Revolutionary Trends of the Fintech Industry
The Organization for Economic Co-operation and Development (OECD), says that the financial industries make 20% to 30% revenue from the total service in the market and make 20% from the domestic products in the developed countries. During the year 2011, the Mckinsey Global Institute has provided the earnings estimation data for the global financial industries, and it figured most of the revenues from life insurance, general insurance, and retail banking. According to that report, the total income from these three sectors was approximately 6 trillion USD and had the capability to grow 6% rate. This report indicates that three divisions make 60% of the sales in the entire financial services industry. Most certainly, these improving are improving the future of fintech companies all around the world.
Apart from these three sectors, the entire financial industries including all areas’ revenue were around 11 trillion USD. To get an estimate of the total percentage of the global economy that 11 trillion USD represents, then the global GDP estimation is required.
Fintech Industry Landscape
The FinTech startups are currently presenting the financial companies with innovative business models and technologies. In the current competitive business strategies, the startups from the financial sector are focusing on competitive technologies such as retail banking and payment technology. Fintech companies are leveraging AI as a service to rapidly deploy cutting-edge solutions that enhance their offerings, from AI-powered chatbots for customer support to predictive analytics for investment strategies. To encourage innovation, many other industries such as healthcare and life science have started using the latest technology for optimizing their business processes, cost cutting, and so on. Since there are opportunities that many industries using the technology, the Fintech industries get the cost-effective processes and fewer regulations in the traditional financial sectors.
Each year, the economic crisis is continuing to be an unpredictable situation, and financial industries are facing various challenges. Some of the common problems are the rapid rise in asset prices, low-interest rates for a long period, huge savings and credit imbalances, and so on. The reports from the World Economic Forum have already predicted that the mentioned challenges are going to continue as a risk in the market. In the earlier decades, the exceptional growth and the capitalism to its best have now created the market to adapt to tighter credit, slow pace of globalization, government intervention, and no growth in the economy. Since the regulations are changing in the United States and the lack of credit availability, the financial industries are facing risks in the business growth.
Most ATMs across the nation charge a fee for using them. It is better to be aware of your bank charges before you start using them. Most banks offer us maximum six times to use the ATMs free of charge on a monthly cycle. ATMs apparently provide services like withdrawals, transfer of funds, bill payments, recharging mobile and cheque as well as cash deposits and these services should be carried only in your bank tellers, as tellers of other banks charge a fee for processing each transaction.
Check deposits in the ATM usually take one business working day to get cleared. A mere receipt from the ATM doesn’t allow you to access funds immediately after the deposit. But after depositing the check in the ATM, you get access to your first $200 of your check instantly and usually remaining on the next working day depending on the ATM you have used. If you have used a shared branching, it might need an extra time to clear your checks. There is no fee levied to deposit a check in your account.
ATM fees charged by the banks do not discourage us from using them if you use it consciously as stated above; fees are kept to the minimum. The services offered by the ATMs are plentiful. We need to manage our free transactions in such a way that we reap maximum benefits out of it.
Future Trend
The following are the unique trends that enable the future growth of the financial industries:
- Globalization in banking – Many banks such as Citibank, JPMorgan, American Express operate in multiple regions. Some of the factors for banks being an important reason for the financial sectors are improved finance supply, credit to small industries, and reduced interest rate. To achieve a consistent growth with banking relationships, the financial industries will have to provide and get access to the emerging markets as well. Even today, few regions in Africa and Asia, the market growth opportunities for profit and market share price are not in parallel. This could be one of the major reasons for companies with an aggressive growth strategy are not operational in these regions. The market share and profit not in parallel do not mean that these companies cannot be successful in these areas. Global banking is recommended to achieve significant growth in the financial companies. Global banking is recommended to achieve significant growth in the financial companies.
- E-Banking – As per a recent report, approximately 4 billion people around the world are using cell phones. Out of 4 billion people, almost 90% of the people are using smartphones. It is also expected that 10% of 20% growth each year in smartphone usage. Considering the latest technology and the feature in these smartphones, all banking sectors have now started their own mobile application (app), and banking transactions have become easier through E-banking. The same report also indicated that people prefer to use e-banking/online banking to do banking transactions. Thus, E-banking capability is quick and is also becoming a mandatory requirement to be successful from the competitors. Since all the major banking activities can be done through E-banking/Online Banking, this initiative has become popular. The financial industries can also do the same initiative to attract customers and stay productive in the market.
- Mobile Money – Unlike E-banking, there are other platforms where customers can pay or get paid. This low-cost initiative has become famous across the world, enabling the customers to accept money, send money, and transfer the money to the bank. For example, one of the leading mobile operators, Vodafone has introduced its M-Pesa mobile-based money transfer technology. Using this technology, customers are using the mobile-based money transfer/accept as an alternative method. One of the primary reasons that Mobile Money has become famous is because people do not have to worry about internet banking, credit cards, password, PIN, and so on. Similarly, financial industries such as life insurance and general insurance can also follow this initiative to attract the customers, for new policy and renewing the policies.
