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Two years ago, I wrote an article on the 6 biggest trends in FinTech. Looking back, I’m happy to say that there has been significant progress in all the areas. A year after that, I wrote Everyone is Talking about APIs to discuss a trend that, at the time, was new to the industry. In a landscape where new technology arises, gets implemented and goes mainstream in a heartbeat, I wanted to cover five of the most impactful trends currently impacting the FinTech industry today:
1. Artificial Intelligence and Machine Learning
Discussions about artificial intelligence and machine learning have dominated the tech world for the past year. To IBM, we refer to it as cognitive computing and it emphasizes that artificial intelligence should augment human intelligence, not replace it. In finance, AI is helping detect and fight fraud before it can be detected by humans. Stacks of new compliance regulations are being fed into artificial intelligence systems like IBM Watson to help businesses stay on top of the ever-changing rules. Chatbots built with AI are able to help agents satisfy customer questions with accuracy and speed, or even satisfy customers with no human manpower at all. In wealth management, AI is helping with stress testing a market scenario and removing biases from investment decisions. We are just now beginning to scratch the surface learning what we can do with AI and machine learning, in and out of the FinTech industry.
The benefits of creating applications using APIs as building blocks are being recognized as the best way to keep up with tsunami of business and economic challenges facing the financial industry. FinTech startups have dominated the landscape by creating mobile apps that have challenged, and in some cases, surpassed the established banking industry. By using APIs, these small but dynamic businesses are able to innovate with agility and speed that larger established banks and financial institutions are unable duplicate. To keep pace, banks are now investing heavily to improve their ability to create innovative mobile apps, while participating in developer sandboxes and also the API economy. Banks could be positioned to regain dominance in this area due to the amount of data they’ve collected over the years and have barely touched.
Blockchain, or distributed ledger technology, is promising to bring trust and transparency to a world filled with uncertainty and the threat of fraud. Large financial players are collaborating in consortiums to rebuild infrastructure based on this new technology to replace legacy and incompatible systems. From trade finance platforms, to cross border payments and digital identification, eliminating inefficiencies created by lack of trust and transparency is a major selling point of implementing blockchain technology. By removing these intermediaries in business processes and creating innovative networks, blockchain is streamlining the exchange of value across ecosystems.
4. Human Digital Interfaces
Most of us have trouble going a day without one of our digital devices, so it’s natural to see mobile technology becoming more integrated into our daily lives. We’re already using our voice to make commands rather than touching our screen or typing. Passwords are being replaced by biometric finger, retinal, or face scans as security checks. Technology is gauging our emotional state based on our interactions with our devices. Gestures can be used to trigger an action. For the next few years, expect to see these interfaces showing up in more places and being perfected. I’m not sure if I’m ready for cyborg type integration with technology, but you can be sure that someone is already tinkering with those ideas.
5. Quantum Computing
Earlier this year I attended AI.Toronto where Vern Brownell from D-Wave spoke to a financial audience about what to expect in the future for the next level of computing: quantum computing. A traditional computer system is based on bits that are either 0’s or 1’s. Quantum computing uses qubits, essentially enabling a computer to go beyond simply two states to store an enormous amount of information while using less energy. Quantum computers will not replace traditional computers, but will be able to solve computationally difficult problems such as maximizing returns for investments based on a given risk profile. In addition to finding answers fast, consider the accuracy achievable in artificial intelligence or machine learning. It might even make technology look intuitive. Technology to detect fraud or money laundering is an area well suited for quantum computing.
FinTech is an industry that continues to be on the forefront of innovation. Technology that would take decades to design, test and implement by large financial institutions, are going from beta to real-world applications in a fraction of the time, by scrappy startups that are disrupting the financial industry in a big way. While security risks remain, the winners are us, as consumers who are seeing the benefit in conveniences and functionality in our banking and financial experiences, thanks to these trends in FinTech technology.
For more information on how IBM can help you keep up with technology changes in the finance industry, visit: ibm.com/banking