife” application. This transformation is an excellent example of a masterful flagship work in FinTech history. This has been a major source of disruption so far because of the blending of so many ideas working together as a complement to each other.
There is no push service on WeChat with a subscription account. Users are allowed to send one message to followers every week. Followers will get an alert via a push service, though. The key differentiators that have led to WeChat’s dominance are highlighted below. This app hosts many mini-apps and services for external partners. These features positioned the product as the best in China and the top category in the world.
- Messaging: Instant messaging over a mobile data network with group messaging like whats app
- Social media: The Super intelligent blend of twitter, facebook, and other social media platforms allow users to share stories, follow influencers and companies and share pictures/videos/links/etc. Also making audio and video calls over the internet
- Mobile payments: Mobile wallet or e-wallet payments, utility and merchant payment transactions.
- File Share: This is another biggest use case for any user especially among youth. This is for sharing music, files, documents, contacts, etc.
- App Aggregations: “Mini Programs,” (FinTech VAS Revenue boosting services) mini-apps allow users to directly install & run applications smaller than 10 megabytes can run instantly on WeChat’s interface. With the mini-program push, it aims at Apple and Google app stores. Excellent & Superb example of re-engineering work.
Despite all the positives it also has its own challenges and issues. Below are few issues and challenges WeChat faces as on date but off-course solutions are at hand.
- Messy App: Too many features could eventually drag down the user experience because of the huge computing and memory hungry application.
- Saturation: The penetration of this app has reached its pinnacle in China. The next growth has to be international. This has to grow outside the country China.
This holistic approach is not only revolutionizing financial services but also enhancing customer trust and experience, while simultaneously setting elevated standards for security and efficiency in the dynamic realm of fintech. This would happen through higher returns on capital, regulators, and leaner, simpler, and more efficient operations. Smart customers make smart decisions.
Conclusion- This post was an attempt to explain FinTech from a beginner’s to an advanced level. FinTech gave digital-savvy institutions a mandate to raise the bar on service quality to attract and retain customers. We saw in this post that essentially, digitization took banks from just being product providers to offering services. Digitization keeps on contextualizing services and helping customers better understand their financial and commercial affairs. We are most likely to see the future as a win-win with a relationship between FinTech as a partner for the banking industry with new products and shareholders.
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Feedback & Further Questions
Do you have any burning questions about Big Data, “AI & ML“, Blockchain, FinTech,Theoretical PhysicsPhotography or Fujifilm(SLRs or Lenses)? Please feel free to ask your question either by leaving a comment or by sending me an email. I will do my best to quench your curiosity.
Points to Note:
All credits if any remains on the original contributor only. Our last post was on Convolutional Neural Networks. In the next post, we will talk about Artificial Neural Networks in detail.
Books & Other Material referred
- AILabPage (group of self-taught engineers/learners) members’ hands-on field work is being written here.
- Referred online materiel, live conferences and books (if available)
- PWC documentation
- The Financial Brand
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