- Networking / Collaborating –Networking is one of the important aspects of the business and for being competitive in the market. For future success in any business, instant access to information, product integration, and geography are the mandatory requirements. Financial industries need to compromise or need to be ready to reduce the price, based on the demand and supply of the global market. One of the cost-effective initiatives is that the mobile service operators from one country have tie-up or collaboration with another company, where there is no service to that location. Instead of starting a new service, the cost becomes lesser when it comes to collaboration. In this way, financial industries can start with collaboration for easy access to many destinations with lower cost. This method would be helpful for the growing industries trying to expand their services to many destinations.
- Self-Service – According to IBM, when it comes to the financial services, the customer and self-service should be the primary focus. There are various self-service portals that enable the customers to get instant access to various services and to check the status of the account online. Many service providers have also automated to connect to the customer service representatives instantly for support. Unlike waiting and selecting various options from the phone, a one-click button enables the customers to get in touch with customer service representatives instantly. This type of service in the financial industries would definitely help the customers for building a good relationship.
Revolution of Fintech
Fintech (Finance and Technology) has created a major impact in the financial sectors, from leveraging some of the latest innovations such as Artificial Intelligence, Robotics, Biometric applications, Blockchain, Peer-to-Peer lending, and so on. If FinTech has created a bigger revolution in the financial sectors, then there will be subsequent opportunities to seize the market. To get the similar opportunities, some of the start-up companies are providing enhanced options such as PayPal, GoldMoney, and Alipay. To elaborate more on the options, for example, PayPal, customers can send and accept money in all types of currencies. The additional benefit of PayPal is that customers can also convert the foreign currency to local currency and transfer the converted currency directly to the bank. Currently, the financial sectors using PayPal have grown significantly in all the regions. It is expected that the investments in the FinTech would increase up to $150 Billion across the world.
Apart from FinTech creating revolution in the financial sectors, let us also explore the options, which the financial sectors roll to next ways of innovations.
- Robo advisory – The concept of robo advisory is to provide financially related bits of advice, to reduce human interventions. And these advices are mainly through complex algorithms. The algorithms are carried out through computers and hence, human interventions are not required. Intermediaries played an important role between the investors and the stock market. Sometimes, this also leads to transactions that are not traceable as well as inefficient. Robo advisory helps the investors to access the stock market with value-added services in an easier and transparent manner.
- Alternate lending – Some of the banking industries found that lending funds to small business are not profitable. FinTech has taken an opportunity to provide peer-to-peer lending based on mutual terms and conditions at low-interest rates. This service has become popular with the investors and set to grow in the emerging markets. In some developed countries, the alternate lending services are payday loans, money orders, mortgage loans, refund anticipation loans, car title loans, and so on. Some of the popular alternate lending companies are SpringLeaf financial, Lendmark Financial Services, and Duvera Financial Inc.
- Blockchain – For online transactions, third-party validation is required for all the transactions. Blockchain is one of the technologies that eliminate reconciliation of third party concept and provides additional security. One of the trends that has made Blockchain technology so popular are Bitcoins. Bitcoins are an unregulated currency which can be traded or exchanged in multiple currencies. The future application of blockchain in finance industries will be through cryptocurrencies, which is called Bitcoin Mining. The term Bitcoin Mining refers to a peer-to-peer process to verify bitcoin transaction, which is the payment from one person to another through a decentralized network. Since the blockchain technology and cryptocurrencies are getting popular, many fintech startups have already started to send/store bitcoin and other currencies through digital.
- Digital payments – As smarter payment options are hitting the market, FinTech start-up companies have provided quick and convenient payment modes to the customers. For example, PayPal is a famous digital payment method used popularly in the US. Upon successful registration in PayPal, the process to send and receive money requires only a valid email address. Some of the payment options are already popular in all over the world and soon it is expected that ATM services will become redundant and customers in the developed countries might go for digital payments for all transactions. With the demonetization push in India, we see huge spike in the use mobile payment apps and mobile banking in order to transact cash, and it will reflect in many other emerging countries in the near future as well.
Financial services have to be sustainable and have to be steadily expandable in order to get a steady growth in the market. Due to various reasons, many financial industries have not been in a position to capitalize in many locations across the world. The lack of no service in many locations results in failure of wider business opportunities. It is recommended that the financial industries must also start to invest in the mature market. This is necessary because, by 2030, these mature markets might be equal in terms of growth and business from the faster-growing companies in the market. One of the major benefits of investing in other locations or in mature markets is because of the constant growth. For example, if the revenue in one location is not up to the required level, then the loss can be compensated from the revenue that is emerging in the mature market. Similarly, the same conditions also apply from one geography to another.
In conclusion, the future of the finance industry is bright like a diamond and every year on we will find increasing use of mobile and card payments and sharp reductions in cash transactions. Fintech industries are fostering swift innovations in a short period of time and we are likely to see more advancements in the future to come.
