Long before the advent of the internet set the world on the path to digital transformation, technologies and tools have been optimizing the way we handle our money. But despite important early advances such as the pantelegraph (used for verifying signatures in banking transactions) and the Federal Reserve Wire Network (which made it possible to move money electronically), it wasn't until relatively recently that businesses around the world began to make the marriage of finances and technology a major focus.

Fintech, as it was coined back in the late 20th century, has already done a lot to change the world. Big data has made it possible for banks and other financial institutions to see the patterns and insight hidden in vast volumes of information, and mobile banking options put control literally in the hands of account holders. And according to experts, the best is yet to come, with the global fintech market expected to hit $16,652 billion by 2028. How is that possible? Because in the next few years, new innovations will completely disrupt and reshape the financial landscape.

Here, we take a look at six key technologies and trends that are poised to revolutionize the future of fintech.

Blockchain

There are a lot of risks associated with finances, but perhaps the biggest dangers are those that have to do with digital transparency and fraud. Simply put, most current financial processes leave something to be desired in terms of security and efficiency. Blockchain may be the answer.

Given its role as a central technology in cryptocurrency, blockchain has enjoyed more than its share of attention. But for those who may not be familiar with what blockchain is or what it can do, it may help to think of it as a digital ledger built on a series of code blocks. These make up links in the chain, with each containing a cryptographic hash of the block that precedes it, as well as transaction data and a timestamp. Why is this important? Because blockchain's unique structure makes it extremely transparent, increasingly efficient, and nearly impossible to hack.

The applications of such a technology in the financial sector are obvious. Rather than relying on intermediary trust authorities, financial systems can be decentralized, making identity confirmation instantaneous. Instead of worrying about tampering, everyone on the network gains a complete copy of the ledger along with a full record of every change. And as for security, because blockchain relies on an unchangeable sequence of code blocks, any hacker attempting to breach the system would need to hack every block in the chain. With blockchain, institutions and their customers can have greater faith in financial processes.

Internet of Things

It's been said that data is the currency of the 21st century, and nowhere is this more accurate than in the connection between the financial industry and the internet of things (IoT). IoT takes internet connectivity beyond the browser (and beyond the person using it) and instead connects devices, products, and parts to create a digital web of informational data. In other words, we're now reaching an age where you no longer have to contact customer support when your toaster stops working — the toaster can do it for you.

IoT technology also makes possible a range of fintech applications. Sensors built directly into certain devices will be able to authorize micro-payment transactions whenever and wherever they are needed — without requiring the account holder to reaffirm their payment information. Biometric technology such as facial recognition and thumbprint unlocking is also set to replace more traditional authentication, and user tracking may allow banks to provide valuable assistance without waiting for their customers to reach out to them.

But IoT has even greater implications for the financial industry. Working side-by-side with blockchain, IoT devices will supply financial systems with a constant stream of accurate, real-time data to ensure that all accounting records match their transactions. The technology for a true internet of things already exists; it's only a matter of how quickly that technology will proliferate into the financial sector.

Hybrid Cloud

When the cloud first arrived on the scene as a viable option for data storage, financial institutions were hesitant. After all, financial data is extremely sensitive and at the time it was a foregone conclusion that data maintained in on-site servers was more secure than data held "in the cloud." But cloud technology has come a long way, and those concerns are looking less and less valid, while the advantages only continue to grow. Still, there are some things that financial institutions prefer to retain in-house.

Hybrid cloud offers all of the advantages of public cloud, while still allowing organizations to maintain a tight hold on vital data governance and compliance issues. By mixing traditional IT with public and private cloud solutions, many financial companies are discovering that an enterprise-wide hybrid cloud strategy gives them the flexibility they need to enhance innovation, improve their operational efficiency, and reduce unnecessary costs.

Peer-to-Peer Lending

For nearly as long as money lending has existed, banks and other financial institutions have played a necessary role in helping facilitate borrowing and repaying — not only acting as brokers but also taking on the greatest share of the risk. Of course, there are also downsides to inserting a "middleman" into a loan transaction; the banks get the final say in what loans go through and can slow the entire process to a crawl. Peer-to-peer (P2P) lending offers a solution, replacing the bank with a digital 3rd-party platform.

These platforms do not own the loan and they do not depend on human intermediaries. Instead, P2P lending platforms function as a quick and convenient way for savers to connect with borrowers in a secure digital environment. The platform handles all approvals and helps ensure that investors achieve better returns. At the same time, borrowers may be eligible for more favorable interest rates and are less likely to have to worry about arbitrary limits on minimum loan size or penalties for early repayment.

But cutting out the middlemen doesn't mean cutting out the financial industry; the increased demand for P2P lending has created a new market, and innovative fintech companies are filling that need by building new P2P lending platforms. And as banks and traditional lenders become ever more obsolete within the loan process, fintech stands to become increasingly relevant.

Virtual Financial Assistance for Customers

Moving funds and making payments are pretty straightforward tasks, and most people can figure out how to perform basic financial actions through their online portals. But when you move beyond the basics, financial customers quickly start to get lost. Human advisors at banks and other financial institutions have long taken on the responsibility of answering questions and offering guidance to clients who want to better understand their options. Unfortunately, this kind of 1:1 assistance isn't efficient or cost-effective — automating these transactions is.

Using machine learning and event-driven software, robotic process automation (RPA) enhances chatbot technology to the point of providing vital financial assistance and education in a way that is both scalable and effective. Built on clear logic, repeatability, and stability, these virtual financial assistants will soon make it possible for financial institutions to provide a personalized, educational customer experience that's also completely automated. RPA is likewise revolutionizing the back office, automating and optimizing a range of vital financial processes.

Artificial Intelligence

This is the big one. Artificial intelligence (AI) has seen some major advances within the last decade. And now, in addition to powering chatbots, modern AI capabilities are being directed toward big data analytics. Fintech companies are leveraging AI and predictive data analysis to take massive amounts of individual customer data into account to build a hyper-personalized client experience in real-time.

More than just educating customers, AI stands to take on the role of personal financial advisor, designing extremely customized financial packages to meet the unique needs of every user. And all at the push of a button.

Put Fintech Advances to Work for You

Technology has always played a role in managing and securing financial activity, and that role is starting to expand. Innovations in fintech are poised to turn the financial industry on its head, and will soon be opening up new doors for improving digital accuracy and enhancing the customer experience. But not every financial institution is moving in the right direction. And as customer and industry standards continue to advance, financial institutions that fail to invest in the correct fintech solutions may get left behind.

Acrisure, a global leader in financial technologies, is here to help organizations survive and thrive in this new era. Contact us today; our experts will work with you to develop a unique financial service solution to match your business needs. After all, fintech is the future. And with Acrisure in your corner, that future has never looked brighter.

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