For All the Talk of a Fintech Revolution, It Is Only Just Beginning
As the COVID-19 pandemic continues to bring rapid changes to all areas of business, we finally have an idea of what the new, leaner financial sector will look like in the aftermath.
The coronavirus pandemic has left many businesses scrambling to adapt. The lockdown and social distancing measures now in place – likely to remain in place, in one form or another, for many months to come – are forcing organisations of all sizes and sectors to reconsider how they operate. Ammar Akhtar, co-founder and CEO of Yobota, shares his thoughts on what the newly adapted financial sector might look like.
As we so often hear, we must prepare for a “new normal”; a world where office working, unrestricted travel and regular visits to bricks-and-mortar premises for essential services is going to become increasingly rare. In short, the transition from physical to digital is being greatly accelerated.
In the finance industry, there is a huge amount at stake. Firms that are unable to deliver their services while the physical world is largely closed off from us are at risk of being left behind by their competitors.
Rising to this challenge invariably means turning to technology. Indeed, fintech has been championed as the future of the finance sector for a decade now, but it has taken COVID-19 to bring about a “fintech revolution” in any meaningful sense.
What will this ‘revolution’ look like?
The increasing prevalence of financial technologies has been a common subject in both consumer and business contexts for many years. The so-called fintech revolution promised open access to data, hassle-free banking experiences and fairer deals for customers.
Yet only relatively small steps have been taken towards this vision. Until now we have only really witnessed a cautious adoption of this technology as consumers, regulators and established banks became familiar with what it can enable – and this has still come at considerable investment.
The so-called fintech revolution promised open access to data, hassle-free banking experiences and fairer deals for customers.
Now, though, things are finally changing. Technology is now not just a competitive advantage for financial services firms; it is essential to their very existence.
Today, people must be able to access critical financial services digitally. From taking out a new product (a loan or a credit card, for example) through to managing their finances and receiving advice, this must all be possible from within one’s own home. But more than that, the process of doing so must be fast, painless and personalised as possible.
There are credit marketplaces in the UK which already offer pre-approved loans that can be opened in just a few minutes with minimal clicks. This is possible because the lenders have made progressive choices in the way they develop or utilise technology.
Conversely, many finance companies still have data, systems and processes that are completely reliant on legacy technologies and on-premise servers. Simply put, these firms are under threat of becoming the Blockbuster or Kodak of the financial services sector (that is to say, businesses that were far too slow to respond to technological change).
Interoperability and the cloud
For financial technologies to be successful, two things are essential: interoperability and cloud computing.
Over the past decade firms have too often taken a piecemeal approach to adopting fintech; they have deployed specific technologies to solve isolated problems. That is because fintechs – financial technology startups – are typically created with that very focused mindset.
For financial services companies, particularly banking providers, a much broader perspective is required. Not only must each element of a business’ operations be built around best in class technology, but the technology must also be interoperable – it must fit together to form entire systems and processes that work seamlessly together.
Take the example of someone applying for a credit card – something that is increasingly common as a result of the economic hardship brought about by COVID-19. There are various different stages that an applicant will need to pass through – identity verification; credit scoring; advice or product recommendation; application and assessment; and, if successful, creating the account.
Using interoperable fintechs on a cloud-based platform removes time, complexity and human interference in all of those processes. Data can be rapidly shared and analysed, allowing for the appropriate products – better yet, personalised products – to be shown to the user. There is no reason that an applicant cannot go from the start of the process to the end by themselves in minimal time; so long as the credit card provider invests in the technology that enable them to do so.
Embracing fintech to its fullest
We are in the midst of what, in ‘business speak’, they would call a paradigm shift. We are moving past the stage of thinking about financial technology as simply being a means of checking one’s account or transferring someone money. The fintech revolution is gathering speed, and it will lead us to a more open, connected form of banking where one can see and manage all their finances digitally, as well as accessing personalised advice and products all from the comfort of their sofa.
In this primarily digital landscape, financial services firms who cannot deliver an exceptional level of service to customers – be it consumers or business – risk losing them to those who can. Now is the time for the sector to embrace fintech to its fullest and build systems that are not just adapted to the new normal, but actually help to shape it.